Uganda Economic Update 18th Edition December 2021 1 © 2021 International Bank for Reconstruction and Development/International Development Association or The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessary reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. The World Bank encourages dissemination of its knowledge, so this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; FAX: 202-522-2422; e-mail: pubrights@worldbank.org. Photo credits: Rachel Mabaala, www.freepik.com Design/Layout: The New Vision Printed in Uganda by The New Vision Additional material relating to this report can be found on the World Bank Uganda website (www.worldbank.org/uganda). Uganda Economic Update 18th Edition December 2021 Contents Table of .......................................................................................................................... i FOREWORD. ABBREVIATIONS................................................................................................................. ii ACKNOWLEDGEMENTS.................................................................................................. iv KEY MESSAGES........................................................................................................................ v PART 1: STATE OF THE ECONOMY.......................................................................................... 1 1. RECENT ECONOMIC DEVELOPMENTS..............................................................................2 1.1 Vaccine inequity is leading to a two-track global economic recovery......................................2 1.2 Sub-Saharan Africa to exit recession in 2021, but recovery is still timid and fragile.............3 1.3 Uganda’s economy was recovering strongly before the second COVID-19 wave.............. 4 1.4 Poverty and vulnerability have increased, and threats to human capital loom large...... 8 1.5 Monetary measures preserved financial stability, yet private sector credit continues to decelerate................................................................................................................................................................................... 12 1.6 Strong import growth helped the recovery, but contributed to a current account deterioration.............................................................................................................................................................13 1.7 Revenue shortfalls and COVID-19 related spending pushed the fiscal deficit to a record high.................................................................................................................................................................16 2. ECONOMIC OUTLOOK, RISKS AND POLICY ACTIONS.......................................................................20 2.1. An uncertain stop-start economic recovery is expected...............................................................20 2.2. Risks remain tilted to the downside............................................................................................................. 23 2.3. Key policy actions for a resilient and inclusive recovery................................................................... 25 PART 2: WOMEN’S ECONOMIC EMPOWERMENT..........................................................27 3.1. Uganda continues to face significant gender inequality in economic outcomes............. 28 3.2. Expansion of gender gaps in labor outcomes has accelerated during the pandemic.......... 30 3.3. Lack of land ownership limits women’s productivity and empowerment.............................. 38 3.4. Women are more financially included than ever, but less so in formal mechanisms.............. 44 3.5. Meeting female entrepreneurs’ demand to lead growth-oriented businesses.................... 51 3.6. Conclusion and key recommendations: taking action to improve women’s economic empowerment....................................................................................................................................................... 58 REFERENCES . ........................................................................................................................... 62 ANNEX 1: Balance of Payments (annual, % GDP)............................................................................. 68 FOREWORD Uganda’s economy was recovering well, up until the second wave of COVID-19 infections and subsequent lockdown in mid-2021. Since then, activity has rebounded – much like after the first lockdown – but the country is likely to still face a stop-start recovery until there is wider coverage of the COVID-19 vaccine. Notwithstanding this recovery, there has been a rise in poverty and – with the shift back to agriculture for some workers – an increase in household vulnerabilities. We have also seen a widening of inequalities, which have been most severe in the education sector, where schools have now been fully or partially closed for longer than any other country in the world. As a result, Uganda has a long way to go in its quest to build-back-better. Women’s economic empowerment is key to quickening and strengthening Uganda’s revival. Global experience shows that increasing women’s rates of labor force participation and wage employment – as well as earnings, access to productive assets, and the ability to make independent decisions – brings immediate benefits for women and also contributes to more sustained economic growth. Alternatively, countries in which women are not as empowered to develop their economic potential, usually experience slower growth and more limited poverty reduction, in addition to a range of negative education and health impacts for children. In short, women’s economic empowerment is not only the right thing to do and a core development objective – it is also smart economics. It is against this backdrop that I am pleased to introduce the Eighteenth Uganda Economic Update, which includes the special topic of Putting Women at the Center of Uganda’s Economic Revival. In line with the structure of earlier editions of the Uganda Economic Update series, this report reviews recent economic developments – with particular attention paid to the effects of the ongoing COVID-19 pandemic – provides an outlook for the macro-economy, and then delves into the special topic. Uganda has a great and timely opportunity to harness the economic potential of women for a stronger and more sustainable economic recovery. There is already much that can be built on: Uganda has a relatively high female labor force participation, some of the highest levels of female entrepreneurship in the world, and is nearing gender parity in financial inclusion. However, gender disparities in educational