UgandaEconomicUpdate|

December,

2023?

2023

International

Bank

for

Reconstruction

and

Development/International

DevelopmentAssociation.TheWorld

BankGroup1818H

StreetNWWashington

DC20433Telephone:202-473-1000Internet:This

work

is

a

product

of

the

staff

of

The

World

Bank

with

external

contributions.

The

?ndings,interpretations,

and

conclusions

expressed

in

this

work

do

not

necessarily

re?ect

the

views

of

TheWorld

Bank,itsBoard

ofExecutive

Directors,

orthegovernments

they

represent.The

World

Bank

does

not

guarantee

the

accuracy

of

the

data

included

in

this

work.

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boundaries,colors,

denominations,

and

other

information

shown

on

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map

in

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work

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on

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of

The

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Bank

concerning

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or

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oracceptanceofsuchboundaries.Rights

and

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is

subject

tocopyright.TheWorldBankencouragesdissemination

of

itsknowledge,

so

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reproduced,

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whole

or

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part,

for

noncommercial

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aslongasfullattributiontothisworkisgiven.Anyqueriesonrightsandlicenses,includingsubsidiary

rights,shouldbeaddressedtotheOf?ceof

the

Publisher,

The

World

Bank,

1818

H

Street

NW,

Washington,

DC

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USA;

FAX:

202-522-2422;

e-mail:pubrights@.Photocredits:DerrickSanyunitoDerrickSsenyonyi,

2022–

2023andRachelMabala(2021-2022)Design/Layout:Art?eldGraphicsPrintedinUgandaby

Art?eldGraphicsAdditional

material

relating

to

this

report

can

be

found

on

the

World

Bank

Uganda

website

(www./uganda).iiUgandaEconomicUpdate|

December,

2023ContentsAcronymms

and

Abbreviations....................................................................................................................................

vForeword

......................................................................................................................................................................viAcknowledgements.....................................................................................................................................................

viiExecutive

Summary.....................................................................................................................................................viiiPART

1

State

of

the

Economy

....................................................................................................................................121.1Recent

Economic

Developments...............................................................................................................................14Globaleconomicgrowthisprojectedto

remainweakin2023dueto

thelingeringe?ectsofmultiplecrises..........

14Growthhasbeenbroad-based,

withrisingoutputintheagricultural,

industrial,

andservicesectors

......................

14MonetaryconditionsinUgandahaveeasedinlinewithglobaldevelopments..............................................................17Challengesaroundrevenuecollectionthreatenthe?scalconsolidation

.........................................................................17Thecurrentaccountremainedstableashigherexportrevenueso?setasurgeinimports.........................................

191.2

Economic

Outlook,

Risks,

and

Policy

Actions...........................................................................................................21Economicresilienceunderpinnedbytheprospectsoftheoilsector

................................................................................211.3

Summary

and

Recommendations...........................................................................................................................

23PART

2

Assessing

the

Quality,

E?ciency,

and

E?ectiveness

of

Public

Spending

in

Education..................................242.1Structure

and

Governance

......................................................................................................................................

282.2

Key

Education

Outcomes

.......................................................................................................................................

302.3

Analysis

of

Public

Spending

on

Education.............................................................................................................

332.3.1Adequacy

...........................................................................................................................................................................332.3.2E?ciency

..........................................................................................................................................................................372.3.3Equity

................................................................................................................................................................................402.4

Recommendations

.................................................................................................................................................

45References...................................................................................................................................................................

47iiiUgandaEconomicUpdate|

December,

2023List

of

FiguresFigure

1:

Growthremainedrelativelystrongdespiteadverseweatherconditionsandweakminingoutput

.......................

15Figure

2:

ThePMIhasimprovedsince2022.

....................................................................................................................................17Figure

3:

Lowergoodspricesdrovethedeclineincorein?ation..................................................................................................17Figure

4:

Theongoing?scalconsolidationisnarrowingthede?cit.

............................................................................................17Figure

5:

TheUgandanshillingappreciatedsubstantiallyduringFY2023.

................................................................................19Figure

7:

ImportcoveragefellduringFY2023...................................................................................................................................20Figure

6:

Privatein?owsandgovernmentborrowing?nancedthecurrent-accountde?cit.

..................................................20Figure

8:

TheStructureandOrganizationoftheUganda′sFormalEducationSystem..............................................................28Figure

9.

