1.1 Inflation

Annual headline inflation continued on an upward trend increasing to 3.7 percent in February 2025 from 3.6 percent the previous month. This was largely attributed to an increase in annual food crops and related items inflation recorded at 4.3 percent in the year ending February 2025 compared to 0.2 percent registered in the year ended January 2025. On the other hand, annual core inflation and annual energy, fuels and utilities (EFU) inflation slowed down over the same period to 3.9 percent and 0.2 percent, from 4.2 percent and 0.3 percent respectively.

Annual core inflation declined to 3.9 percent in February 2025, from 4.2 percent the previous month driven by notable decline in prices of education services, passenger transport (by road) services. Particularly, prices dropped for taxi fares (short and medium distance), bus fares long distance (over 100 km) and textbooks among others. On the contrary, other goods inflation increased slightly to 2.7 percent in February 2025, from 2.5 percent in January as price increases were registered for goods such as refined oil, domestic beer bottled, tilapia, beef, liver and plastic cups. Additionally, the rate of price reduction for items such as rice, maize flour and sugar slowed during the period.

Annual inflation for food crops and related items surged to 4.3 percent in February 2025, up from 0.2 percent in January 2025, primarily due to supply constraints attributed to dry weather conditions in some regions. Upward price pressures were recorded for cooking bananas (matooke), tomatoes, avocado, apples, pumpkins, onions, irish potatoes, sweet potatoes, cow peas, milk and dry beans.

Annual Energy, Fuels and Utilities (EFU) inflation dropped to 0.2 percent in February 2025, down from 0.3 percent in January 2025. This was largely driven by a slowdown in price increases for solid fuels such as firewood. Additionally, the electricity price index fell by 2.0 percent in February 2025, reflecting the Electricity Regulatory Authority’s decision to lower end-user tarrifs in the first quarter of 2025.

1.2 Economic Activity

Despite a slight drop in consumer demand in January 2025, overall economic activity in February 2025 increased following a rebound in consumer demand during the month. As a result, sentiments about the business conditions outlook were positive among the private sector players.

The Composite Index of Economic Activity (CIEA)⁴ maintained an upward trend indicating increased economic activity over the 12 month period as shown in Figure 3 above. The CIEA increased to 169.20 in January 2025 from 168.10 in December 2024.

The Purchasing Managers’ Index (PMI) increased to 52.6 in February 2025 up from 49.5 recorded the previous month signifying an improvement in business conditions. The second month of the year was characterised by a renewed upturn in consumer demand and new orders in all monitored sectors resulting in growth in output from the private sector. Employment likewise increased during the month for the first time since November 2024 as companies augmented the workforce to meet the higher demand and new orders. However, output prices rose owing to the persistent rise in input costs, particularly, cement, toiletries, packaging and cereal products.

2.1 Exchange Rate Movements

The Ugandan Shilling gained by 0.3 percent on average against the US Dollar in February, 2025. The US Dollar traded at an average midrate of Shs. 3,677.7 in February 2025, down from Shs. 3,689.0 recorded the previous month. February 2025 marked the fifth consecutive month to register a rate below the average levels of Shs. 3,711 per US$ recorded in quarter one of this financial year. Higher dollar inflows, particularly from offshore portfolio investors during the month, outweighed corporate demand which contributed to the strengthening of the Shilling.

2.2 Interest Rate Movements

In February, the Central Bank maintained the monetary policy rate at 9.75 percent. Despite risks to the inflation outlook being tilted to the upside, the Central Bank decided that keeping the rate unchanged was sufficient to anchor inflation around the medium-term target of 5 percent while fostering economic growth and socioeconomic transformation.

2.3 Government Securities

Government raised a total of Shs. 2,266.6 billion from the sell of securities in February, 2025. Of the total amount raised, Shs. 742.8 billion was from T-Bills while Shs. 1,523.7 was from T-Bonds. A total of Shs. 646.6 billion was used for refinancing maturing securities while Shs. 1,619.9 was used to finance other items in the budget.

