By Bob Twinomugisha
The budget for this fiscal year was released at a critical point in Uganda’s economic development journey as it prepares for the commencement of commercial oil production, deepen participation in the African Continental Free Trade Area (AfCFTA), and pursue its ambitious goal of growing the economy from a baseline of nearly US$ 50 billion in 2025 to US$ 500 billion by 2040.
This budget supports the implementation of Uganda’s Tenfold Growth Strategy through investments in agro-industrialization, tourism, mineral beneficiation, oil and gas, science, technology and innovation, and supporting infrastructure. Opportunities arising from strategic sector investments, oil production and AfCFTA market access have the potential to improve productivity, competitiveness, and export diversification.
However, the successful exploitation of these opportunities will require substantial investment and access to affordable medium-to-long-term financing. According to Uganda Bankers Association (UBA), Agriculture, Tourism, Minerals, Oil and Gas, and Science, Technology and Innovation (ATMS) strategy response, achieving the Tenfold Growth Strategy will require private sector credit to increase from UGX 28.6 trillion in 2025 to UGX 490 trillion by 2040, while capital markets are expected to mobilize an additional UGX 440 trillion during the plan period. These resources will support not only priority sectors but also enabling sectors such as transport, energy, telecommunications, manufacturing, real estate, and services.
Over the last two decades, Uganda has strategically invested in foundations for development. The country increased electricity access to over 58 percent of the population in FY2023/24, expanded paved road networks (tarmac) to over 6,199km in 2025, improved digital connectivity with internet penetration and usage rising to 53% in 2022 from 1.8% in 2010 and invested in education and health leading to a rise in life expectancy to 68.2 years in FY2023/24 from 50.4 in FY2010/11, according to the latest reports by the National Planning Authority and Ministry of Finance, Planning and Economic Development.
While these achievements have strengthened productive capacity and competitiveness, infrastructure alone cannot deliver economic transformation. Economic transformation will only happen when businesses invest strategically, adopt technology, expand production and productivity, engage in value addition to raw materials, access domestic, regional and international markets and generate productive jobs. At the Centre of this transformation process lies a critical factor: development finance.
According to Bank of Uganda’s latest statistics, personal and household loans accounted for 25.6 percent of the total private sector credit while building, mortgage, construction and real estate activities accounted for 18.6 percent. In comparison, manufacturing accounted for 12.5 percent, agriculture 11.4 percent, and mining and quarrying only 2.0 percent. This implies that productive sectors central to structural transformation continue to require greater access to affordable medium-to-long-term financing.
Development finance plays a critical role in addressing this challenge by providing affordable patient capital and business advisory services, that supports productive investment in key growth sectors of the economy, benefiting Small and Medium Enterprises (SMEs) and large-scale enterprises that have significant socio-economic impact. Through instruments such as long-term loans, asset finance, project finance, trade investment and assurance support, equity investments, development finance enables businesses to undertake investments that may not be adequately served by conventional financing. Notably, development finance institutions’ flexible funding arrangements and extended repayment terms give businesses enough time to generate cash flow, expand operations, enhance competitiveness, and achieve long-term sustainability. Further, beyond financing, development finance institutions also provide business advisory services to have professionally run businesses and enterprises which in result reduces the risk of default of financed projects.
International experience demonstrates that many countries have relied on national development banks to avail this type of financing and have successfully transformed their economies. Germany’s KfW supported post-war reconstruction and industrial modernization, Brazil’s BNDES financed infrastructure and industrial expansion, East Asian development banks supported export-oriented industrialization, and the Development Bank of Southern Africa (DBSA) continues to finance strategic infrastructure and regional integration projects. These experiences show that countries that successfully industrialized established institutions capable of mobilizing and deploying affordable long-term financing for productive investment.
In Uganda, priority sectors under the Tenfold Growth Strategy, including agro industrialization, tourism, mineral development, and science, technology and innovation, are capital intensive and require strong development finance support. Recognizing this challenge, Government continues to capitalize and revitalize institutions that support productive investment and structural transformation. Government has cumulatively capitalised UDB with Shs 1.96 trillion to provide patient capital to strategic sectors vital for industrialization and value addition. Notably, UDB has financed more than 100,000 beneficiaries either directly as projects, or through other innovative financial solutions.
The continued capitalization of UDB is therefore important not only because it expands access to affordable medium-to-long-term financing, but also because it strengthens the country’s capacity to finance strategic investments in sectors that are critical for industrialization, value addition, export growth and job creation.
Ultimately, achieving tenfold growth will require more than infrastructure and macroeconomic stability. Uganda must mobilize long-term capital, deepen capital markets, strengthen development finance institutions, expand blended and concessional financing, and increase private investment. Development finance is therefore not merely a supporting instrument but one of the critical pillars upon which the successful achievement of Uganda’s Tenfold Growth Strategy depends.
The writer is Senior Economist, Macroeconomics and Trade, Uganda Development Bank Ltd