GrossEnrollmentRates,

2019(%).....................................................................................................................................30Figure

10.

EarlyGradeReading

AssessmentResultsbyLocalLanguage,

2022..........................................................................31Figure

11.

PublicSpendingonEducationasaShareofGDP,2018orLatest

Available

Year

.......................................................33Figure

13.

PublicEducationSpendingperStudentasaShareofGDPperCapita,

Latest

Available

Year.................................33Figure

12.

PublicSpendingonEducationasaShareofTotal

GovernmentSpending,

2018orLatest

Available

Year.............33Figure

14.

PublicSpendingbyEducationLevel

................................................................................................................................34Figure

15.

PublicSpendingperStudentbyEducationLevel,

2010/11–2021/22

..........................................................................34Figure

16.

Ratio

of

Teacher

Salaries

to

Earnings

of

Similarly

Educated

Workers

by

Highest

Degree

Completed

and

AgeGroup,

2019/20.................................................................................................................................................................................35Figure

17.

Ratio

of

Teacher

Salaries

to

Earnings

of

University

Educated

Workers

by

Level

of

Instruction,

2019/20

(25-64Years

Old).........................................................................................................................................................................................35Figure

18.

CompositionofHouseholdSpendingonEducationbyLevelofEducationandType

ofSchool,

2019/20..............36Figure

19.

Learning

AdjustedYears

ofSchoolbyGDPperCapitaandEducationSpending,

2020............................................37Figure

20.

NumberofStudentsperTeacherandTotal

NumberofStudentsinGovernment-FundedPrimarySchoolsbyDis-trict,

2020/21....................................................................................................................................................................................38Figure

21.

Number

of

Students

per

Teacher

and

Total

Number

of

Students

in

Government-Funded

Secondary

Schools

byDistrict,

2020/21...............................................................................................................................................................................38Figure

23.

School

AttendanceandPovertyRatesbySubregion,

2019/20....................................................................................41Figure

22.

LorenzCurveofEducationSpendinginUganda,

2019/20............................................................................................41Figure

24.

LearningPovertyinPrimaryEducationandPovertyLevelbySubregions,

2018/2019

...........................................42Figure

25.

Per-StudentUPEGrantsandPovertyRatesbySubregion,

2020/21...........................................................................43Figure

26.

Per-StudentUSEGrantsandPovertyRatesbySubregion,

2020/21...........................................................................43Figure

2

7.

LearningPovertyinLiteracyandStudent-TeacherRatios,

PrimaryEducation,

2020..............................................44Figure

28.

LearningPovertyandper-StudentUPETransfers,

PrimaryEducation,

2020/21

.....................................................44ivUgandaEconomicUpdate|

December,

2023List

of

TablesTable1:

QuarterlyRealGDPGrowth(%).....................................................................................................................................

16Table2.

KeyFiscalIndicators(%ofGDP)...................................................................................................................................

18Table

3.

BaselineEconomicOutlook(annual%changeunlessotherwiseindicated)

.........................................................21Table4.

DistributionofSchool

AttendancebyEducationLevelandSchoolType,

2019/20(%)

.........................................29Table5.

DistributionofReasonsCitedforLeavingPrimaryEducationbyGradeandGender,

2019/20(%)......................31Table

7.

Net

AttendanceRatebyPopulationGroup,

2019/20

...................................................................................................40Acronymms

and

AbbreviationsBOUBTVETCFRBankofUgandaBusiness,

Technical

andVocational

Education

andTrainingCharter

ofFiscalResponsibilityDebt

Sustainability

AnalysisDSAECFExtended

Credit

FacilityEMISFDIEducationManagement

InformationSystemForeign

Direct

InvestmentFYFiscal

YearGDPGross

DomesticProductGoUGovernmentofUgandaIGFTRIMFIntergovernmental

FiscalTransfer

ReformsInternationalMonetaryFundLAYSMoESMoFPEDNDP

IIIPLELearning

AdjustedYears

ofSchoolingMinistryofEducation

andSportsMinistryofFinance,

Planning,

andEconomic

DevelopmentThird

NationalDevelopment

PlanPrimaryLearningExaminationResearch

Triangle

InstituteRTISPASchoolPerformanceAssessmentScience,

Technology,

EngineeringandMathematicsStudentTeacher

RatioSTEMSTRUBOSUgIFTUGXUgandaBureau

ofStatisticsUgandaIntergovernmental

FiscalTransfer

Reform

ProgramUgandanShillingUPEUniversalPrimaryEducationUSEUniversal

Secondary

EducationvUgandaEconomicUpdate|

December,

2023ForewordThe

Ugandan

economy

continues

to

recover

from

multiple

shocks

and

a

challenging

global

environment.Economic

activity

has

been

robust

due

to

strong

industrial

activity

and

improved

performance

of

the

servicessector.