attainment, occupational gender segregation and heavy care responsibilities – all exacerbated by the COVID shock – continue to limit women’s movement into more skilled and better paid jobs and sectors. This deprives the economy of their contributions and threatens progress toward Uganda’s goal of transitioning away from its dependence on subsistence agriculture. Uganda is at a pivotal stage on its development path and the potential gains from investing in women’s economic empowerment are sizable. Keith Hansen Country Director Kenya, Rwanda, Somalia, and Uganda Africa Region i ABBREVIATIONS AFDB Africa Development Bank Bbl Barrel BOU Bank of Uganda BTI Business Tendency Indicator BTVET Business Technical Vocational Education and Training CARE Cooperative for Assistance and Relief Everywhere CEDOVIP Center for Domestic Violence Prevention CEWIGO Center for Women in Governance CDS Center for Development Services CRM Credit Relief Measures CPI Consumer Price Index COVID-19 Corona Virus Disease 2019 DRC Democratic Republic of Congo DRMS Domestic Revenue Mobilization Strategy DSA Debt Sustainability Analysis ECD Early Childhood Development EMDEs Emerging Market and Developing Economies EPRC Economic Policy Research Center FAO Food and Agriculture Organization FAWE Forum for Africa Women Educationalists FDI Foreign Domestic Investment FHHs Female-Headed Households FID Final Investment Decision FY Financial Year GBV Gender Based Violence GDP Gross Domestic Product GEM Global Entrepreneurship Monitor GFN Gross Financing Need GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH GJCSP Green Jobs Creation Strategy and Plan GJFLMP Green Jobs and Fair Labour Market Program HBL Habib Bank Limited ICF Inner City Fund ICT Information Communication Technology IFAD International Fund for Agricultural Development IFIs International Financial Institutions IHS Information Handling Services ILO International Labour Organization IMF International Monetary Fund MDI Microfinance Deposit-taking Institution MFI Microfinance Institution MoES Ministry of Education and Sports MoGLSD Ministry of Gender, Labour and Social Development MoH Ministry of Health ii MLHUD Ministry of Lands, Housing and Urban Development MoFPED Ministry of Finance, Planning and Economic Development MSMEs Micro, Small and Medium Enterprises NDP III Third National Development Plan NEET Neither in Employment nor in Education or Training NGO Non-Governmental Organization NPLs Non-Performing Loans NUSAF Northern Uganda Social Action Fund PCR Polymers Chain Reaction PFM Public Financial Management PMI Purchasing Managers Index PPP Public-Private Partnerships PV Present Value RHS Right-Hand Side SACCO Savings and Credit Cooperative Organization SDR Special Drawing Rights SFIs Supervised Financial Institutions SLAAC Systematic Land Adjudication and Certification SLM-CSA Sustainable Land Management-Climate Smart Agriculture SMEs Small and Medium Enterprises SOE State-Owned Enterprise SOPs Standard Operating Procedures SRH Sexual Reproductive Health SSA Sub-Saharan Africa STEM Science Technology Engineering and Mathematics TFR Total Fertility Rate UAE United Arab Emirates UBOS Uganda Bureau of Statistics UCW Unpaid Care Work UDHS Uganda Demographic and Health Survey UGGDS Uganda Green Growth Development Strategy UHFPS Uganda High Frequency Phone Survey UNESCO United Nations Educational, Scientific and Cultural Organization UNHS Uganda National Household Survey UNPS Uganda National Panel Survey UNWTO United Nations World Tourism Organization URHFPS Uganda Refugees High-Frequency Phone Survey US United States USAID United States Agency for International Development US$ United States Dollars UWEP Uganda Women Entrepreneurship Program VSLAs Village Savings and Loan Associations WB World Bank WBL Women, Business and the Law iii   ACKNOWLEDGEMENTS The Eighteenth Edition of the Uganda Economic Update was prepared by a team consisting of Richard Walker, Jennifer Solotaroff, Rachel K. Sebudde, Aziz Atamanov, Margarita Puerto Gomez, Alys Willman and Fatima Naqvi. Contributions from Joanna Juzon, Rogers Ayiko, Paul Turner, Ivan Mwondha, Collins Chansa, Brian Akimanzi, Fred Matovu, Romeo Arahan, Amy Copley, Cansu Birce Gokalp, Daniel Kirkwood, Paula Tavares and Benjamin Reese are greatly appreciated. The team is also grateful to Philip Schuler, Kathleen Beegle and Raju Singh for their guidance on the structure and messaging of the report. Esther Ampumuza provided logistical support, while Keziah Muthembwa and Josephine Karungi managed the communications and dissemination strategy. Overall guidance provided by Mukami Kariuki (Country Manager), Helene Carlsson Rex (Practice Manager, Social Sustainability and Inclusion), and Vivek Suri (Practice Manager, Macroeconomics, Trade and Investment) is gratefully acknowledged. Finally, we would like to thank the Minister of Finance, Planning and Economic Development, Hon. Matia Kasaija, and his staff for their continuous commitment and close collaboration iv KEY MESSAGES State of the economy: an uncertain stop-start recovery Given the second wave of infections, the banking system, this has led to subdued growth economic recovery in FY21 tapered off in early in private sector credit, which is constraining FY22. Following the sharp contraction in late the recovery. Instead, monetary policy actions FY20, after the initial COVID-19 shock, real GDP have effectively reduced government’s cost growth rebounded strongly to over 13 percent of borrowing, supporting growth in domestic in Q4 of FY21, driven by an improvement in financing. Due to the expected lingering consumption and recovery in public investment. effects of the pandemic on private sector Services recovered fastest, but agriculture finances, monetary policy is likely to remain remains volatile, due to limited adoption of accommodative. improved farming practices to manage weather variability. However, the rebound tapered off in Strong import growth helped the recovery early FY22 due to a more severe second wave of but contributed to a deterioration in the COVID-19 and the related lockdown measures. current account from 6.7 percent of GDP in At 3.4 percent, growth in FY21 was well below FY20 to 10.1 percent in FY21. Both investment pre-COVID-19 projections of over 6 percent. and consumption imports surged, as firms re- Even with stronger growth in FY22, per capita opened, supported by a real appreciation of GDP will remain well below the NDPIII target. the shilling and further easing of supply chains. Even though the travel industry remains flat, Poverty increased significantly after the total exports had recovered to pre-pandemic first lockdown from March-June 2020 and levels by the end of FY21, driven by strong may have risen again given