Uganda economy grows despite Middle East tensions
The Ministry of Finance's June 2026 Performance of the Economy Report indicates that the economy expanded by 6.4% in FY2025/26, slightly higher than the 6.3% growth recorded in the previous financial year.
According to the finance ministry, businesses remained optimistic about future demand and the overall macroeconomic environment, supported by improving prospects in both domestic and export markets. (Pictured is finance minister Henry Musasizi)
KAMPALA - Uganda's economy maintained strong growth during the 2025/26 financial year despite heightened global uncertainty and supply chain disruptions arising from the conflict in the Middle East, with the government citing resilient domestic demand, improved business activity and sustained investment across key sectors.
The Ministry of Finance's June 2026 Performance of the Economy Report indicates that the economy expanded by 6.4% in FY2025/26, slightly higher than the 6.3% growth recorded in the previous financial year.
The ministry notes that the performance demonstrates the resilience and robustness of the economy despite external shocks that have disrupted global trade and pushed up commodity prices.
According to the report, high-frequency indicators of economic activity continued to point to sustained expansion during June, supported by stronger domestic and external demand.
The ministry attributed the improvement to stronger customer demand, which resulted in higher new orders and encouraged firms to increase production. Businesses also expanded purchases of raw materials, built inventories and recruited more workers to meet growing demand.
However, firms continued to face higher operating costs driven by rising fuel prices, wages and utility charges, with part of these additional costs passed on to consumers through higher selling prices.
The report attributes the increase to stronger aggregate demand and increased investment activity across the economy.
Business confidence also remained firmly in positive territory during June.
According to the ministry, businesses remained optimistic about future demand and the overall macroeconomic environment, supported by improving prospects in both domestic and export markets.
Among the sectors, confidence was strongest in construction, wholesale trade and financial services.
Despite the positive outlook, the report notes that inflation edged higher during June as global developments continued to influence domestic prices.
Annual headline inflation increased to 3.7% from 3.2% in May, largely driven by higher fuel prices. Energy, Fuel and Utilities inflation rose sharply to 11.9% from 9.1%, reflecting increases in the prices of petrol, diesel, kerosene and cooking gas.
Core inflation also increased to 3.4%, driven by higher prices for processed foods, transport services and education-related expenses. However, food crop inflation remained subdued at 0.0%, supported by lower prices for commodities such as matooke, dry beans, onions and carrots.
The report also highlights continued stability in the financial sector, with the Uganda shilling strengthening against major international currencies during June.
The shilling appreciated by 1.4% against the US dollar, 2.8% against the euro and 2.6% against the British pound, supported by strong foreign exchange inflows from commodity exports and offshore investors.
Meanwhile, average lending rates declined slightly as lower inflation, exchange rate stability and adequate liquidity in the banking sector reduced borrowing costs for businesses and households.
Outstanding private sector credit expanded to Sh26.72 trillion, driven mainly by increased lending to the manufacturing and trade sectors.
The ministry says the combined performance of the real, financial and external sectors demonstrates that Uganda's economy has remained resilient despite a challenging global environment marked by geopolitical tensions, volatile commodity markets and supply chain disruptions.
It says continued improvements in business activity, investment, exports and private sector lending provide a positive outlook for economic growth going into the 2026/27 financial year.