Although

agricultural

production

was

a?ected

by

adverse

weather

conditions,

the

sector

recordedstrong

growth.

Spillovers

from

the

war

in

Ukraine

led

to

higher

food

and

fuel

prices

that

broadened

across

othergoods

andservices,

contributingtoa

surgein

in?ation

in

thesecondhalf

of

2022.

In?ationbegantodeceleratein

February

2023

and

has

since

remained

below

the

Bank

of

Uganda’s

target

rate

of

5

percent

due

to

its

policyactions.

Notwithstanding

the

resilience

of

the

economy,

the

country’s

growth

trajectory

is

fragile.

Recent

globalmarketturmoil

andpotential

spillovers

from

thecon?ict

in

Sudanposenewpolicychallenges.Uganda

will

soon

enter

a

pivotal

stage

in

its

development

path

where

human

capital

–

the

knowledge,

skills,and

health

that

people

accumulate

throughout

their

lives

–

has

the

potential

to

be

a

central

driver

of

thecountry’s

progress.

Yet

even

as

Uganda’s

population

is

projected

toincrease

by

60

percent

in

the

next

20

years,the

country

has

been

underinvesting

in

its

human

capital.

The

World

Bank

estimates

that

at

current

levels

ofinvestment

in

human

capital,

a

child

born

in

Ugandatodaywillgrowupto

be

only

38percentasproductiveashe

or

she

could

be

with

complete

education

and

full

health.

ForUganda

to

bene?t

from

a

demographic

dividend,the

country

will

need

not

only

substantial

resources

to

serve

a

larger

population,

but

it

must

further

elevateits

investments

in

social

services

to

improve

the

current

poor

levels

of

access

and

quality.

In

addition,

providingequal

access

to

human

capital

development

is

key

to

addressing

the

inequality

of

opportunities

and

makingfuture

growth

more

inclusive.This

22nd

edition

of

the

Uganda

Economic

Update

focuses

on

a

critical

component

of

Uganda’s

human

capitaldevelopment:

the

quality,

e?ciency,

and

e?ectiveness

of

public

spending

oneducation.

Spending

oneducationhas

been

consistently

low

and

ine?cient

in

Uganda,

contributing

to

inadequate

and

inequitable

access

aswell

as

poor

learning

outcomes.

Although

the

scale

of

the

challenge

may

seem

daunting,

Uganda

has

manyachievements

to

build

on:

one

of

the

?rst

countries

to

embrace

the

idea

of

universal

primary

education;

a

leaderin

employer-led

skills

development;

and

a

world

leader

in

its

generosity

toward

refugees,

including

in

theirhuman

development.

The

World

Bank

isreadyto

supportUganda’s

e?ortsto

seize

thiscriticaland

time-boundopportunity

by

investingmore,

investingsmarter,andinvesting

nowin

thefuture

productivityofitspeople.Keith

HansenCountryDirectorKenya,

Rwanda,

Somalia,

andUgandaAfricaRegionviUgandaEconomicUpdate|

December,

2023AcknowledgementsThe

Uganda

Economic

Update

(UEU)

analyses

economic

and

structural

issues

in

the

Ugandan

economyand

situates

them

in

a

long-term

domestic

and

global

context.

It

is

intended

for

a

wide

audience,

includingpolicymakers,

business

leaders,

?nancial-market

participants,

think

tanks,

non-governmental

organizations,and

the

community

of

analysts

and

professionals

engaged

in

the

Ugandan

economy.

The

publication

intendsto

foster

well-informed

policyanalysisanddebate

regarding

the

key

challenges

facingUganda

asit

strivestoachieveinclusive

andsustainableeconomic

growth.This

22ndeditionof

the

UEU

wasprepared

bya

team

that

included

SashanaWhyte,

Rachel

K.

