Uganda still low-income country, says World Bank

People sort groundnuts at St Balikuddembe Market in Kampala in May. Phote / File

What you need to know:

  • The report, a biannual analysis of the near-term macroeconomic outlook, said Uganda’s gross national income (GNI) per person stood at about $840 in FY2021 and has increased only marginally in the year since, leaving the country well below the lower-middle income threshold of $1,045 per person.

Uganda remains a low-income country, the World Bank said in a new report released on Thursday, a fortnight after President Museveni and Finance minister Matia Kasaija said the economy had risen to middle-income status.

Real gross domestic product grew by 4.3 percent in the first half of 2022 supported by a strong and speedy recovery of the service sector after the lifting of travel and social gathering restrictions, as well as sustained buoyancy of the information and communications sector.

But it was not enough to lift the country into the middle-income bracket that the National Resistance Movement government has made a major policy goal over the past two decades. In addition, the target might remain elusive for a bit longer after the Bank cut its projection for economic growth this year to 3.7 percent, down from the six percent pre-pandemic estimate.

The report, a biannual analysis of the near-term macroeconomic outlook, said Uganda’s gross national income (GNI) per person stood at about $840 in FY2021 and has increased only marginally in the year since, leaving the country well below the lower-middle income threshold of $1,045 per person.

During the State of the Nation address on June 6, President Museveni said government data put Gross Domestic Product (GDP) per person at $1,046 (about Shs3,945).

“You remember the entrance points for the lower middle-income status is $1,036 (about Shs3,906). We have now passed that figure. Congratulations. However, to be declared a middle-income country, you need to sustain this for two to three consecutive years,” he said.

A week later, Mr Kasaija said the economy had bounced back strongly from the pandemic and was on the road to a full recovery.

“With this buoyant recovery and resilience of the economy—induced by our deliberate and prudent economic policies—Uganda’s GDP per capita has increased to $1,046 in current prices, which is equivalent to Uganda Shs3.7 million per person per year,” he said.

Government’s figures are based on GDP, which is an estimate of the total value of goods and services produced within a country during a set period, usually one year. The World Bank’s figures are based on 2021 calculations, and are based on GNI, which estimates the total amount of money earned by a country’s people and businesses. It includes GDP and income from abroad, for instance from Ugandans working in the diaspora.

Status gap

The World Bank said Uganda’s income per capita improved strongly between 2001 and 2011, shrinking the gap to lower middle-income status from 75 percent in 1994 to 17 percent at the end of that period. Since then, however, the gap has remained between 19 to 26 percent, as a high population growth rate weighed down economic growth.

“Over the last two decades, the difference between these variables has been minimal, yet indicating that Uganda’s GNI was slightly greater than GDP in the 1990s, while the reverse was true in the 2000s. This implies that the non-residents income earned withinUganda increased beyond the income earned by Ugandans resident outside Uganda in the 2000s,” the World Bank noted.

Our reporter’s effort to get comments from the senior presidential press secretary, Ms Linda Nabusayi, was futile by press time since she did not answer our repeated phone calls.

The Secretary to the Treasury, Mr Ramathan Ggoobi, also never answered the calls. On Mr Kasaija’s behalf, a handler said the minister was engaged in a meeting.

Ms Mukami Kariuki, the head of the World Bank Uganda office, said middle-income status has benefits and disadvantages. She said: “Of course, if you are a big [country] you have to begin looking at yourself and begin getting commercial resources outside the soft window of the World Bank; only eligible [low-income] countries qualify for resources from soft windows of the World Bank.”

She said Uganda’s move towards middle-income status has been impressive and will eventually be met. The report proposes four policy actions to support economic recovery: mass vaccination against Covid-19; social protections for the vulnerable; prudent fiscal and debt management; as well as cautious monetary tightening to curb rising inflation.

The report also calls for faster reforms to widen the tax base, improve the use of public investments, and reallocate wasteful public expenditure to improving human capital, the business environment, and greener growth. It also calls for a reduction in the public debt.

“Uganda has a great opportunity to harness Public Investment Management by making sure that beyond preparing good projects, effort is also directed at ensuring that they are efficiently funded, implemented, monitored, operated, maintained, and evaluated,” said Ms Rachel Sebudde, a World Bank senior economist and lead author of the Uganda Economic Update.

“These steps will ensure that the country can reap the maximum value of public investments.”

Hurdles

The report highlighted key challenges including poor and slow execution of projects and high commitment fees on non-concessional externally funded projects.

Discussing the report, Prof Waswa Balunywa, the principal of Makerere University Business School, said many Ugandans are still poor and while 30 percent are entrepreneurial, they need training to do the right things.

“There are a lot of people doing so many things but they are doing wrong things,” he said.

Professor Balunywa said middle-income status is just numbers and focus must shift to the many Ugandans who remain poor. He said the Parish Development Model is a good programme that could help lift many out of poverty. Mr Balunywa advised Ugandans to stop selling land to buy boda bodas or to go abroad to do menial jobs.

Ms Margaret Kakande, the head of Budget Monitoring Unit at the Ministry of Finance, Planning and Economic Development, decried the high level of political interference in development projects. 

“The politicians are passing the process required to be followed in project establishments. Projects are coming through the window,” she said.

Going forward, she added,  it is better to do a few development projects and do them in time and in budget.

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