Uganda’s economy registered strong growth in the second quarter of the 2025/26 financial year, supported by rising demand, increased investment and improved business activity, according to the latest performance report.
Preliminary estimates from the Uganda Bureau of Statistics show that the economy expanded by 8.5 percent, up from 5.4 percent recorded in the same period last financial year.
“This strong performance was largely driven by increased aggregate demand and investments in ICT equipment, buildings, other structures, machinery, and equipment,” the report states.
The growth reflects real improvements across key sectors of the economy, with agriculture, industry and services all posting stronger output, supported by increased production, exports and private sector activity.
Economic conditions continued to improve in February, with businesses reporting higher output, increased orders and rising employment levels. Key indicators remained firmly in expansion territory, signaling sustained growth in private sector activity.
“The improvement in business conditions was driven by increased consumer demand, which led to higher output and employment levels,” the report notes.
The Purchasing Managers’ Index rose to 54.2 in February, while the Business Tendency Index climbed to 58.7, indicating growing confidence in sectors such as agriculture, manufacturing, financial services, and trade.
“Firms continued to hire both temporary and full time staff in response to increased workloads across the majority of sectors,” the report adds.
Inflation eased further during the month, with annual headline inflation declining to 2.9 percent in February from 3.2 percent in January, marking the lowest level recorded in the current financial year.
“The decline in inflation was partly attributed to a slowdown in the rate at which prices of services increased, particularly air transport and health services,” the report states.
It adds that improved food supply during the harvest season also contributed to lower prices.
“The fall in inflation was supported by reduced prices of food items such as fresh vegetables, beans, pumpkins and cowpeas, largely reflecting increased supply.”
However, energy-related costs edged up, with fuel and charcoal prices rising due to supply disruptions and enforcement measures, highlighting pockets of inflationary pressure within the economy.
Monetary policy remained unchanged, with the Central Bank Rate held at 9.75 percent for the seventeenth consecutive month to support growth while maintaining price stability.
In the external sector, Uganda recorded a major turnaround in trade performance, posting a merchandise trade surplus of $147.26 million in January 2026, reversing previous deficits.
“Uganda’s merchandise trade balance improved from a deficit of $206.43 million to a surplus of $147.26 million,” the report states.
Export earnings rose sharply by 72.1 percent to $1.45 billion, driven by strong performance in gold, coffee, industrial products, oil re-exports, and electricity.
“Higher export earnings from gold, coffee and other products significantly boosted the country’s external position,” the report notes.
Gold exports recorded the most significant growth due to rising global prices and increased volumes, while coffee earnings also improved on account of higher export volumes.
Despite the strong export performance, imports grew by 23.2 percent on a year-on-year basis, largely driven by increased demand for machinery, vehicles and industrial inputs by the private sector.
The report highlights that gold and coffee accounted for more than 74 percent of export earnings, underscoring the need for diversification to sustain the gains and reduce exposure to global price shocks.
On the fiscal side, government operations recorded a deficit of Shs1.22 trillion in February, exceeding the planned target due to higher spending on infrastructure and payments related to aircraft acquisition for Uganda Airlines.
“Government operations during February resulted in a fiscal deficit of Shs1.22 trillion, mainly driven by expenditure that exceeded projections,” the report states.
Revenue collections also fell short of expectations, with total revenue amounting to Shs2.61 trillion against a target of Shs2.88 trillion.
“The underperformance was mainly driven by shortfalls in non tax revenue and delayed disbursement of grants,” the report notes.
Regionally, Uganda maintained a trade surplus with the East African Community, supported by increased exports and reduced imports, while inflation trends across partner states remained mixed.
Overall, the report indicates that Uganda’s economic growth is being supported by stronger domestic demand, improving business conditions, and a rebound in exports, even as fiscal pressures and global uncertainties remain key risks.
