Uganda's economic pressures cannot be attributed solely to global shocks, with domestic weaknesses in production, foreign exchange retention and public spending also exposing the country to external disruptions, according to economists speaking on NBS Morning Breeze. Dr Stephen Mukitare, an Executive Board Member of the National Planning Authority, and Trevor Lukanga Bwanika, Tax Director at PwC, examined the factors driving the country's economic challenges amid pressure on the Uganda shilling against the US dollar, rising fuel prices, elevated interest rates and persistent inflation. While Mukitare acknowledged that external developments including geopolitical tensions, changing international trade policies and global supply chain disruptions have contributed significantly to Uganda's economic pressures, he argued that the country must also address domestic vulnerabilities. He cited US tariffs and the Russia-Ukraine war as examples of how decisions by major economies can have far-reaching consequences for Uganda and similar countries.
Mukitare raised concerns about Uganda's capacity to generate and retain foreign exchange, which underpins the pressure on the shilling. Coffee and other agricultural exports, tourism, diaspora remittances and foreign direct investment are among the country's major sources of foreign currency. However, he questioned how much of the value created within the economy is retained and recirculated locally. He called for stronger local participation in strategic sectors including infrastructure, banking and insurance, arguing that a stronger industrial policy and deliberate promotion of local content would help retain more economic value within Uganda, reduce capital outflows and strengthen the country's resilience. Mukitare also stressed the need for improvements in domestic production to enable Ugandan businesses to compete more effectively in regional markets including Kenya, Tanzania and the Democratic Republic of Congo.
The country's economic ambitions are outlined in the National Development Plan IV and the Tenfold Growth Strategy, which identify agro-industrialisation, tourism, minerals, oil and gas, and science, technology and innovation as key drivers of economic transformation. Uganda aims to grow its economy towards a US$500 billion economy, supported by investments in critical infrastructure including electricity, roads and multimodal transport systems. However, Mukitare argued that attracting investment and expanding infrastructure must be accompanied by stronger domestic capacity to ensure Ugandans benefit from the resulting economic activity.
Tax Director Lukanga Bwanika acknowledged improvements in domestic revenue mobilisation but cautioned that increased tax collection alone does not guarantee a healthy macroeconomic position. He highlighted that the relationship between government revenue and expenditure remains a critical concern, particularly where public spending exceeds available resources. He stressed the need to examine not only how much government collects but also how effectively the money is spent and the economic returns generated from public expenditure. This raises questions about the sustainability of relying on increased taxation to finance government programmes, especially when households and businesses are already grappling with higher operating costs and pressure on disposable incomes.
Although the shilling has recovered some ground following recent pressure in the foreign exchange market, concerns remain over inflation, financing costs and the country's broader growth outlook. The debate centres not simply on whether the currency can stabilise, but whether current interventions are addressing underlying weaknesses or offering temporary relief. For Mukitare, building a resilient economy requires stronger domestic production, export competitiveness, industrialisation and deliberate efforts to retain more economic value within the country. The sustainability of Uganda's economic recovery will depend on government's ability to address domestic weaknesses, manage public resources efficiently and translate economic growth into improved livelihoods.