another shift of performance in the gold and coffee sectors. workers to agriculture and the slow recovery Remittances were still lower than pre-COVID-19 of household incomes. Despite an improvement levels, threatening the support they provide to between October 2020 and April 2021, income household consumption and incomes, and FDI was still below pre-COVID-19 levels for at least has remained sluggish. As a result, the current one third of households before the onset of the account deficit was financed mainly through second wave of COVID-19. This is concerning borrowing, largely on concessional terms. This given the high levels of vulnerability to poverty has, however, contributed to a sharp increase in (especially for those working in agriculture), public debt. limited social safety nets, effects of the crisis on MSMEs (especially those owned by women), Revenue shortfalls and COVID-19 related and impacts on human capital development spending pushed the fiscal deficit to a record and Uganda’s capacity to benefit from its high of 9.2 percent of GDP in FY21, which demographic transition. Schools have remained is about double pre-crisis levels. Revenues largely closed over the last two years, with the missed the budget target by about 1.5 percent number of children able to access any form of of GDP. Meanwhile, expenditures rose by over remote learning being limited. 20 percent, and, in GDP terms, were above the projected pre-COVID-19 trajectory. This was Monetary measures preserved financial driven by pressures to respond to the COVID-19 stability, yet private sector credit continues to crisis, as well as poor budgeting that led to a decelerate. The macro-prudential policies and sharp increase in supplementary spending, and liquidity buffers have kept the financial system elevated interest payments given the shift to capitalized and liquid, with non-performing domestic financing and commercial borrowing. loans (NPLs) decreasing throughout FY21. There was also a continued imbalance between However, BOU’s efforts to support increased recurrent and development spending, with the lending to the private sector, by reducing the former being above target and the latter well policy rate further to 6.5 percent in late FY21, below target, which could constrain the medium have had little effect on lending rates which to longer-term recovery. remain high. Combined with a risk-averse vi Against the background of low tax revenues schools need to gradually and/or partially and increasing expenditure, Uganda has reopen. As learners return, schools will need seemingly exhausted the fiscal space it would to focus on two overarching measures: need to drive the recovery and respond to minimizing disease transmission and shocks. Uganda’s public debt has surged to accelerating learning recovery. There should about 48 percent of GDP in FY21, alongside be a strategy for continuous assessment heightened liquidity pressures. This has led of areas/schools where cases are spiking to a shift in Uganda’s rating from low risk of and then using appropriate measures for debt distress to moderate. Consequently, isolation and temporary closures. As children government’s fiscal strategy has shifted return to classrooms, Uganda will also to one of consolidation over the next few need to re-orient its system for a learning years, anchored on an IMF program, whilst remediation process on an unprecedented supporting a stronger private sector-led growth scale. model. Ultimately, this aims to improve debt sustainability and limit private sector crowding b) Prioritize MSMEs for job creation during out. At the same time, efforts still need to be the economic recovery. MSMEs will need made to revitalize key sectors (education and affordable finance to recapitalize their health) that are critical for inclusive growth and businesses and make new investments. poverty reduction. Digitalization offers opportunities to access more affordable finance, reach The medium-term outlook remains uncertain new customers, deliver goods and – with the expectation of a stop-start services efficiently, transact remotely and economic recovery – and risks are tilted ensure the post-COVID-19 resilience of heavily to the downside. Uncertainty remains MSMEs. However, for MSMEs to digitalize, on the evolution of COVID-19 and its effects government must facilitate access to in Uganda, relying largely on the success of a affordable electricity, ICT products and stuttering vaccination effort. Under a baseline services, and the right technical skills and scenario, real GDP is expected to grow by capacity. Given that MSMEs owned by around 3.5-4.0 percent in FY22 and about 5.5 women have been disproportionately percent in FY23. Considering large global and affected by the COVID-19 crisis, they should domestic uncertainties, however, the recovery be put at the center of the recovery. could be slower. This may materialize if Uganda experiences a combination of progressively c) Maintain prudent and transparent fiscal worse waves of infections, widespread coverage and debt management. Uganda still has of the COVID-19 vaccine is delayed until a reasonable fiscal and debt position that 2023, mobility restrictions are occasionally needs to be protected to ensure a smooth reintroduced, fiscal consolidation results in the and stable recovery. Raising revenues and scaling back of support to vulnerable persons using public resources more efficiently to and businesses, financial sector conditions maximize returns on investments are critical deteriorate, and tourists only start traveling to for improving fiscal and debt sustainability. Uganda in larger numbers from 2024 onwards. Budget planning and credibility must also improve, which is being increasingly To ensure an inclusive recovery, widespread undermined by the growing use of coverage of the vaccine is critical, as well as supplementary budgets, financing through immediate policy actions in three key areas: domestic arrears, increasing allocation to classified expenditures, and rising costs of a) Open the schools with safeguards to public administration. The latter is driven by minimize disease transmission. Remote the creation of new districts and increase in learning has not been accessible to all Parliament, cabinet and other top executive students and continued closure of schools administration units that have resulted in will have significant implications for future the hiring of more personnel. productivity and economic growth. Thus, vii viii Putting women at the center of Uganda’s economic revival Uganda continues to face gender Improving women’s economic empowerment inequality in economic empowerment will involve, inter alia, bringing more women and economic outcomes, despite closing