By Bob Twinomugisha
Uganda’s budget for the 2026/27 financial year was presented at a pivotal moment in the country’s economic journey.
The country is preparing for the start of commercial oil production, deepening its participation in the African Continental Free Trade Area (AfCFTA), and pursuing an ambitious target of expanding the economy from about US$50 billion in 2025 to US$500 billion by 2040.
The budget supports the implementation of Uganda’s Tenfold Growth Strategy through investments in agro-industrialisation, tourism, mineral beneficiation, oil and gas, science, technology and innovation, and supporting infrastructure.
Opportunities created by investments in these strategic sectors, together with oil production and access to the AfCFTA market, have the potential to improve productivity, strengthen competitiveness and diversify exports.
However, fully exploiting these opportunities will require substantial investment and access to affordable medium and long-term financing.
According to the Uganda Bankers Association’s response to the Agriculture, Tourism, Minerals, Oil and Gas, and Science, Technology and Innovation (ATMS) strategy, achieving the Tenfold Growth Strategy will require private sector credit to increase from Shs28.6 trillion in 2025 to Shs490 trillion by 2040.
During the same period, Uganda’s capital markets are expected to mobilise an additional Shs440 trillion. These resources will finance not only priority sectors but also enabling sectors such as transport, energy, telecommunications, manufacturing, real estate and services.
Over the past two decades, Uganda has invested strategically in the foundations of economic development.
Electricity access increased to more than 58% of the population in the 2023/24 financial year. The country’s paved road network expanded to more than 6,199 kilometres by 2025.
Internet penetration and usage rose to 53% in 2022 from just 1.8 per cent in 2010. Investments in education and healthcare also contributed to an increase in life expectancy from 50.4 years in the 2010/11 financial year to 68.2 years in 2023/24, according to the National Planning Authority (NPA) and the Ministry of Finance, Planning and Economic Development.
These achievements have strengthened Uganda’s productive capacity and competitiveness. However, infrastructure alone cannot deliver economic transformation.
Transformation will occur when businesses invest strategically, adopt modern technology, expand production, improve productivity, add value to raw materials, access domestic, regional and international markets, and create productive jobs.
At the centre of this process lies one critical ingredient: development finance.
According to the latest Bank of Uganda statistics, personal and household loans account for 25.6% of total private sector credit, while building, mortgage, construction and real estate account for 18.6%.
Manufacturing receives 12.5% of private sector credit, agriculture 11.4%, and mining and quarrying only 2%.
These figures suggest that productive sectors that are central to structural transformation still face significant challenges in accessing affordable medium and long-term financing.
Development finance plays a vital role in addressing this gap by providing affordable patient capital and business advisory services that support productive investment in key sectors of the economy.
This benefits both small and medium-sized enterprises and large-scale businesses with significant socio-economic impact.
Through instruments such as long-term loans, asset finance, project finance, trade finance, investment guarantees and equity financing, development finance enables businesses to undertake projects that may not be adequately supported by conventional commercial lending.
One of the key advantages of development finance institutions is their flexible financing arrangements and longer repayment periods.
These allow businesses sufficient time to generate cash flow, expand operations, improve competitiveness and achieve long-term sustainability.
Beyond providing finance, these institutions also offer business advisory services that strengthen corporate governance and improve management practices, reducing the likelihood of project failure and loan defaults.
International experience demonstrates the important role national development banks can play in economic transformation.
Germany’s KfW supported post-war reconstruction and industrial modernisation.
Brazil’s BNDES financed infrastructure development and industrial expansion.
Development banks across East Asia played a central role in supporting export-led industrialisation, while the Development Bank of Southern Africa continues to finance strategic infrastructure and regional integration projects.
These examples show that countries that successfully industrialised established institutions capable of mobilising and deploying affordable long-term financing for productive investment.
In Uganda, priority sectors under the Tenfold Growth Strategy, including agro-industrialisation, tourism, mineral development, and science, technology and innovation, are capital intensive and require strong development finance support.
Recognising this need, the Government has continued to capitalise and strengthen institutions that finance productive investment and structural transformation.
To date, the Government has capitalised Uganda Development Bank (UDB) with a cumulative Shs1.96 trillion to provide patient capital to strategic sectors that drive industrialisation and value addition. UDB has financed more than 100,000 beneficiaries, either directly through project financing or indirectly through innovative financial solutions.
Continued capitalisation of UDB remains important because it expands access to affordable medium and long-term financing while strengthening Uganda’s ability to support strategic investments that promote industrialisation, value addition, export growth and job creation.
Ultimately, achieving Uganda’s Tenfold Growth Strategy will require more than investment in infrastructure and sound macroeconomic management.
The country must mobilise long-term capital, deepen capital markets, strengthen development finance institutions, expand blended and concessional financing, and attract greater private sector investment.
Development finance is therefore not simply a supporting tool. It is one of the critical pillars upon which the successful implementation of Uganda’s Tenfold Growth Strategy will depend.
The writer is Senior Economist for Macroeconomics and Trade at Uganda Development Bank Ltd.
