Uganda’s ambitions to achieve middle-income status by 2020 have come up against some strong headwinds recently, raising concerns among economists about what the country needs to do to overcome the bumpy stretch.

To achieve the target set in the country’s National Development Plan II, the government is looking to heavy investment in transport and energy infrastructure and security.

In the Budget Framework Paper for 2017/2018, all ministries will have to cede at least 10 per cent of their budgets to fund critical ongoing and new road and rail projects, especially in the oil-rich Albertine Graben.

The middle-income dream is seen by some as mere political sloganeering by the Museveni regime.

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For a majority of Ugandans struggling to get by, new roads mean little, especially with allegations of inflated costs on the projects.

“Uganda’s long run of rapid growth has struggled to maintain its pace in recent years,” noted Daireitou Gaye, World Bank country director for Eritrea, Kenya, Rwanda and Uganda.

“The economy has faced a number of shocks including bad weather, disruptions to its export markets in South Sudan as a result of civil unrest; election-related macro instability during the post-2011 election period and high uncertainty around the 2016 elections; upheavals in the domestic financial system as well as the global ups and downs in growth and commodity prices.”

The country’s binge investment in infrastructure is yet to trigger the expected accelerated private sector investment, a factor some blame on high interest rates that have kept borrowing out of reach for the majority in the private sector.

“As a result, Uganda’s economy has been growing at an average 4.5 per cent per year since 2012, generating only modest per capita growth, given a fast-growing population and falling below projections by at least a percentage point each year,” warns the World Bank in its 8th Country Economic Update released recently.

“The near term growth projection of about 6 per cent is also lower than the average sufficient for Uganda to attain middle-income status by 2020.”

Acknowledging the challenges highlighted by the World Bank, Uganda’s central bank noted in its February monetary policy statement that the economy was yet to pick up the necessary momentum to push the middle income dream forward.

“The Bank of Uganda’s composite for economic activity for December 2016 indicates a slowdown in economic activity in the quarter to December 2016. While the slowdown is due to temporary factors, economic growth could remain weak in the remaining part of FY2016/2017, reflecting a combination of domestic and external factors. Consequently, GDP growth projections for 2016/17 has been revised downwards to 4.5 per cent from 5 per cent that we had at the previous monetary policy committee meeting,” it said in a statement.

The bank pushed prospects for a rebound to next year, banking on improved agricultural performance with better weather conditions and improved global conditions. 

Recent shocks in the financial markets, such as the collapse of Crane Bank —which, until 2015, was the country’s fourth largest by assets — have helped highlight the challenges in the financial sector such as the high level of non-performing loans. Many big businesses are in distress.

The property market, a major test of the vibrancy of an economy and one in which Uganda has consistently registered growth over the years, has significantly slowed and is projected to slow down even further.

Drought in parts of the country has left 1.6 million in need of emergency food aid.