Uganda’s Economy Surges 8.5% as Inflation Hits 2.9% and Trade Balance Swings to Surplus
KAMPALA – March 24, 2026 – Uganda’s economy recorded a remarkable 8.5 percent expansion in the second quarter of the 2025/26 financial year, driven by strong aggregate demand and increased investment, according to the latest Performance of the Economy report released by the Ministry of Finance, Planning and Economic Development.
The preliminary figures, compiled by the Uganda Bureau of Statistics (UBOS), mark a sharp acceleration from the 5.4 percent growth recorded in the same quarter of the previous financial year. The surge was largely attributed to robust investments in ICT equipment, buildings, other structures, and machinery.
High-frequency indicators released in the report point to continued economic momentum through February 2026. The Purchasing Managers’ Index (PMI) rose to 54.2 from 52.6 in January, signaling improving business conditions, higher output, and increased employment. Similarly, the Business Tendency Index (BTI) climbed to 58.70, reflecting growing optimism across key sectors including agriculture, manufacturing, and financial services.
Inflation Eases to 2.9%
Inflationary pressures continued to ease, with annual headline inflation falling to 2.9 percent in February 2026 from 3.2 percent in January. This represents the lowest inflation rate recorded since the start of the fiscal year. The decline was driven by a slowdown in service price increases—particularly international air transport and health services—as well as lower food prices during the ongoing harvest season.
“The fall in inflation was supported by reduced prices of food items such as fresh vegetables, mangoes, beans, pumpkins, and cowpeas,” the report noted.
Meanwhile, the Central Bank Rate (CBR) was held steady at 9.75 percent for the 17th consecutive month, a level policymakers deemed appropriate to sustain economic growth while anchoring inflation toward the medium-term target of 5 percent.
Trade Balance Swings to Surplus
In a significant external sector development, Uganda recorded a merchandise trade surplus of USD 147.26 million in January 2026, a sharp turnaround from a deficit of USD 206.43 million in December 2025 and a USD 215.28 million deficit in January 2025.
The improvement was driven by a 72.1 percent year-on-year surge in export earnings, which rose from USD 844.60 million in January 2025 to USD 1.45 billion in January 2026. Key contributors included gold, coffee, industrial products, oil re-exports, beans, and electricity. Gold exports alone jumped 182.2 percent, benefiting from higher volumes and a sharp rise in global prices.
“This concentration underscores the need for Uganda to add value to its exports and diversify its export base to higher value commodities,” the report cautioned, noting that gold and coffee together accounted for over 74 percent of total export earnings in January 2026.
Merchandise imports grew 23.2 percent year-on-year to USD 1.31 billion, driven mainly by formal private sector imports of machinery, vehicles, and mineral products.
The report highlighted that Uganda recorded trade surpluses with the Middle East, the European Union, and the East African Community (EAC) in January, though deficits persisted with Asia and the rest of Africa.
Fiscal Performance
Government operations in February 2026 resulted in a fiscal deficit of Shs 1.22 trillion, exceeding the programmed target due to higher-than-expected expenditure, including part payment for new aircraft for Uganda Airlines and front-loaded interest payments on domestic borrowing.
Domestic revenue collections fell short of target, totaling Shs 2.61 trillion against a projected Shs 2.88 trillion, largely due to underperformance in non-tax revenue and indirect taxes. However, direct domestic taxes—including PAYE and corporate tax—surpassed expectations.
The report is part of the ministry’s regular monitoring of economic performance and is available online alongside an interactive macroeconomic data portal.
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