Uganda’s Economic Challenges: Lessons from COVID-19 and Global Shifts

Ugandan economists urge the government to practice sound fiscal management to cope with local and global economic challenges exacerbated by reduced foreign aid. Experts like Dr. Fred Muhumuza emphasize the necessity of learning from past crises, managing spending, and bolstering local investments to ensure sustainable growth. The impending election cycle adds to concerns about inflation and expenditure.

Uganda’s economists emphasize the necessity for the government to adopt prudent financial management practices in response to both local and global economic challenges. The recent statements arise in the context of diminished aid from major donors due to sweeping fiscal changes enacted by U.S. President Donald Trump. As Uganda approaches a pivotal election period marked by increased government spending, concerns over budget cuts and inflation loom large.

At the 2025 Stanbic Economic Insights Symposium, Dr. Fred Muhumuza highlighted that while Uganda navigated the COVID-19 pandemic relatively well, it needs to learn from both that experience and the ongoing effects of the war in Ukraine. He criticized the government for its continuation of high expenditures, citing potential savings from reducing the size of the government vehicle fleet. He argued that maintaining a status quo approach is insufficient, stating that optimism must be balanced with proactive measures to address economic vulnerabilities.

Despite receiving substantial U.S. aid—over 1.2 billion dollars annually—Muhumuza pointed out that the allocation of funds plays a crucial role in economic stability. He stressed the importance of discussions around reducing government spending to ensure sustainable growth. In response, Dr. Adam Mugume from the Bank of Uganda downplayed the consequences of U.S. aid reduction but acknowledged the need for Uganda to lessen its reliance on foreign assistance.

Economic projections by the Stanbic Bank indicate a cautious midterm outlook, with Uganda relying on strong exports of coffee, gold, and agricultural output. However, economist Christopher Legilisho cautioned that these factors are subject to fluctuations in global prices. Additionally, adverse weather conditions could hinder agricultural yields, and consistent growth in the oil and gas sector is contingent on securing investment for essential infrastructure.

While Dr. Mugume noted that lessons have been learned since the hyperinflation experienced post-2011 elections, ongoing governance improvements are necessary. Dr. Sebastien Walker from the IMF highlighted the importance of nurturing local investors to establish a robust economic foundation, emphasizing that future oil revenues will not suffice in addressing all economic challenges. Lastly, Francis Karuhanga from Stanbic cautioned against purely focusing on global geopolitics, urging acknowledgment of regional dynamics, particularly in the DRC and South Sudan, which significantly affect Uganda’s business environment.

In summary, Ugandan economists advocate for a more sustainable fiscal approach amid rising economic pressures. The government is urged to learn from past experiences and allocate resources wisely as global aid fluctuates. Strengthening local investments and improving governance will be critical for long-term economic stability, especially as Uganda navigates its geopolitical environment leading up to the elections.

Original Source: www.independent.co.ug