The Ugandan economy has performed well in the past decade and a half, showing considerable resilience against external shocks – including weather and energy shocks. GDP growth has averaged 6 percent per annum since 2000 and 8.3 percent over the past five years.. The country has achieved a degree of economic diversification, with manufacturing increasing in importance. Inflation has declined from 8.5 percent in 2005 to 6.4 percent in 2007, but has been in double digits since April 2008, standing at 11.5 percent in October 2008. Economic growth was forecast at 8.0 percent for 2008, supported by growth in construction and services. Rising food prices, exacerbated by low productivity in agriculture, poor transportation infrastructure, and high energy prices, remain the main determinant of inflation, forecast at 5.0 percent for 2008.

Real GDP growth rates of 7 to 8 percent a year are required to make an impact on poverty. Poor electricity supply, due to an inadequate generation, distribution infrastructure, and spillover effects from the global financial turmoil will, however, make the attainment of these figures a challenge. Consequently, real GDP growth rates have been downgraded from 8.0 percent to 7.3 percent.

Economic policy is broadly focused on the government’s Poverty Eradication Action Plan (PEAP) and its successor, the National Development Plan (NDP). Agricultural modernization is the main long-term policy objective, along with improvements to infrastructure and a solution to the electricity crisis. Financial sector development and improved governance are also important goals.  

The Bank Group’s strategy for Uganda draws on the Uganda Joint Assistance Strategy (UJAS), supported by Development Partners, covering the period 2005 to 2009. Its objective is to articulate a harmonised response to the country’s PEAP and other development goals. More specifically, the Bank Group’s support is mainly around two pillars of the PEAP, namely, enhancing production, competitiveness and incomes, and human development.

The Bank’s current public and private sector portfolio in Uganda (including multinational operations) comprises 22 projects with a total commitment of UA 522.64m, of which UA119.28m (38.13 percent) has been disbursed. Although overall portfolio performance improved in 2007, a few challenges still prevail.
As part of its support to Uganda’s private sector, the AfDB has provided direct financial assistance to the energy and hospitality sectors, and advisory services to private entrepreneurs. Among the most important projects supported by the Bank are the Bujagali and Buseruka Hydropower Projects and rehabilitation of the Sheraton-Kampala Hotel.

Uganda’s African Development Fund (ADF XI) allocation for 2008-10 is UA356.39m. Projects to be funded under the allocation include the Education IV Project (UA52m); the Community Agriculture Infrastructure Improvement Project-II (UA45m); the Rehabilitation of Mulago Hospital (UA40m), and the Power Transmission Lines Project (UA52.51m), which comprises the the construction of the 132 KVA Mbarara-Nakenda Line and the upgrading of the 132 KVA Tororo-Lira line.  Others are the upgrading the Nyakahita-Ibanda-Fort Portal road (UA80m), the Microfinance Project-II (UA18m), the Urban Markets and Trade Improvement Project (UA 38 million), and the Kampala Sanitation Project (UA 35 million). The AfDB Bank is also supporting a number of regional infrastructure projects, including roads and electricity transmission that benefit Uganda.