into small and medium enterprises (SMEs). gender gaps in rates of labor force Government has been very successful at helping participation and entrepreneurial activity. women start small businesses, particularly Girls and young women still lag behind boys microenterprises, through initiatives such as and young men in completing school and government’s Uganda Women Entrepreneurship attaining sufficient education and training Program (UWEP). However, more female needed for skilled jobs and leadership entrepreneurs need to move into the larger business of profitable enterprises. A larger pool of space, to empower them to drive Uganda’s properly skilled workers will help employers economic recovery and industrial transition. As in priority sectors, such as those in Uganda’s some women are supported to improve their industrial parks, to meet their labor needs. productivity in agricultural enterprise, others will Women need to be more financially included need interventions to help them start and grow in their use of formal financial services and small, and especially medium, enterprises outside access to large volumes of credit to be on a of agriculture. These firms will need to be in priority par with loans currently accessible to men. value chains and growth sectors of the economy, with women attaining higher positions in these Gender gaps in paid work and business value chains. Women entrepreneurs are more likely ownership have expanded during the to employ women, and thus larger female-led COVID-19 pandemic. The March 2020 enterprises are more transformational than female- lockdown set off a wave of work stoppages led microenterprise. The returns from investing in and business closures that affected women female SME owners are likely to be exponential. more than men, especially young women aged 15-30. In addition to job losses, school Uganda’s policy and legal framework must closures have placed an even greater better support women in their human capital, share of unpaid care work on females, employment, and entrepreneurial aspirations; who already shoulder a disproportionate the enforcement of policies is required to enable amount of these household responsibilities. policy and related programs to have impact Uganda High Frequency Phone Survey on the ground. In particular, policy will need to (UHFPS) data suggest that fewer girls than tackle demand-side and supply-side constraints boys are resuming their education upon on women’s skilled labor and growth-oriented schools reopening, in part because teenage entrepreneurship, including constraints rooted pregnancy rates have increased during in traditional gender norms that encourage the pandemic – but largely because many discrimination against girls and women. To not only households cannot afford to pay the school encourage but measurably close gender gaps in fees for girls as well as boys. Since the onset of economic empowerment and economic outcomes, the pandemic and subsequent lockdown, girls policy actions in three key areas will be critical: and women have been facing higher rates of child marriage and gender-based violence a) Help meet women entrepreneurs’ demand (GBV), respectively. These are associated to lead growth-oriented enterprises. When with lower educational attainment, reduced given the opportunity, Ugandan women are future income streams, and less decision- eager to lead larger, more profitable businesses making power over household finances and than just micro-enterprises. Lack of access their own economic activity. All of these to sufficiently large loans is among several are critical elements of women’s economic constraints they face, and this could be eased empowerment, which is good business for by two legislative improvements. First, the legal women, their households and communities, framework needs to clearly and specifically and Uganda’s economy. prohibit gender discrimination in access to credit. Once passed, the law will need to be enforced across public and private financial ix institutions and in their main branches partnerships and employer-provided and subsidiaries. Second, legislation that childcare models that have succeeded in guarantees gender equality in rights to lower-middle and upper-middle income countries. Other in-country stakeholders, inherit land and other family assets needs such as women’s empowerment-focused to be enforced with regards to land that NGOs, could also adopt community-focused is under informal tenure arrangements – programs that promote more gender- that is, customary land – as well as land equal division of unpaid care labor in the under formal ownership. This will increase household. Interventions related to fertility rates of women’s ownership rights over adjustments could accompany messaging land, which is the main form of collateral on gender-equal sharing of unpaid care required to secure larger loans from formal work and provision of childcare services. financial institutions. Enforcement will involve leveraging the power of local courts, as c) A government agency – and high-level well as raising awareness among men and champion within that agency – should spearhead re-orientation of government women about legally mandated gender employment programs, so that they move equality in inheritance. With greater control women from the subsistence level to over land – especially larger parcels of land more growth-oriented sectors and jobs. – women farmers will be able to invest more Government policies and programs need in their land and improve their productivity. to better consider the diversity of skills and strengths that women bring to the economy. b) Address women’s time poverty so that It will be important to translate national they can complete their education, strategies into programs with clear targets acquire marketable skills, and work for and guidelines for women’s participation, pay outside the household. A common and to have a high-level champion to direct factor to making all three possible is these efforts. In addition to interacting easing the care burden that women and with high-level representatives across older girls disproportionately carry in government agencies that cover education, households. In addition to expanding access skills training, and employment, this high- to early childhood education programs, level champion could serve as the face of a government could start by considering multi-media national campaign. Media and which models of childcare provision are accompanying community-based activities appropriate for Uganda. In the short-term would deliver messages on the importance these models could replicate community- of keeping girls in school, easing the burden based approaches that do not depend of unpaid care work on working-age women on parents’ employers to offer childcare by developing the childcare services market, services. For the longer-term, as Uganda and encouraging women’s leadership of advances further on its path to urbanization SMEs in more profitable (typically male- and industrialization, government will need dominated) economic sectors, such as to consider examples of public-private renewable energy and green agriculture. x PART 1: STATE OF THE ECONOMY AN UNCERTAIN STOP-START RECOVERY 1 1. RECENT ECONOMIC DEVELOPMENTS whose legacies are expected to weigh on global activity. Many of these countries will 1.1 Vaccine inequity is leading to a two- take time to regain their pre-COVID-19 levels track global economic recovery1 of output, and a return to pre-pandemic trends may be unattainable in the absence 1. The global economy is set to expand by of major reform efforts. 