Sebudde,

ShawnPowers,

Aziz

Atamanov,

and

Daniel

Lukwago

(consultant).

The

team

is

grateful

to

Philip

Schuler,

Marek

Hanusch,Tamoya

Christie,

and

Shinsaku

Nomura

for

their

input

and

guidance

on

the

structure

and

messages

presentedin

the

report.

The

UEU

22

was

edited

by

Sean

Lothrop.

Pearl

Namanya

provided

logistical

support,

while

BernardTabaire

managed

the

communications

strategy

and

Karina

Acevedo

provided

invaluable

research

assistance

onthe

analysis

ofeducationexpenditures.

The

Uganda

CountryTeam

providedvaluable

feedback,

and

theoverallguidance

provided

by

Abha

Prasad

(Practice

Manager,

Macroeconomics,

Trade

and

Investment)

and

MukamiKairuki

(Country

Manager)

is

gratefully

acknowledged.

Finally,

the

team

would

like

to

thank

the

sta?

of

theMinistry

of

Finance,

Planning,

and

Economic

Development

and

the

Ministry

of

Education

and

Sports

for

theircommitment

andproductive

collaboration.viiUgandaEconomicUpdate|

December,

2023Executive

SummaryUganda’seconomycontinueditsrecoveryfrommultipleexternalshocks,

despiteaturbulentglobalenvironment.Uganda’s

real

GDP

growth

rate

rose

from

4.6

percent

in

FY2022

by

the

resumption

of

gold

exports

and

a

marginal

recoveryto

5.2

percent

in

FY20231,

but

domestic

challenges

persist,

in

travel

in?ows,

exports

increased

by

2.7

percentage

pointsand

external

conditions

remain

challenging.

The

services

of

GDP.

Although

spending

on

imports

fell

by

8.3

percent,

thesector

accounted

for

half

of

GDP

growth,

led

by

professional

shilling’s

real

depreciation

during

the

second

half

of

the

yearservices,

administrative

services,

and

accommodation

and

food

caused

import

costs

to

rise

by

2.4

percentage

points

of

GDP,services.

Agricultural

output

also

rose

by

4.8

percent

during

o?setting

the

sizable

growth

of

exports.

The

current-accountthe

period,

driven

by

livestock

and

?shing,

while

irregular

de?cit

was

?nanced

mainly

through

FDI

in

the

oil

and

gasrainfall

continued

to

adversely

a?ect

crop

production.Growth

sector

andto

a

lesserextent

bypublic-sector

borrowing.in

the

industrial

sector

slowed

to

3.5

percent

due

to

decliningmining

and

quarrying

activity.

High-frequency

indicatorssuggest

economic

activity

will

remain

solid

through

the

endofthecalendaryear.Monetary

tightening

slowed

the

growth

of

credit

to

theprivate

sector.private-sectorcreditgrowthdeclinedto3.0percentin

FY2023.Slowing

credit

growth

primarily

re?ected

the

rising

cost

ofTighter

monetary

policies

have

helped

ease

in?ationary

credit,

as

thecentral

bankraised

rates

to

manage

in?ationarypressure.

In?uenced

both

by

global

and

domestic

factors2,

pressures.

While

lending

to

the

public

sector

risks

crowding

outheadline

in?ation

rose

from

3.7

percent

in

FY2022

to

8.8

private-sector

credit

and

slowing

economic

growth,

personalpercent

in

FY2023,

well

above

the

central

bank’s

target

rate

loans

and

commercial

lending

to

the

transport,

trade,

andof

5

percent.

Rising

prices

for

nonfood

goods

contributed

mining

and

quarrying

sectors

continued

toincrease

in

FY2023.46

percent

to

the

total

increase

in

in?ation

in

FY2023,

asthe

shock

of

the

external

crises

compounded

the

e?ects

ofadverse

weather

conditions,

while

food,

energy,

fuel,

andThe

centralgovernment’s?scal

de?cit

reached5.6percentofGDP

in

FY2023,

down

from

7.4

percent

in

the

previous

?scalyear.

Total

central-government

revenue

rose

to

14.2

percentutility

prices

also

increased

substantially

during

the

year.of

GDP,

albeit

well

short

of

the

policy

target

of

16-18

percent.3The

in?ation

rate

began

to

decline

in

February

2023

andImproved

tax

administration

pushed

tax

revenue

from

13.4reached

2.6

percent

in

November.

