KAGENYI LUKKA: Uganda is on the Right Direction to a Middle Income Status
Uganda’s economic story since 1986 is one of deliberate recovery, reform, and transformation. From a war-ravaged economy with inflation above 200% and a collapsed productive base, the country has steadily rebuilt its institutions, stabilised its macroeconomy, and shifted towards industrialisation and household wealth creation. The data shows we are not just moving, we are moving in the right direction towards lower-middle income status.
1. The Recovery and Stabilisation Phase: 1986–1997
When the National Resistance Movement took power in January 1986, Uganda’s economy was in free fall. GDP had contracted for most of the 1970s and early 1980s. Public institutions were dysfunctional, infrastructure was destroyed, and the private sector was moribund.
In 1987, Uganda adopted the Economic Recovery Program with support from the World Bank and IMF. The Structural Adjustment Programs that followed were unpopular but necessary at the time. The core measures included:
1. Liberalisation of the economy– the state monopoly on coffee and other exports was dismantled, allowing private traders to enter the market.
2. Privatisation and divestiture– loss-making parastatals were either privatised or closed to reduce the fiscal burden.
3. Fiscal discipline and retrenchment – the civil service was reduced, and the army demobilised to cut recurrent expenditure.
4. Exchange rate and trade liberalisation – a market-determined exchange rate and removal of import controls restored competitiveness.
The results were visible by the mid-1990s. Inflation fell from 240% in 1987 to 5.8% by 1995. GDP growth averaged 6.8% annually between 1990 and 1999. This period laid the foundation for macroeconomic stability, which became the anchor for the next phase of growth.
2. Poverty Reduction and Infrastructure Build-up: 1998–2015
With stability secured, government shifted focus to poverty reduction and investment in public goods. The Poverty Eradication Action Plan, introduced in 1997, directed more resources to health, education, roads, and agriculture.
By 2008, the share of discretionary spending going to core poverty programs had risen from 17% in 1997 to 38%. Uganda’s poverty rate declined from 56% in 1992 to 19.7% in 2012/13, one of the fastest reductions in Sub-Saharan Africa.
Infrastructure investment accelerated during this period. The Kampala-Masaka, Kampala-Jinja, and Northern Corridor highways were rehabilitated, cutting transport costs and opening rural areas to markets. Electricity generation expanded with Bujagali in 2012 and Karuma later. Installed capacity grew from 380MW in 2010 to over 1,200MW by 2020, reducing one of the key bottlenecks to industrialisation.
Industry’s share of GDP rose from 10.4% in 1990 to 26.2% in 2014. By 2015, GDP per capita had reached $848, up from $216 in 1992. Uganda was classified as a low-income country, but the structure of the economy was changing.
3. Industrialisation and Job Creation: 2016 to Date
The current phase is defined by import substitution, value addition, and job creation. Government policy under the National Development Plans has prioritised agro-processing, light manufacturing, and mineral beneficiation.
Industrial growth
Uganda now has over *5,000 operational industries* spread across industrial parks and zones in Kampala, Mbale, Jinja, Mbarara, and Arua. These include steel mills, cement plants, pharmaceutical manufacturers, edible oil processors, and textiles. The manufacturing sector alone employs 180,216 people in formal establishments.
Between 2023 and 2025, the economy created *618,503 new jobs*, with the private sector accounting for 1.7 million of the 2.2 million formal jobs recorded by UBOS. Trade, manufacturing, and finance are the fastest-growing employers outside agriculture.
Infrastructure as an enabler
Improved roads have cut the cost and time of moving agricultural produce to markets. The Kampala-Entebbe Expressway, the expansion of the Northern Corridor, and rural road programs under the District Discretionary Equalisation Grant have connected parishes to district markets. Electricity access rose from 9% in 2010 to 57% in 2024, largely through rural electrification and grid extensions. This has made agro-processing viable in areas that previously lacked power.
Macroeconomic indicators
Uganda’s GDP in current USD terms grew from $29.2 billion in 2015 to $45.6 billion in 2023. GDP per capita reached $1,590 in 2024 and is projected at $1,704 in 2025. The World Bank’s threshold for lower-middle income status is $1,136 per capita. Uganda crossed that threshold in 2021 and has maintained it.
The IMF projects real GDP growth of 7.6% for 2026, driven by oil and gas investments, agro-industrialisation, and services. This positions Uganda to consolidate its middle-income trajectory.
4. The Parish Development Model: Lifting the 39%
Despite macro gains, 39% of Ugandan households remained in the subsistence economy as of 2016/17. These 3.5 million households, mostly in agriculture, were outside the money economy. Of these, 62% were engaged in subsistence agriculture and 38% in non-agricultural activities.
The Parish Development Model, launched in February 2022, is designed to close this gap. It operates at the parish level, with each parish receiving UGX 100 million annually as a revolving fund for SACCOs. The model targets production, storage, processing, and marketing through parish-level planning and enterprise selection.
As of mid-2025, over 1.4 million households had received PDM funds. Disbursements had hit UGX 3.6 trillion, with UGX 1.4 billion already repaid, showing the start of the revolving cycle. The 2025/26 budget added another UGX 1.059 trillion to capitalize the model further.
PDM is different from past programs because it is bottom-up, parish-based, and tied to the value chain. It seeks to move households from “working for the stomach” to commercial production, creating a domestic market for the industries being built.
5. What the Numbers Tell Us
The structural shift is clear when you compare 1986 to 2025:
– GDP: From under $3 billion in 1986 to $45.6 billion in 2023.
– Poverty: From 56% in 1992 to 19.7% in 2012/13, with further decline expected as PDM matures.
– Employment: Formal employment rose to 2.2 million in 2023/24, with 77% in the private sector.
– Industrialisation: Over 5,000 industries now operate, employing over 110,000 people directly in manufacturing and agro-processing.
– Infrastructure: Road network expanded from 10,000km of tarmac in 2010 to over 6,000km of paved national roads and thousands more in district and rural roads today.
These are not isolated achievements. They are linked. Roads and electricity enable factories. Factories create jobs. Jobs increase household incomes. PDM ensures that households at the parish level enter the money economy and become both producers and consumers.
6. Challenges and the Road Ahead
The journey is not without challenges. Value addition is still low in some sectors. Access to affordable credit remains a constraint for SMEs. Corruption and inefficiency in project implementation can delay infrastructure. Climate change is affecting agriculture, which still employs over 60% of the population.
However, the policy direction is consistent. From SAP in 1987 to PDM in 2022, the arc has moved from stabilisation, to liberalisation, to infrastructure investment, and now to household wealth creation. The National Development Plan IV and Vision 2040 provide the framework to sustain this trajectory.
Three priorities will determine how fast we arrive at middle-income status:
1. Deepen industrialisation – increase local content, reduce imports, and expand exports under AfCFTA.
2. Complete strategic infrastructure– the Standard Gauge Railway, oil refinery, and rural road network will lower production costs.
3. Protect and scale PDM – ensure funds reach intended beneficiaries and are used for productive enterprise.
In conclusion therefore,Middle income status is not declared in a speech. It is earned through jobs created, factories built, roads paved, and households that move from subsistence to surplus.
Since 1986, Uganda has moved from collapse to stability, from stability to growth, and from growth to structural transformation. The industrial base is expanding, infrastructure is improving, and the Parish Development Model is targeting the last mile of poverty.
The direction is right. The pace must be sustained. With discipline, accountability, and continued investment in productive sectors, Uganda will not just reach lower-middle income status, it will stay there and climb higher.
Kagenyi Lukka is the Deputy Resident City Commissioner, Kawempe Division, Kampala Capital City Authority
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