5.6 percent in 2021 – its strongest post- recession pace in 80 years – but the slower 2. The recovery in global activity has been recovery in EMDEs is concerning. While accompanied by a sustained increase in the global economy continues to recover global trade and consumption. The volume from the 2020 recession, vaccine inequity of global goods trade is now well above its pre- and hesitancy across the world is leading crisis level, despite supply bottlenecks, resulting to a divergence in health and economic in supplier delivery times falling to record outcomes and a two-track recovery. lows. Tourism remains depressed, however, Advanced economies are rebounding fast, even in countries that have not experienced amid unprecedented fiscal support coupled major outbreaks, and international travel with a strong vaccine rollout, while the is expected to be constrained by lingering developing world is struggling with a slow mobility restrictions and a reluctance to pace of vaccinations and disparities in their travel if the virus is not completely under capacity to provide exceptional fiscal and control. Inflationary pressures have increased monetary support (Figure 1 and 2). US output alongside the recovery in activity, with is rebounding sharply, fueled by substantial survey data pointing to a continued strong fiscal support, and sufficient to allow output rise in global input prices. In advanced to regain its pre-pandemic level. Activity in economies, financing conditions remain the Euro Area has been slower to recover, broadly accommodative, whereas in EMDEs, but has regained ground since the beginning financing conditions have tightened in of the year because of the relaxation of recent months because of policy rate hikes mobility restrictions and an accelerated in some countries, pandemic setbacks, and vaccine roll out. In China, whose economy country-specific risks. Amid the ongoing led the initial stages of the recovery last spread of the Delta variant, a withdrawal year, activity remains robust, but the pace of fiscal stimulus, supply bottlenecks, and of growth has moderated amid diminished lingering inflationary pressures, the recovery policy support. Across most EMDEs, however, is expected to slow from 2022. the ongoing recovery will not be sufficient to erase the damage from the pandemic, Figure 1: Forecast average real GDP growth from 2021 to Figure 2: Vaccine roll out (share of population fully 2023 (% y/y) vaccinated) Source: GEP, June 2021 & Africa’s Pulse, October 2021 Source: Our World in Data Note: Figure 2 shows share of people that have received at least one COVID-19 vaccination dose. Sample includes 36 advanced economies and 65 Emerging Market and Developing Economies (EMDEs). Last observation is August 24, 2021 1 This section draws from World Bank (2021, June) and World Bank (2021a, October). 2 1.2 Sub-Saharan Africa to exit recession continent. Renewed lockdown measures in 2021, but recovery is still timid and sapped business confidence, constrained fragile2 activity in many sectors, and slowed the pace of recovery. In addition, most countries in the 3. Economic growth in sub-Saharan Africa region will fail to meet the vaccination goals (SSA) is set to expand by 3.2 percent in of 10 percent coverage by September and 2021, which is a 0.9 percentage point 40 percent by end-2021. Projections for 2022 improvement on the April 2021 forecast. and 2023 suggest that economic growth will This rebound is being fueled by rising remain just below 4 percent. At this pace, only commodity prices (Figure 3), relaxation of three-quarters of SSA countries will reach social distancing measures, and recovery their pre-COVID-19 levels of activity by 2023. in global trade – particularity with China. Commodity prices remain well above their 5. Eastern Africa is expected to fare better, pre-pandemic levels, with several reaching with growth likely to pick up considerably all-time highs. Oil prices rose above their pre- as vaccine coverage expands, supply pandemic levels in the first half of 2021 and chains normalize, and domestic demand are hitting record highs in recent months. improves. Besides South Sudan, all of Agricultural prices have been volatile, with Uganda’s other main trading partners in weather-induced supply concerns pushing the region (Kenya, Democratic Republic of up the price of wheat, cocoa, and coffee. Congo (DRC), and Rwanda) are expected to However, available data for the first two grow by about 4.5 percent or more annually quarters of 2021 suggest that the recovery from 2022 onwards (Figure 4). However, there in SSA was supported primarily by a rebound are significant risks to these projections, as in the service and industry sectors, and to a limited access to safe water and sanitation lesser extent agriculture. facilities, urban crowding, weak health systems, and large informal economies – all 4. The SSA recovery remains timid and fragile alongside uncertain progress in vaccine as the slow pace of vaccination continues roll out and insufficient fiscal space – pose to expose the region to emerging strains challenges to a sustained containment of of COVID-19. While private consumption the virus. Therefore, large-scale community rebounded strongly in the first half of 2021, its transmission could still cause deeper and growth is likely to be subdued in the second protracted disruptions to the recovery, even half due to the third – and in some countries as countries sustain easing restrictions both the fourth – wave of COVID-19 across the domestically and through their borders. Figure 3: Commodity prices (monthly indices) Figure 4: Real GDP growth in eastern Africa, incl. Uganda’s main regional trading partners (% y/y) Source: World Bank Commodity Price Data Source: World Bank calculations Note: Monthly indices based on nominal US$, 2010=100 Note: f = forecast; Ethiopia and South Sudan are fiscal-year-based number. 