In?ation

is

expected

topercent

of

GDP

to

13.7

percent,

with

increased

collections

ofcontinue

easing

due

topay-as-you-earn

tax,

taxes

on

rental

income,

and

casino

taxesprices,

especially

for

energy,

as

external

shocks

abate,

ando?setting

a

decline

in

revenue

from

corporate

income

tax

andsupply-chain

disruptions

unwind.

The

relative

stability

of

thewithholding

tax.

Meanwhile,

total

spending

fell

from

21.5Ugandanshillingalsocontributed

to

disin?ation.percent

of

GDP

to

19.9percent.

Development

spending,

much

ofStrongandsustainedin?owsofforeigndirectinvestment(FDI)

which

remains

focused

on

megaprojects,

fell

from

7.9

percenthelped

?nance

a

large

current-account

de?cit

of

7.9percent

of

of

GDP

to

5.8

percent.

While

part

of

this

decline

was

plannedGDP.

The

current-account

de?cit

(including

grants)

remained

as

part

of

the

?scal

consolidation

agenda,

developmentbroadly

unchanged

from

FY2022,

as

a

surge

in

imports

o?set

spending

was

also

undercut

by

execution

challenges

both

inthe

recovery

of

goods

exports

and

tourism

in?ows.

Driven

domestically

andexternally

?nanced

projects.1The?scalyearinUgandarunsfromJulytoJune.2

Adverseweatherconditions,

highenergyandfoodpricesandsupplyconstraints3Thistargetisde?nedintheDomesticRevenueMobilizationStrategy.viiiUgandaEconomicUpdate|

December,

2023Alady

pours

peas

for

sale

into

abasket

in

Nakasero

Market.

Derrick

Senyonyi,

2023.Outlook,

Risks,

andChallengesor

incomplete

implementation

of

structural

reforms

in

keyareas

such

as

private-sector

development

and

climate-changeadaptation

in

the

agricultural

and

tourism

sectors.

On

the

upside,rapid

disin?ation

in

advanced

economies

could

lead

to

loosermonetary

policies,

easing

?nancial

constraints

in

global

markets.The

medium-term

outlook

remains

broadly

positive.

Medium-term

growth

prospects

hinge

on

the

anticipated

development

ofthe

oil

and

gas

sector,

which

is

expected

to

push

the

annual

GDPgrowth

rate

to

well

above

6

percent

in

the

medium

term.

Thecontinued

implementation

of

governance

and

product-marketreforms

designed

to

boost

agri-business,

encourage

trade,and

foster

private

investment

is

also

expected

to

contributeAssessingtheQuality,

E?ciency,

andE?ectivenessofPublicSpendinginEducationto

medium-term

growth.The

implementation

of

the

Domestic

With

a

young

and

growing

population,

Uganda

has

a

one-timeRevenue

Mobilization

Strategy—particularly

the

reforms

to

opportunity

to

capture

a

demographic

dividend,

but

successtax

expenditures

and

value-added

taxes—will

support

?scal

is

not

guaranteed.As

improving

economic,

health,

and

socialconsolidationon

therevenueside.

Meanwhile,

?scal

spending

conditions

lower

?rst

mortality

rates

and

then

fertility

rates,aimed

at

easing

constraints

on

growth,

including

investments

in

countries

pass

through

abrief

window

in

which

the

size

of

theenergy

and

transport

infrastructure,

should

help

revive

private

working-age

population

(ages

15-64)

far

exceeds

the

dependentinvestment,

boost

agricultural

production,

and

energize

the

light

population

of

children

and

the

elderly.

During

this

demographicmanufacturingsector.transition,

a

country

can

leverage

its

changing

age

structure

toaccelerate

growth,

but

only

if

its

workers

are

able

realize

theirproductive

potential.Uganda

is

a“pre-dividend”country,meaningthat

today’s

children

will

be

the

working-age

population

duringthe

country’s

demographic

transition.

To

ensure

that

Ugandareaps

a

demographicdividend,

the

government

must

invest

inhumancapital.Risks

to

the

medium-term

outlook

are

substantial.

Key

risksinclude

a

further

deterioration

of

global

economic

conditionsdue

to

intensifying

geopolitical

tensions,

an

escalation

of

thecon?ict

in

the

Middle

East,

slower-than-expected

growth

inChina,

a