2.4 Annualised Yields (Interest Rates) on Treasury Bills

Yields (interest rates) on the 182-Day and 364-Day Treasury Bills declined to 13.9 percent and 15.0 percent in February 2025 down from 14.4 percent and 15.3 percent in January 2025, respectively. The yield on the 91-Day tenor slightly edged upwards to 10.7 percent in February 2025 from 10.4 percent recorded the previous month. The general reduction in yields in February is partly due to the lagged effect of the Central Bank monetary policy easing stance and demand for Government Securities from the private sector.

All auctions for Treasury Bills were oversubscribed, with the average bid to cover ratio recorded at 2.9 in February, 2025.

2.5 Outstanding Private Sector Credit⁸

In January 2025, the stock of outstanding private sector credit saw a slight uptick of 0.27 percent, reaching Shs. 22,880.45 billion from Shs. 22,818.96 billion in December 2024. This growth was driven by a rise in Shilling denominated credit which increased from Shs. 16,272.98 billion in December 2024 to Shs. 16,371.30 billion in January 2025, on account of higher deposits to deposit taking institutions. This availed more funds for lending. In contrast, foreign currency-denominated credit declined over the same period, falling from Shs. 6,545.99 billion in December 2024 to Shs. 6,509.15 billion in January 2025. This was partly due to restructuring of key loans from dollar to shilling denominated credit, in the telecommunications and communications sector.

2.6 Credit Extensions⁹

The value of credit approved for disbursement in January 2025 amounted to Shs. 1,250.8 billion against applications valued at Shs. 2,090.3 billion, implying a 59.8 percent approval rate for the month. Just like in December 2024, Personal loans and Household loans continued to dominate the largest share of credit approved in January 2025 at 43.1 percent (Shs. 539.7 billion) of the total. This was followed by Trade at 19.5 percent (Shs. 244.3 billion), Building, Construction and Real Estate at 11.0 percent (Shs. 137.2 billion) and agriculture at 9.8 percent (Shs. 122.4 billion).

In comparison to the same month last year, personal and household loans continued to receive the largest share of credit, increasing from 27.0 percent in January 2024 to 43.1 percent in January 2025. However, comparison with the same period shows that credit allocated to manufacturing and building, construction and real estate declined.

3.1 Merchandise Trade Balance

Compared to the same month last year, the merchandise trade deficit widened by 28.5 percent, rising from USD 187.81 million in January 2024 to USD 241.25 million in January 2025. The surge was driven by the rise in imports which more than offset the increase in exports.

However, Uganda’s merchandise deficit with the rest of the world reduced by 24.4 percent month-to-month. The deficit fell from USD 318.90 million in December 2024 to USD 241.25 million in January 2025, on account of an increase in exports which more than offset the increase in imports.

3.2 Merchandise Exports ¹¹

In comparison with the same month last year, export earnings in Uganda grew by 50.4 percent from USD 571.16 million in January 2024 to USD 859.22 million in January 2025, largely due to increased earnings from coffee and mineral products which rose by 82.9 percent and 77.9 percent respectively. The spike in earnings from coffee was largely driven by higher coffee prices which rose by over 60.0 percent in the last year, coupled with a 14.3 percent increase in quantity. The increase in global prices followed a reduction in supply of coffee from Brazil and Vietnam (the world’s largest producers of Arabica and Robusta coffee), arising from dry weather conditions in the two countries. The increase in exports was also attributed to higher earnings from electricity, tobacco, simsim, oil re-exports, fish and its products among others.

On a monthly basis, export earnings in January 2025 amounted to USD 859.22 million, a 16.6 percent increase from USD 736.81 million in December 2024. This growth was primarily driven by higher earnings from mineral products, coffee, electricity, tobacco, cotton, tea, flowers and maize among others. Similarly, exports excluding coffee and mineral products increased by 18.1 percent from USD 320.79 million to USD 378.87 million, signaling a rise in majority of our exports in January 2025.

Coffee export earnings increased for January 2025 by 36.1 percent, from USD 115.03 million to USD 156.50 million, primarily due to higher volumes of coffee exports during the month.

