Business Climate Index Drops in Q1

By Naome Namusoke: KMA updates

Kampala, Uganda | May 20, 2025. The Economic Policy Research Centre (EPRC) has released its quarterly report on Uganda’s business climate, revealing a slight decline in the first quarter of 2025. The report, presented during a press conference at the EPRC offices in Makerere, shows that the Business Climate Index dropped by 2.3 points—from 91.1 in the October to December quarter of 2024, to 88.8 in the January to March period of 2025.

Businesses in Uganda remain central to the economy, accounting for approximately 75% of GDP, 90% of private sector activity, and 80% of the country’s manufacturing output.

Presenting the findings, Dr. Brian Sserunjogi, a research fellow at EPRC, attributed the decline to reduced business activity, weakened sales turnover, and falling profitability. He said the situation reflects growing operational challenges, particularly among micro and small enterprises.

“The dip is largely due to declining performance in sectors dominated by small businesses. Many are facing rising costs and declining revenues,” Dr. Sserunjogi stated.

The report notes that formal businesses in the agricultural sector experienced the highest decline, while the manufacturing sector showed improvement, with a four-point increase.

“Manufacturing appears to be gaining ground even as agriculture struggles,” he added.

Key issues identified in the report include multiple taxation, unreliable power supply, and increased competition from unregistered businesses, which continue to undercut formal enterprises.

Meanwhile, broader economic factors are also shaping the business landscape. According to a recent report by the Uganda Bureau of Statistics (UBOS), poverty levels in the country have declined from 20.3% in 2019 to 16% by the 2023/24 financial year.

EPRC Executive Director Dr. Sarah Ssewanyana welcomed the UBOS findings, saying they indicate that more Ugandans are now earning at least a dollar a day a sign of economic progress that could stimulate business demand in the long term.

In light of Uganda’s recently approved UGX 72 trillion national budget for the 2024/25 fiscal year, Dr. Ibrahim Kasirye, Director of Research at EPRC, called on government to broaden the tax base and maintain reduced public expenditure, as was implemented during last year’s rationalization of government agencies.

“We urge the government to maintain fiscal discipline and find ways to bring more informal actors into the tax net,” Dr. Kasirye said.

The report also highlighted the role of poverty alleviation programs such as Emyooga and the Parish Development Model (PDM). According to Dr. Mboowa from EPRC, research shows that these initiatives particularly PDM are beginning to boost local business activity.

“Our findings suggest PDM is helping grassroots businesses access funds and grow,” he noted.

As part of their policy recommendations, EPRC experts urged the Ministry of Finance and Uganda Revenue Authority (URA) to differentiate taxes and levies for various categories of traders. They also called on the Ministry of Trade and local governments to implement proper trade zoning and order, and for the Ministry of Energy to invest more in reliable power infrastructure.

The EPRC says addressing these structural challenges is critical for supporting Uganda’s private sector and ensuring sustainable economic growth.