2 This section draws from World Bank (2021a, October). 3 1.3 Uganda’s economy was recovering manage weather variability. However, this strongly before the second rebound likely tapered off in early FY22 COVID-19 wave due to the effects of the sudden rise in COVID-19 cases and more stringent 6. New cases of COVID-19 infections started lockdown measures. Furthermore, at 3.4 rising again in May 2021, leading into a percent, growth in FY21 continues to be well more severe second wave. By end of July below pre-COVID-19 projections of over 6 2021, when the second full lockdown was percent. lifted, the cumulative number of recorded COVID-19 cases in Uganda had risen to 8. The recovery in FY21 was largely driven 94,195. In the first wave, a total of 40,367 by a strong improvement in consumption cases were reported over the period of (Figure 6). With the loosening of COVID-19 a year. In the second wave that started containment measures and opening of the in March 2021, more than 50,000 cases economy, domestic demand conditions were reported in just five months. This improved and private consumption grew increase was particularly apparent at the by over 7 percent in FY21. This is reflected in end of May and through June, with the the better performance of Uganda’s PMI for daily number of people testing positive most of FY21, as the business and trading increasing from below 100 to almost 1,800 environment improved (Figure 8).5 However, (Figure 5).3 Testing capacity continues to be this did not continue, with the PMI crashing constrained, however, by high costs for PCR to 34.9 in June and further to 34.6 in July, as test kits, although other options (e.g., rapid the effects of the second lockdown took diagnostic tools) are being progressively hold. During this period, output, new orders used. and employment fell, while firms lowered their selling prices to try and attract business. Figure 5: Evolution of new daily COVID-19 cases in Although the PMI bounced back quite Uganda strongly to over 50 in August, September and October 2021 – which is a similar trend after the lockdown in 2020 – uncertainty is elevated and business confidence has deteriorated compared to the first half of 2021.6 Figure 6: Sources of real GDP growth in Uganda by spending component (% y/y) Source: Our World in Data 7. Given the second wave of infections, the economic recovery likely tapered off in early FY22.4 Following the sharp contraction in late FY20, after the initial COVID-19 shock, real GDP growth rebounded strongly to over 13 percent in Q4 of FY21 (Figure 7), driven by an improvement in consumption and recovery in public investment (Figure 6). Source: Uganda Bureau of Statistics (UBOS) Services recovered strongly, but agriculture Note: The statistical discrepancy is an adjustment factor to ensure any omissions or differences in source information used to remains volatile (Figure 7), due to limited measure GDP from the income, production and expenditure adoption of improved farming practices to sides are accounted for and the final GDP numbers are aligned. 3 This daily increase is quite a jump from the seven-day daily average of 719 cases during the initial peak in mid-December 2020 and the drop to 17 daily cases in mid-March. 4 Uganda’s fiscal year is from 1 July to 30 June of the subsequent year. For FY21, this is from 1 July 2020 to 30 June 2021. 5 Stanbic Bank (2021, October) The PMI is compiled monthly by IHS Markit and is sponsored by Stanbic Bank Uganda. It is a composite index, calculated as a weighted average of five individual sub-components: new orders (30%), output (25%), employment (20%), suppliers delivery times (15%), and stocks of purchases (10%). It gives an indication of business operating conditions in the Ugandan economy. 6 MoFPED (2021, August) 4 9. Public investment also recovered in FY21, almost 1.5 percent contraction in FY20. This growing at over 30 percent, compared is also mirrored in the lower FDI numbers of to only 4 percent growth in FY20. about 2 percent of GDP in FY21 compared This was largely driven by a noticable to an average of almost 3 percent over the uptick in road and bridge building, the previous three fiscal years (see Annex 1). acquisition of additional aircraft for the Although imports and exports both slowed continued revival of Uganda Airlines, in the early part of the COVID-19 crisis, and large classified investments. At the the acceleration in imports and slower same time, however, with the elevated recovery of exports (see section 1.6) has levels of uncertainty, private investment significantly strained growth in FY21. contracted by 5 percent, following an Figure 7: Real GDP growth in Uganda by quarterly sector contributions (% y/y) Source: UBOS Note: Net taxes are included to ensure the value-added numbers are in line with the overall GDP growth statistics. 10. With improved levels of business FY21. The surge of activity in the gold confidence, fewer trade disruptions mining sector, including a significant and more open regional borders, the increase in the value of gold exports in industrial sector rebounded strongly FY21 compared to FY20 (see section 1.6), towards the end of FY21 (Table 1). This was and a growing number of artisanal and driven by increasingly better performance small-scale miners continues to support of the manufacturing and construction robust growth in mining and quarrying. sectors. Even a dip in business confidence This growth is likely to have slackened in January 2021 – around the election considerably in Q1 FY22 though, given a period (Figure 8) – seemed to have little rapid slowdown in gold exports as dealers impact, with both manufacturing and waited on the outcome of negotiations construction growing at over 9 and 11 with government to reduce a new tax levy percent, respectively, in the second half of on gold exports that was introduced in FY22. 