Italy remained the largest market for Uganda’s coffee exports, accounting for 36.9 percent of the total coffee exports in January 2025. Other significant markets included Belgium (11.9 percent), India (9.8 percent), Sudan (9.4 percent), and Germany (8.3 percent).

3.3 Destination of Exports¹²

The Middle East emerged as the biggest destination of Uganda’s exports, accounting for 32.9 percent of the total exports in January 2025. Within the Middle East, the United Arab Emirates accounted for 97.7 percent of Uganda’s exports to the region. Other notable destinations for Uganda’s exports were the EAC (27.4 percent), the European Union (16.9 percent), Asia (14.8 percent) and the Rest of Africa (4.0 percent). Within the European Union, Italy, Belgium, Germany and the Netherlands accounted for close to 90 percent of exports to the region.

Within the EAC, Democratic Republic of Congo emerged as the largest importer of Uganda’s merchandise, taking up 33.4 percent (USD 78.61 million) of total exports. This was followed by South Sudan at 27.1 percent (USD 63.80 million) and Kenya at 21.6 percent (USD 50.87 million).

3.4 Merchandise Imports¹³

The value of merchandise imports year-on-year grew by 45.0 percent from USD 758.98 million in January 2024 to USD 1,100.46 million in January 2025. This growth was majorly attributed to an increase in formal private sector non-oil imports and project related Government imports. These include mineral products, machinery equipments, vehicles & accessories, vegetable products, animal beverages, fats & oils, animal & animal products, among others.

Similarly, on a month-to-month basis, imports increased by 4.3 percent from USD 1,055.71 million in December 2024 to USD 1,100.46 million in January 2025. This growth was mainly attributed to higher volumes of project-related Government Imports as well as formal private sector oil-related imports. These include vegetable products, animal, beverages, fats & oils, petroleum products, chemical & related products, plastics, rubber & related products, electricity, among others.

3.5 Origin of Imports ¹⁴

Asia maintained its position as the largest source of Uganda’s imports in January 2025, accounting for 40.6 percent of total imports. Within Asia, the major sources were China, India, Malaysia and Japan, accounting for 44.6 percent, 29.7 percent, 7.1 percent and 6.3 percent respectively. Other notable sources of Uganda’s imports included the EAC, Rest of Africa and the Middle East accounting for 21.1 percent, 19.6 percent and 9.6 percent consecutively. Within the EAC, Tanzania and Kenya were the primary source of Uganda’s imports, accounting for 61.7 percent and 34.6 percent of the imports from the region, respectively.

Comparison with January 2024 shows that, despite Asia being the largest source of Uganda’s imports, the import bill from Rest of Africa and the EAC increased as a share of our total imports from 11.8 percent to 19.6 percent and 18.0 percent to 21.1 percent respectively, pointing to increased imports from African countries. Consequently, the share of imports to Uganda from Asia, the Middle East and the European Union decreased from 48.4 percent to 40.6 percent, 10.3 percent to 9.6 percent and 7.1 percent to 6.7 percent successively.

3.6 Trade Balance by Region

During January 2025, Uganda recorded a trade surplus with the Middle East, the European Union, the Rest of Europe and the EAC amounting to USD 177.27 million, USD 71.41 million and USD 3.35 million and USD 2.43 million respectively.

On the other hand, trade deficits were recorded with Asia and the Rest of Africa worth (USD 319.45 million) and (USD 182.09 million) accordingly.

4.1 Revenue Performance

Total revenue in February 2025 amounted to Shs. 2,382.76 billion against the target of Shs. 2,851.10 billion resulting in a shortfall of Shs 468.33 billion. This shortfall was registered under both tax and other revenues as well as grants from development partners.

Tax collections in February 2025 amounted to Shs. 2,081.30 billion which was Shs. 138.36 billion short of the Shs. 2,219.66 billion target for the month as all major tax categories registered shortfalls during the month.

The biggest shortfall of Shs. 96.17 billion was registered under taxes on international trade transactions where lower than projected petroleum imports during the month affected petroleum duty collections. Additionally, the projected imports on which VAT is charged turned out lower, leading to less collection of VAT on imports during the month.

