Trade Pressures Mount Despite Economic Resilience – Uganda’s Widening Trade Deficit
Export growth is strong, but rising imports threaten fiscal stability as the government seeks to balance trade and development.
Uganda’s economy continues to show resilience, with strong export performance and stable inflation, yet rising imports are widening the trade deficit, raising concerns among policymakers and economists.
According to the Bank of Uganda, exports of coffee, tea, fish, and horticultural products have increased by 12 percent year-on-year, reflecting stronger regional and international demand. At the same time, the value of imported goods—including machinery, refined petroleum, and consumer products—has grown faster, leading to a trade gap estimated at USD 2.4 billion for the first three quarters of 2025.
“Export growth is encouraging, but import dependency continues to put pressure on foreign exchange reserves,” said Dr. David Okwir, Senior Economist at Makerere University. “The challenge is ensuring that Uganda produces enough value-added goods to compete both regionally and globally.”
Sectoral Highlights
Agriculture remains Uganda’s backbone, contributing roughly 24 percent of GDP. Coffee and tea exports surged due to improved yields, while fisheries exports to the European Union have benefited from compliance with quality standards.
Manufacturing and industrial sectors, however, continue to rely on imported machinery, raw materials, and fuel, increasing import bills. This has fueled calls for enhanced local production and value addition to reduce dependency.
“We cannot continue to export raw materials while importing finished goods,” said Rose Nankya, Policy Analyst at the Uganda Manufacturers Association (UMA). “Promoting local industries and regional trade agreements can help close the gap.”
Inflation and Consumer Prices
Despite trade pressures, inflation has remained moderate at 3.8 percent, thanks to stable food prices for staples such as cabbages, maize, and Irish potatoes. The Central Bank’s careful monetary policy has helped maintain the shilling’s stability, but analysts warn that currency volatility could intensify if the trade deficit continues to expand.
Consumer sentiment remains cautiously optimistic, with rising wages in urban centers and improved access to banking services helping households manage costs.
Regional Trade Dynamics
Uganda’s membership in the East African Community (EAC) has facilitated exports, but non-tariff barriers and logistics challenges remain obstacles. Several neighboring countries have imposed restrictions on Ugandan goods, affecting trade flows and regional competitiveness.
“We need to resolve EAC trade barriers and invest in logistics and storage to ensure our products reach markets efficiently,” said Dr. Okwir. “Otherwise, export growth alone will not be enough to balance our import demands.”
Government Response
The Ministry of Finance has outlined measures to encourage import substitution and industrialization, including incentives for local manufacturers, reduced tariffs on essential production inputs, and programs to boost agricultural processing.
Plans to leverage upcoming oil revenues for infrastructure development and industrial projects may help strengthen domestic production, but implementation will require careful fiscal management to avoid exacerbating the deficit.
Looking Ahead
While Uganda’s economy demonstrates resilience, experts warn that unchecked trade imbalances could strain the shilling, increase debt pressure, and limit the benefits of growth. Strategic investment in local manufacturing, value addition, and export promotion will be critical to sustaining economic stability.
“The trade deficit is not just a number—it’s a signal,” noted Rose Nankya. “We must ensure that growth translates into self-reliance and competitiveness.”