5 Figure 8: Uganda PMI (>50 = improvement since previous month) Source: Stanbic Bank, (2021, October) 11. Increased domestic demand is supporting 12. Agricultural growth fluctuated throughout some growth in services, but a stronger FY21 as food crop output slowed and recovery in FY21 was held back by a fishing contracted. Although growth in food sustained contraction in education, crops had been largely robust through the recreation and trade. Although all service early stages of the COVID-19 crisis and at sectors started to recover in FY21 – with the same time boosted by good weather, particularly strong growth in Q4 – the there was a sharp contraction in the second overall performance of the sector is being half of FY21 (Table 1). This slowdown could held back by a few sectors that continue adversely affect livelihoods, given that to face sustained operating and mobility many who had lost jobs in non-farm sectors restrictions (Table 1). Given the protracted because of the COVID-19 crisis – particularly closure of most schools and learning the urban and informal poor – shifted to institutions, the education sector continued the agriculture sector as a buffer against to contract sharply in FY21 – with a similar the crisis (see section 1.4). However, cash outcome expected in the first half of FY22 crops have continued to grow robustly as uncertainty remains as to when this throughout FY21, with the value of coffee sector will fully reopen again (see Box 1). exports increasing by almost 12 percent, Moreover, given the limited operating hours despite the fall in the annual average price (a curfew remains in place) and with no of Robusta coffee.7 While poorer weather recovery in tourism, the sectors of trade, may have affected production of both food accommodation, food services, recreation and cash crops, the latter was less affected and entertainment continued to contract given the higher resilience of cash crops due in FY21. Better performance in the trade to better use of farming practices to manage sector is also being curtailed by global and weather fluctuations. This divergence in the regional supply chain disruptions, which is performance of food and cash crops may negatively affecting the ability of traders increase in the years to come, as Uganda to replenish inventories and fully meet the continues to be amongst the world’s most growing domestic demand. There were, vulnerable and simultaneously least adapted however, better signs in the latter part of countries to climate change. The fishing FY21, but this is likely to have been curtailed sector continues to face COVID-19 related by the second lockdown and reintroduction trade disruptions – the value of fish exports of longer curfew hours. At the same time, declined by 19 percent in FY21, following a the information and communication sector 21 percent decline in FY20 – as well as long sustained double-digit growth inFY21, as standing sectoral challenges such as poor- firms and households increasingly use online quality fish stock (e.g. too few adult fish), solutions to make and receive payments and limited access to feeds, and trade in illegal ensure continuity of business and daily life. and unrecorded immature fish. 7 From US$1.63 per kg in FY20 to US$1.52 per kg in FY21 6 Table 1: Real GDP sub-sector outcomes   FY21 FY20 FY21     Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 share of   y/y growth rates GDP AGRICULTURE 23.3 6.6 8.6 -1.3 4.2 6.7 6.3 -0.2 0.7 Cash crops 2.5 3.1 9.5 17.3 -1.7 5.0 7.3 5.9 14.7 Food crops 12.3 5.5 9.6 -11.1 10.0 11.0 9.5 -7.4 -5.3 Livestock 3.4 7.8 7.9 8.5 7.4 7.9 7.8 7.2 8.2 Agriculture support services 0.0 14.2 16.2 -1.2 -6.5 -7.4 -4.0 19.9 13.7 Forestry 3.5 4.5 6.9 4.4 -2.4 -4.8 0.5 6.4 9.7 Fishing 1.6 27.0 6.0 -10.0 -15.5 -14.7 -4.9 -9.0 -5.8 INDUSTRY 26.4 10.8 11.0 1.9 -10.1 -2.7 -2.2 2.8 17.7 Mining & quarrying 1.4 31.5 101.6 0.0 -34.8 25.2 -15.4 -14.5 48.8 Manufacturing 15.0 11.6 8.6 -1.0 -14.0 -3.1 -4.8 2.1 18.0 Electricity 1.4 12.8 16.1 16.9 -1.6 6.8 7.1 7.2 25.7 Water 2.3 4.3 3.9 4.2 4.0 4.6 4.9 4.6 5.0 Construction 6.2 6.6 5.8 5.9 -2.7 -13.8 3.7 6.6 16.3 SERVICES 43.7 6.8 7.2 1.3 -5.3 -4.8 -2.7 5.5 14.6 Trade & repairs 8.3 4.2 5.1 -3.2 -11.9 -2.2 -6.8 -3.0 11.2 Transportation & storage 3.0 4.3 2.1 -2.3 -10.7 -8.3 -3.6 1.5 10.4 Accommodation & food service 2.5 5.6 9.5 -2.9 -45.9 -25.9 -19.8 2.7 82.8 Information & communication 2.2 21.4 31.1 20.1 6.3 -2.4 -1.9 16.5 39.1 Financial & insurance 3.0 19.4 18.1 9.6 -7.1 3.2 -1.0 10.1 21.7 Real estate activities 6.7 4.1 0.9 6.1 9.5 5.7 8.0 1.4 0.8 Professional, scientific & technical 2.1 32.5 29.4 -26.4 -21.9 -35.1 -12.0 60.1 33.6 Administrative & support service 2.0 15.7 15.6 1.7 -1.9 -2.2 -2.8 8.0 7.0 Public administration 3.1 14.9 18.8 14.9 16.3 5.0 8.4 19.9 17.1 Education 4.0 -7.3 -6.2 0.0 6.0 -20.9 -12.4 2.1 13.4 Human health & social work 3.4 1.9 5.4 2.5 -5.8 13.0 9.0 0.8 4.9 Arts, entertainment & recreation 0.2 -0.9 2.1 -7.9 -27.1 -27.6 -23.3 -19.1 29.8 Other service activities 2.5 2.5 1.5 0.9 0.8 1.0 2.2 3.7 4.9 Activities of households 0.8 2.8 2.8 2.8 2.7 2.7 2.7 2.7 2.8 ADJUSTMENTS Taxes on products 6.7 10.6 9.2 -0.6 -24.4 -1.6 -3.2 -3.7 43.2 GDP AT MARKET PRICES 7.9 8.7 0.8 -5.9 -0.9 -0.6 3.0 13.7 7 1.4 Poverty and vulnerability have the COVID-19 period was significantly higher increased, and threats to human than in the pre-COVID-19 period (Figure 9). It capital loom large increased from 18.7 to 21.9 percent during the first COVID-19 wave in Uganda. These poverty 13. Poverty increased significantly after the numbers in the first wave may not be strictly first lockdown introduced in March 2020. comparable, however, because they cover According to the latest Uganda National different months and could be subject to Household Survey (UNHS),8 even though overall seasonal changes. As discussed below though, poverty in 2019/20 was slightly lower than in results from UHFPS help to shed more light on 2016/17 – 20.3 versus 21.4 percent – poverty in the impact of COVID-19.9 Figure 9: Headcount poverty rates in 2016/17 and 2019/20 Figure 10: Employment status (% of respondents work- (% of population) ing) 100 91 86 80 70 60 40 20 0 Pre-March 2020 Jun - 20 Mar/Apr 2021 Source: UNHS 2016/17 and 2019/20, UHFPS different rounds, and World Bank calculations Note: Figure 9 results shall be treated with caution given different data collection periods across rounds and within UNHS 2019/20. 14. A decline in employment may have 15. Despite a full recovery in employment, 100 happened after the second lockdown91 in respondents were more likely to work in 86 June-July 2021, but may not be as severe agriculture, which is highly vulnerable to 80 as during the first lockdown 70 in March- weather shocks. As shown in Figure 12, the June 2020. Following the first lockdown employment structure changed after the first 60 in 2020, the employment rate declined lockdown in 2020, with more respondents significantly, before picking up over the working in the agriculture sector. This tendency 40 rest of 2020 and into 2021 (Figure 10). Given was still observed in April 2021, a full year this tendency, a drop in employment may after the pandemic erupted. Given that rural 20 have also happened after the second residents and those working in agriculture lockdown. This is also corroborated by a are more vulnerable to weather shocks and 0 recent survey of micro, small and medium have a lower capacity to adapt to climatic Pre-March 2020 Jun - 20 Mar/Apr 2021 enterprises (MSMEs), with most of them stressors, and that the second lockdown reporting that they have reduced their staff may have forced more workers to move by more than 50 percent because of the to the agricultural sector (as a safety net), impact of the pandemic and consequent this is likely to have further increased overall lockdowns.10 However, the decline in mobility vulnerability. This is also more concerning given during the second lockdown was relatively the fluctuations in agricultural growth in FY21 modest (Figure 11); therefore, the decline (see section 1.3), and that most Ugandan in employment may not necessarily be as households have limited access to alternative pronounced as during the first lockdown and off-farm income streams. could even recover faster. 