Taxes on incomes, profits and capital gains were also lower than target by Shs. 35.58 billion during February 2025. This was mainly due to the lower than anticipated collections of Pay As You Earn (PAYE), driven by the private sector where a reduction in remittances from some top tax payers was registered.

Net taxes on goods and services registered the least shortfall of Shs. 5.44 billion with excise duty short of target by Shs. 3.72 billion while net VAT was short by Shs. 1.72 billion.

4.2 Expenses

In February 2025, expenses by Government amounted to Shs. 2,843.43 billion against a plan for the month of Shs. 2,820.85 billion representing a performance rate of 100.8%. The more than planned expenses during the month were on account of higher grants to local governments, tertiary institutions and regional referral hospitals as Government continues with its commitment towards service delivery. Expenses on social benefits and the other expenses category were also higher than programmed for the month.

Total expenses on compensation of employees for the month were lower than planned mainly on account of allowances. However, wages and salaries were slightly higher than programmed during February on account of supplementary expenditures passed for this item.

4.3 Net acquisition of non-financial assets

During February 2025, Government spent a total of Shs. 556.14 billion on acquisition of non-financial assets. This was lower than the programmed amount of Shs. 793.71 billion. The acquisition of non-financial assets in February 2025 was mainly in form of land for railway transportation projects, road infrastructure, sports facilities, water facilities amongst others.

Ultimately, total expenditure (expenses plus net acquisition of non-financial assets) amounted to Shs. 3,399.57 billion against a plan of Shs. 3,614.56 billion implying a 94.1% performance.

5.1 EAC Inflation¹⁶

Annual headline inflation increased for Uganda, Kenya and Tanzania in February 2025. Kenya’s Annual Headline inflation rose to 3.5 percent from 3.3 percent the previous month, mainly due to higher food and non-alcoholic beverage prices. Similarly, Tanzania’s inflation edged up to 3.2 percent from 3.1 percent, driven by rising costs in housing, water, and utility bills. In the same manner, Burundi’s headline inflation increased to 38.2 percent in January 2025 from 36.5 percent in December 2024, primarily driven by higher food prices.

Contrarily, Annual Headline inflation for Rwanda eased in February 2025, declining to 6.3 percent, down from 7.4 percent the previous month. This was primarily driven by reduced prices for food and non-alcoholic beverages (vegetables, milk, cheese and eggs), recreation and culture and housing, water, electricity, gas and other fuels among others.

5.2 EAC Exchange Rates¹⁷

Save for Ugandan and Kenyan Shillings that strengthened against the US Dollar by 0.3 percent and 0.1 percent in February 2025 respectively, the other currencies within the EAC recorded losses. The Burundi Franc, Rwanda Franc and Tanzanian Shilling depreciated by 0.2 percent, 0.9 percent and 4.4 percent against the US Dollar, respectively.

5.3 Trade Balance with EAC

During the month of January 2025, Uganda traded at a surplus of USD 2.43 million with the EAC Partner States, an improvement from the USD 27.80 million deficit recorded in December 2024. This was driven by the combined effect of a fall in imports by 2.5 percent from USD 238.72 million to USD 232.64 million and an increase in exports by 11.4 percent from USD 210.92 million to USD 235.06 million in December and January consecutively.

At country specific level, Uganda traded at a surplus with the Democratic Republic of Congo, South Sudan, Rwanda and Burundi worth USD 74.11 million, USD 61.05 million, USD 24.00 million and USD 4.63 million respectively. However, deficits were recorded with Tanzania and Kenya worth USD 131.84 million and USD 29.52 million respectively.

Year on year, Uganda’s trade surplus shrank by 97.2 percent from USD 85.41 million in January 2024 to USD 2.43 million in January 2025. The decline in the surplus was driven by an increase in imports from USD 136.43 million in January 2024 to USD 232.64 million in January 2025, most of which were coming from Tanzania and Kenya. This increase in the import bill more than offset the increase in exports to the region, which rose from USD 221.84 million in January 2024 to USD 235.06 million in January 2025. The increase in export earnings was attributed to an increase in exports to DRC and to South Sudan.