• Authored By: Joab Wamani
24 Sep 2023

Uganda’s imports have been growing at a faster pace than exports. The country’s trade deficit as at 2022 reached $4.77bn, a 16% increase from 2021’s $4.11bn.

A trade deficit may lead to depreciation of the local currency, which eventually is expected to correction the same deficit on account of raising the exports’ competitiveness over imports. Uganda’s exports haven’t been competitive enough.

Despite various government initiatives to boost exports, growth remains dismal. This is a cause for concern as a persistent trade deficit may yield inflationary pressures due to exchange rate volatility, external debt accumulation, vulnerability to global shocks due to over reliance on imports.

Overcoming a trade deficit may entail a policy mix of inward and outward looking strategies. Uganda has enacted several policies to help drive exports such as the National Exports Development strategy 2015/16 – 2019/20 which set out several interventions to address the constraints to Uganda’s export sector. It included product and market focusing, increasing production, value addition, quality assurance and product competitiveness among many others. In addition, the government promotes domestic consumption of domestically produced commodities to diminish reliance on imports through the Buy Uganda Build Uganda (BUBU) initiative.

However, the import-export gap has continued to widen. Nevertheless, Uganda has registered a trade surplus from trade within the EAC since 2016 except in in the FY 2020/21. The country’s monthly economy performance report for July 2023 shows that the East African Community remains Uganda’s top export destination.

Kenya, South Sudan, and Democratic Republic of Congo are the top three destinations for Uganda’s merchandise export, accounting for 31.4%, 25.7%, and 24.7% of the total exports respectively.

Yet, exports to region are not immune to pressure from imports. Annual data from Uganda Bureau of Statistics (UBOS) shows that the country has persistently registered trade deficits from trading with Kenya and Tanzania despite their potentially bigger markets compared to other member states. Uganda’s exports to Rwanda were heavily impacted by the spat between two countries that a border closure for almost two years.

This calls for a careful examination of the country’s relations with neighbours in addition to measures aimed at upholding the trade surpluses from South Sudan, Burundi, and DRC.

Cross border trade disputes especially at the South Sudan, Rwanda and Kenya have on several occasions left Ugandan traders stranded with counter accusations of substandard goods. These not only plunge the affected traders into losses, but also threaten the country’s registered trade success and position within the EAC bloc.

The government through its diplomatic missions, Ministry of Trade, Industry and Cooperatives and the Ministry of East African Affairs, needs to find amicable solutions to address such conflicts for smooth flow of trade.

Uganda national Bureau of Standards (UNBS) should undertake product certification and enforce strict adherence to standards by Ugandan exporters to curtail trade conflicts emanating from claims of substandard goods. Additionally, government should support companies in building brand recognition, thereby fostering individual incentives for upholding their reputations through the production and export of high quality products.

Kenya’s Position as the top destination for Uganda’s exports within the bloc cements the need for continued dialogue between the two nations for relaxation of non-tariff barriers on Uganda’s agricultural produce composed of milk, poultry products, sugar, and maize.

For the last five financial years, Uganda traded at deficit with Tanzania, reaching peak of $ 1.1 bn in the FY 2020/21. Tanzania has the largest population within the EAC, signaling a bigger potential market for Uganda’s exports. Like Kenya, Tanzania has also on some occasions imposed trade barriers on Ugandan produce. Alongside negotiations between the two nations for the abolition of trade barriers, more avenues for leveraging the potentially enormous market should be sought for to boost Uganda’s exports from Tanzanian.

Uganda needs policies that target raising firm-level production and export capacities, such as measures that encourage innovation, adoption of better production technologies,  access to cheap credit, easing business formalisation process among others. These will boost local production for exports.

Uganda should fix the standards issue. Micro Small and Medium-sized Enterprises (MSMEs) should be assisted to adhere to standards to smoothen trade within the EAC bloc. The huge and consistent deficit from Tanzania, despite its potentially large market, calls for extra export promotion strategies to boost Uganda’s receipts from Dar es Salaam.



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