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Uganda saw a 25.4% increase in foreign direct investment (FDI) during the first quarter of the 2024/25 financial year, driven by political stability, improved economic conditions, and stronger institutional frameworks.

Uganda recorded a 25.4% increase in foreign direct investment (FDI) during the first quarter of the 2024/25 financial year, spanning from July to September, compared to the same period in the previous financial year.

According to the latest economic data released by the Permanent Secretary and Secretary to the Treasury in the Ministry of Finance, Planning and Economic Development, Ramathan Ggoobi, this growth is attributed to political stability, improved macroeconomic conditions, a growing market size, and stronger institutional frameworks that have made Uganda a more attractive destination for foreign investors.

The country’s involvement in regional economic blocs, particularly the African Continental Free Trade Agreement, has further enhanced its market potential, contributing to the increase in FDI inflows. Government policies, including efforts to lower interest rates, boost real wages, and devalue the domestic currency, have also played a key role in making Uganda a more profitable investment hub.

Uganda’s Gross Domestic Product (GDP) expanded by 6.7% in the first quarter of the financial year 2024/25, a rise from the 5.6% recorded in the same quarter of the previous year. Key contributors to this growth included food crop production in the agricultural sector, agro-processing, construction within the industrial sector, wholesale trade, and transport activities in the services sector.

Looking ahead, Uganda’s economy is projected to grow between 6% and 6.5% in the short to medium term. Inflation is expected to remain within the 5% target set by the Bank of Uganda, while the exchange rate is likely to stay stable, supported by sustained FDI inflows into the oil and gas sector. On the fiscal front, domestic revenue collection is projected to meet 100% of its target.

Uganda’s external sector also showed notable performance, with total export earnings in the first quarter of the financial year reaching $2.262 billion, marking a 21.8% increase from the $1.857 billion recorded in the same period last year. However, the country’s import bill rose to $3.161 billion, up from $2.746 billion in the previous year’s first quarter. This disparity led to a widening trade deficit, which increased by 1.2% from $888.38 million in the first quarter of 2023/24 to $898.66 million in the first quarter of 2024/25.

Inflation edged up slightly, with headline inflation rising to 3.3% in December 2024 from 2.9% in November, largely due to increased demand during the festive season. Despite this, inflation remains within the 5% policy target, thanks to coordinated fiscal and monetary policies.

The Ugandan Shilling appreciated by 0.4% in December 2024, trading at an average mid-rate of 3,664.08 per U.S. dollar, compared to 3,678.65 in November. This appreciation was driven by an uptick in remittances from Ugandans abroad, who sent funds back home during the festive period, alongside increased FDI, particularly in the oil sector.

Diaspora remittances in the first quarter of the 2024/25 financial year amounted to $389.06 million, an 8% increase from the $360.13 million recorded in the same quarter of the previous financial year. These remittances have significantly contributed to reducing poverty, lowering poverty levels in Uganda by nearly 11 percentage points.