Previous Quarterly Editions
Expropriation Risk: 60 60 60 60 ►Political Violence Risk:59 58 59 59 ► Terrorism Risk:36 38 38 38 ►Exchange Transfer and Trade Sanction Risk: 64 63 64 63 ►Sovereign Default Risk:74 82 82 74 ▼
TREND ▼
Protest intensity to date* 2022 2023 Low LowUnrest risk in 2024**Cost of living: HighAnti-austerity: Medium
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Uganda’s economy is slowly recovering from the external shocks caused by Russia’s February 2022 invasion of Ukraine and resultant higher inflation. Nevertheless, the public debt burden has continued to grow, with total interest payments rising from approximately 10% of government spending five years ago to around 19% in the last financial year (2021 – 2022).
With government continuing to reduce public spending, the debt burden remains sustainable over the short-to-medium term, but Uganda’s ability to respond to any further economic shocks has diminished. Furthermore, concerns about democracy and human rights are making it much more difficult to secure new external development finance.
The domestic risks posed by public debt, and resulting government spending cuts, remain low for President Yoweri Museveni and the government in general. Recent years have witnessed growing discontent among parts of Uganda’s growing youth demographic, which has occasionally resulted in street violence. The rising cost of living and curtailing of public services are one causal factor for rising youth discontent.
However, incidents of street violence remain tied to the general election cycle (the next one is in 2026) and, even then, are largely confined to opposition strongholds in and around the capital. As such, they remain relatively easy for the security services to control, albeit via weapons and tactics increasingly condemned by human rights organizations.
Among the wider public, Museveni and his government remain popular. This has been cultivated since the regime came to power (1986) and will likely carry the president through the present challenges. Additionally, over the past year, both the central bank and finance ministry have targeted their anti-inflation measures upon food. This has in turn allowed the government to take credit for the dramatic drop in food inflation over recent months.
TREND ►
Uganda’s medium-term economic outlook remains good, shaped by the start of production from the Lake Albert oilfields. The fields have estimated recoverable oil reserves of at least 1.4 billion barrels, production from which is estimated to start in 2025. Kampala’s plans for developing the oil sector received a major boost in September, when it was announced that the government is in the final stages of talks with two Chinese lenders — the Export-Import Bank of China and the China Export and Credit Insurance Corporation — to provide more than half of the US$3 billion required to build the planned 1,443-kilometer East African Crude Oil Pipeline to transport oil from the Lake Albert oilfields to the Port of Tanga, on the Tanzanian coast.
Any deal with the Chinese lenders would be a huge breakthrough for Uganda’s government, following the withdrawal of many Western financial institutions from the project over environmental and human rights concerns.
In 2019, the government passed a new Investment Code Act, containing provisions on protection from expropriation. The code ended restrictions on foreign investment in certain sectors, including energy and crop and livestock production, and monetary thresholds for investors to qualify for incentives. Although the screening processes for new companies entering the country remain burdensome, the expropriation risk is diminished.
The government’s current focus is upon rapidly increasing foreign direct investment into the country’s mining sector. Recent years have seen a boom in gold refining and exporting; gold is now Uganda’s leading export (accounting for 59.1% of export revenues). However, much of the raw gold for this nascent industry is almost certainly coming from illegal imports from neighboring countries, especially the Democratic Republic of Congo (DRC). Following the completion of a nationwide aeromagnetic survey, which found major new gold deposits, Kampala wants to grow its own production rapidly, to rebalance its gold exports. The government is also promoting investment to develop Uganda’s rich iron ore deposits in the southwest.
Uganda’s security situation has improved in recent years, following resolution of several major armed insurgencies; however, several armed groups remain active in the border zone between Uganda and the eastern DRC, and they retain the ability to launch strikes into Uganda. In late August, a group called the Cooperative for the Development of Congo executed 14 civilians in a village close to northwest Uganda.
Meanwhile, as Museveni continues to maintain power through a creeping authoritarianism, a risk remains that small-scale violent street protests could reemerge. While Museveni remains in power, given his control over the security services, any such protests could escalate into broader civil violence. The risk here will almost certainly grow in the run-up to the next presidential elections, especially if, as anticipated, Museveni’s son, Muhoozi Kainerugaba, makes a run for State House.
Kainerugaba has recently begun a campaign to raise his public profile, which, although still unofficial, has involved him undertaking a series of public inspections of infrastructure and holding what to all intents and purposes look like campaign rallies. This move would pit Kainerugaba against the main opposition challenger, Robert Kyagulanyi Ssentamu (better known as the Afrobeat superstar Bobi Wine), who remains popular among Uganda’s urban youth.
Uganda has been occasionally targeted by terrorists. As the largest contributor to AMISOM (the African Union Mission to Somalia), Uganda remains a prime target for Al-Shabaab attacks. In June, at least 54 Ugandan soldiers were killed in an Al-Shabaab ambush in Somalia; however, the Ugandan military and intelligence services have extended their counterterrorism surveillance in Uganda itself, including with major technological upgrades provided by the United States, Israel and Russia. This reduces the chances of successful attacks there.
Another risk factor is the Allied Democratic Forces (ADF) group, which has pledged allegiance to Islamic States and been classified by Washington as a Foreign Terrorist Organization. The ADF originated in Uganda but has been based in the DRC’s troubled eastern areas, occasionally raiding inside Uganda. The group increasingly uses suicide bombings, improvised explosives and similar tactics. In response, Uganda’s military has expanded its counterinsurgency operations against the ADF in the DRC.
Uganda does not have restrictions on capital transfers into or out of the country. If, however, a foreign investor has benefitted from tax incentives on an original investment, he or she is required to get a certificate of approval from the authorities to “externalize” those funds. There are no restrictions on the currencies that investments can be converted into, as the Uganda shilling floats on global currency markets.
Following the 2021 contested elections, both the United States and European Union have sharpened their criticism of the government’s increasingly autocratic rule. The World Bank has also frozen new lending to Uganda in light of the recent Anti-Homosexuality Act. However, as the Museveni regime is the United States’ main security ally in the region, it is highly unlikely that sanctions would be imposed against it.
Although the debt burden is increasing, it remains sustainable over the short to medium term. The IMF classifies Uganda’s overall risk of debt distress as moderate (in a context in which several other countries in sub-Saharan Africa are now classified as high). Moreover, most of the interest payments due on public debt — more than 90% — are on domestic debt. As a result of this, there is a reduced risk of Uganda defaulting on its external debt commitments.
Meanwhile, GDP growth remains steady and is predicted to be 5.5% in 2023 (albeit slightly down from the 6.4% achieved in 2022); however, GDP will be significantly boosted over the medium term by the start of oil production in the Lake Albert oilfields. In January, the China National Offshore Oil Corporation finally began drilling on one of its concessions in the new oilfields, and full production is now on track to start in late 2025, with predicted peak production of 230,000 barrels per day.
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