The economy faces a delicate balance between survival and growth. Despite low inflation, high prices continue to strain businesses and consumers, which calls for fiscal discipline, prudent oil revenue use, and targeted support for small businesses.
Economist Fred Muhumuza calls for diversification, productivity, and moderate monetary policies as vital to ensure stability and sustainable recovery amid looming elections and global pressures.
What types of businesses should Ugandans prioritize for sustainability and growth?
Many entrepreneurs need to first focus on survival before thinking about sustainability and growth.
Depending on available capital, it’s wiser to invest in fast-moving ventures with quick turnover, such as salons, restaurants, foodstuffs, garages and spare parts, transport services, and other consumables.
Avoid tying up money in slow-moving items that sell once in a while unless you have the financial muscle to hold stock for long periods.
Inflation seems low on paper, but ordinary Ugandans still feel economic pressure. Why the mismatch?
Inflation measures the rate of price increase, not the price level itself. People are affected by high price levels, which erode purchasing power even when inflation is low.
When demand falls because people can’t afford goods, inflation may remain subdued, yet people still feel poorer.
The real solution is to raise incomes moderately while curbing unnecessary public spending, rather than freezing wages out of fear of inflation.
With elections approaching, what economic risks or opportunities do you foresee afterward?
We could see a wave of inflation if government spending remains high, particularly around election-related activities.
Counter-cyclical policies, reducing certain expenditures while others rise, are essential. Without this balance, key sectors such as health, education, and infrastructure may suffer. The greater risk is poor service delivery, though inflation cannot be ruled out.
What lessons from the 2011 economic crisis can help Uganda avoid instability?
The main lesson is restraint. Limit public spending to essential services and maintain fiscal discipline.
Overspending during political cycles leads to the same inflationary and service-delivery challenges we saw in 2011.
How can Uganda ensure that oil production benefits its citizens?
Oil is merely a source of revenue; the true test lies in how we use it. The so-called ‘oil curse’ isn’t caused by oil itself but by weak institutions and poor governance.
Uganda must strengthen its systems, ensure transparency, and invest oil revenues wisely. If not, we risk following the path of Nigeria or Angola instead of success stories like Qatar, the UAE, or Malaysia.
How important is diversification, and where should Uganda focus?
Diversification is crucial, though Uganda is already diversified in low-yield sectors. Agriculture, trade, and services bring limited returns for most players.
To move forward, we must focus on boosting productivity through modern technology, ICT, and efficient farming, reducing costs related to borrowing, infrastructure, and corruption, and investing in high-yield sectors such as digital services and mineral extraction.
Government must also seek to reform taxation, targeting high-income earners and ensuring fair redistribution through better public services.
How can Uganda cushion itself from global economic shocks?
Shielding completely is impossible; adaptation is key. Maintaining strong foreign reserves and a manageable fiscal deficit are traditional buffers.
Currently, Uganda’s reserves cover 3.9 months of imports, below the preferred 4.5 months, while the fiscal deficit is projected to rise from 4.7 percent in the 2023/24 financial year to 6.4 percent this financial year.
Export growth offers some relief, but dependence on transit gold is risky. Trade disruptions, wars, and protectionist policies also remain serious threats.
What support do Ugandan businesses need from government right now?
Local enterprises need reliable, affordable business support services and a stronger domestic market. Reducing costs, such as rent, taxes, and interest rates, will help businesses survive.
Because many small businesses fund their owners’ livelihoods, addressing household costs like healthcare and transport indirectly strengthens business resilience.
Is the current policy effective in maintaining price stability?
Prices are generally stable due to a strong shilling, high interest rates, and restrained wage growth.
However, this tight policy stance limits investment and job creation.
Government needs a moderate adjustment, loosening slightly to encourage productive borrowing, support exports, and create jobs without jeopardizing stability.