Uganda’s economy expanded by 8.5% in the second quarter of the 2025/26 financial year, supported by stronger domestic demand and increased investment, according to the latest performance report released by the Ministry of Finance, Planning and Economic Development based on preliminary data from the Uganda Bureau of Statistics (UBOS).

The growth compares with 5.4% recorded in the same period of the previous financial year, reflecting improved activity across key sectors including construction, manufacturing, and information and communications technology.

Business Activity Strengthens

Economic activity continued to improve in February 2026, with high-frequency indicators pointing to sustained expansion.

The Purchasing Managers’ Index (PMI) rose to 54.2, while the Business Tendency Index (BTI) stood at 58.7, both remaining above the 50-point threshold that signals growth in business conditions and sentiment.


The ministry said the improvement was driven by increased consumer demand, which supported higher output and employment levels across several sectors.

Inflation Declines to 2.9%

Annual headline inflation eased to 2.9% in February from 3.2% in January, marking the lowest level recorded in the current financial year.

The decline was attributed to slowdown in the rate at which the prices of services increased particularly air transport services for international flights, as well as health service costs including consultation fees, hospitalization charges and blood test fees as well as lower food prices following improved supply during the harvest season.

Policy Rate Held Steady

The Central Bank Rate was maintained at 9.75% for the seventeenth consecutive month, a stance the ministry said remains appropriate to support economic activity while guiding inflation toward the medium-term target of 5%.

Lending rates on shilling-denominated credit edged higher in January, while rates on foreign currency loans declined slightly over the same period.

Trade Balance Swings to Surplus

Uganda recorded a merchandise trade surplus of $147.26 million in January 2026, reversing deficits recorded both in the previous month and a year earlier.

Merchandise export receipts rose by 72.1% year-on-year from USD 844.60 million in January 2025 to USD 1,453.53 million in January 2026, driven by increased shipments of gold, coffee, and industrial products, oil re-exports, beans, as well as electricity among others

The merchandise import bill year on year, grew by 23.2 percent, rising from USD 1,059.88
million in January 2025 to USD 1,306.27 million in January 2026 over the same period, largely due to higher formal private sector imports such as mineral products (excluding
petroleum products), machinery equipment, vehicles & accessories, among others.

Fiscal Position

Government operations in February resulted in a fiscal deficit of Shs. 1,221.53 billion, exceeding earlier projections, mainly due to higher spending on infrastructure and payments related to aircraft acquisitions for Uganda Airlines.

Domestic revenue collections reached 90.7% of the monthly target, reflecting a shortfall largely attributed to lower non-tax revenues.

Regional Trends

Within the East African Community, inflation trends were mixed in February, with declines recorded in Kenya and Tanzania, while Rwanda registered an increase.

Uganda’s trade position within the region improved, with the country recording a surplus driven by stronger exports to neighboring markets.

Overview

The report points to continued momentum in economic activity, supported by strong export performance, stable inflation, and improving business sentiment.

At the same time, it notes developments in revenue performance, fiscal outcomes, and private sector credit that will be monitored going forward.