An Analysis of Uganda’s trade deficit trends, Sources and Needed Measures

Abstract

International trade is an engine for economic growth. Uganda’s export growth and diversification drive policy since the early 1990s has contributed to the reduction in trade imbalances and poverty. Until the early 1990s, Uganda’s economic policy was characterized by high controls with high presence of state-owned enterprises, price and marketing controls, foreign exchange transactions, financial and credit market controls.

This article reflects results of a document review addressing export growth and government policy on trade. Since 1990, Uganda’s export and import trade has evolved in response to various economic policies and initiatives taken over time. Efforts taken by government to increase export diversity and foreign exchange earnings actually did pay off. Specifically, foreign exchange earned from Uganda’s merchandise trade increased by almost five times over the last fifteen years, i.e. from US$ 450.5 million in 2001 to US$ 1.62 billion in 2010 and almost US$ 2.5 billion in 2016 (ITC, 2017; UBOS, 2017).

Uganda undertook sweeping trade, investment policy and institutional reforms over the last three decades. The country’s trade responded positively with merchandise comprising
relatively more export product diversification though they remain low in value with little processing undertaken. There is little vertical diversification (processing) to talk of regarding Uganda’s exports. In terms of destination markets, Uganda’s exports have gained market share in the COMESA market which can be accredited to fruits of the country’s efforts in regional integration. Regional markets remain significant for relatively bulky and/or low-value exports, e.g. non-metallic minerals like cement, vegetable/animal products, fats and oils; wood products; prepared foods and beverages; live animals and products thereof; and textiles and articles thereof. Uganda’s imports are skewed towards consumption products (e.g. cushioned vehicles and foodstuffs) rather than capital goods and raw materials. It is also clear that even Uganda imports are highly concentrated into a few products (e.g. oil and petroleum products; vehicles; pharmaceuticals; wheat; and palm oils).