Middle-Income Mirage: Progress Seen, Challenges Remain

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Uganda’s Economic Progress and the Path to Sustainable Growth

Uganda is making steady progress in its economic journey, with signs of improvement in several key areas. The country is approaching formal lower-middle-income classification, poverty levels have decreased over time, and the economy has demonstrated resilience. However, achieving true transformation requires more than just meeting statistical benchmarks—it demands a comprehensive shift in economic structure, policy implementation, and long-term planning.

One of the most ambitious goals set by Uganda is outlined in Vision 2040, which aims to elevate the nation to higher-middle-income status with a Gross National Income (GNI) per capita of $9,500. Despite recent improvements, this target remains far off. According to the latest figures from the Uganda Bureau of Statistics (UBOS), GNI per capita was $1,278 in FY2024/25, up from $1,020 four years ago. While this growth is positive, it still represents only a fraction of the required increase to meet Vision 2040's goal. This challenge is also reflected in the Tenfold Growth Strategy, which emphasizes the need for accelerated development, particularly through potential oil revenues. However, the pace of current economic growth suggests that reaching these targets will require significant efforts.

Uganda has crossed the World Bank’s lower-middle-income threshold of $1,136 for two consecutive years, and if this trend continues, the country could be officially classified as lower-middle-income. Yet, this classification alone does not guarantee improved living conditions for most Ugandans. The United Nations still categorizes Uganda as a Least Developed Country (LDC), which requires meeting three criteria: income, human assets (such as education, health, and nutrition), and resilience against economic and environmental shocks. While Uganda has made some progress on income metrics, it continues to lag behind in human development and vulnerability indicators. As a result, the UN projects that Uganda may not graduate from LDC status until after 2027.

To understand the implications of Uganda’s GNI per capita, consider that $1,278 per person per year translates to roughly $3.50 a day at market exchange rates. Adjusting for purchasing power parity (PPP), this amount increases to about $9.80 a day—still modest compared to global standards. Furthermore, according to the World Bank’s 2021 PPP data, 59.8% of Ugandans live below $3.00 a day, while 93.6% live below $8.30 a day. These figures highlight the reality that the majority of the population remains far from middle-class living, regardless of statistical classifications.

Structural transformation is essential for sustained economic growth and middle-income transition. This involves shifting from low-productivity sectors like subsistence agriculture into higher-productivity industries such as manufacturing. In Uganda, however, manufacturing accounts for only 15% of GDP, which is lower than the typical range of 17–19% seen in other lower-middle-income economies. This gap underscores the challenges Uganda faces in diversifying its economy and creating high-value jobs.

Most Ugandans are still engaged in low-productivity work, with over a third of the working-age population involved in subsistence farming. Even among those who are employed or self-employed, 40% remain in climate-vulnerable, low-productivity agricultural activities. Movement into higher-paying sectors is limited and often restricted to wealthier households, resulting in uneven economic mobility. This lack of structural change means that Uganda has not yet experienced the deep transformation typically associated with a true middle-income economy.

Middle-income status is more than a label—it reflects genuine economic security, including stable employment, rising wages, and the ability to withstand economic shocks. Many Ugandans fall into what economists call the "floating class," meaning they are only slightly above poverty and highly vulnerable to setbacks. For most citizens, this remains their daily reality.

Despite these challenges, Uganda has opportunities for growth. The Tenfold Growth Strategy offers a realistic path forward, provided it is implemented effectively. Key areas for development include modernizing agriculture, expanding manufacturing, diversifying exports, and strengthening private-sector competitiveness. Oil revenues, once production begins, could provide an additional boost—but only if managed responsibly. Ghana’s experience shows that oil can bring both opportunities and risks, with weak fiscal management leading to debt issues. Uganda must learn from these lessons to avoid similar pitfalls.

While Uganda has made progress, real transformation will require more than crossing statistical thresholds. It demands millions of decent jobs, strong human capital, faster productivity growth, and reduced vulnerability to shocks. Crossing into lower-middle-income status is an achievement, but staying there—and moving further—will require deeper reforms, faster implementation, and a focus on productivity. Uganda has laid the foundation. Now, it must build the house.