8 UBOS (2021). UBOS has recently announced poverty rates based on UNHS 2019/20. The data for this survey was collected in two periods with a break during the strictest lockdown period between March–June 2020. The first data collection period started in September 2019 and ended in February 2020, then it resumed in July 2020 and ended in November 2020. 9 In order to track the impacts of the COVID-19 pandemic on households in Uganda, UBOS, with the support from the World Bank, launched the UHFPS on COVID-19 in June 2020. This survey is to be conducted every few months and will try to recontact the entire sample of households that had been interviewed during the 2019/20 round of the Uganda National Panel Survey (UNPS) – where phone numbers for at least one household member or a reference individual exist. Six rounds of data collection have been conducted between June 2020 and March/April 2021 (sixth round). 10 Federation of Small and Medium Sized Enterprises in Uganda (August 2021). 8 Figure 11: Mobility trends in Uganda (percent change in visits to different places) average percent change in visits to different places compared to baseline 2020 2021 30 20 10 0 .................................................................................................................. -10 -20 -30 -40 Grocery & Pharmacy -50 Residential Retail & Recreation -60 Transit stations (public transport) Workplaces -70 November September December June June May May February February March March April April October August August January July July Source: Google LLC “Google COVID-19 Community Mobility Reports.”https:/ /www.google.com/covid19/mobility/ Accessed: August 30, 2021. Note: This dataset shows how visits to different places changed compared to the baseline (i.e., 5-week period Jan 3–Feb 6, 2020. 16. The slow recovery in income, as observed 17. Female-owned MSMEs seem to have over the last year, is likely to have been been more negatively impacted by the further disrupted by the second lockdown. COVID-19 crisis. Following the recent In contrast to employment, income levels lockdown in mid-2021, 45 percent of female for many households have not returned owned MSMEs reported that their sales to pre-COVID-19 levels (Figure 13). Despite completely stopped, compared to 39 some improvement observed between percent of male owned MSMEs.12 This can October 2020 and April 2021, income levels be partly explained by the fact that women were still below pre-COVID-19 levels for at entrepreneurs are concentrated in sectors least one third of households. The second like trade, tourism and food services, which lockdown is very likely to stall and even have been hardest hit by the pandemic. possibly reverse progress in income recovery. Secondly, many women entrepreneurs and In fact, 49 percent of MSMEs interviewed managers have had to take on additional on the impact of the second lockdown domestic and care responsibilities during indicated that they struggled to make ends the lockdowns, which also negatively meet.11 Of those MSMEs in Kampala, 45 affected their businesses. Job losses have percent reported closing their business as a also disproportionally affected women with direct consequence of the pandemic. They 67 percent of female employees in MSMEs were facing both demand (willingness to being laid off, as compared to 33 percent spend) and supply (labor force disruptions) of male employees. Section 3 considers this constraints. Furthermore, the majority (83 further. percent) reported that they were not aware of government’s relief measures. 11 Ibid. 12 Ibid. 9 18. The coverage and design of social small, reaching no more than 1 percent of protection programs in Uganda have a households. In addition, one of the largest limited ability to mitigate the negative safety-net programs in the country, Northern impact of the COVID-19 crisis.13 Only four Uganda Social Action Fund (NUSAF), ended percent of households received any type of in June 2021. This program provided income social assistance in March/April 2021 (Figure support in the poorest region of the country. 14), with in-kind non-food assistance (soap, Government is considering restarting and mosquito nets and masks) remaining the expanding the program, which is important main source of support. Overall, direct cash to help reduce vulnerabilities in some of transfers have been extremely Uganda’s poorest households. Figure 12: Economic sector of employed respondents (% of Figure 13: Households with income below average those working) monthly income during 12-month’s prior to COVID-19 crisis (% receiving income) Source: UHFPS different rounds and World Bank calculations 19. Persistent high inequalities in access to and economic growth. COVID-19 related education remain a key threat to human learning losses and increased dropouts development in Uganda during and most may cost Ugandan students an average of likely after the pandemic. On average, 0.8 learning-adjusted years of schooling, about 84 percent of children aged 3-18 resulting in a US$170 per year of average attended school in Uganda before the earnings losses in the future.14 closure of schools in March 2020. Schools have been gradually re-opening for some Figure 14: Incidence of social assistance grades since then, whilst children from other grades were supposed to study from home. Overall, only 41 percent of children either returned to school or were engaged in any learning activities from home in early 2021 (Figure 15) – this is about half of the school attendance before the lockdown. Moreover, participation in learning activities was very unequal, with children in urban areas and from the wealthiest pre-COVID-19 consumption quintiles having much higher chances to study compared to children in rural areas and those from the poorest quintiles (see Box 1). This will have significant Source: UHFPS different rounds and World Bank calculations implications for the scale and extent of learning lost, as well as for future productivity 13 World Bank (2020, January) 14 Azevedo, J.P et al (2020) 10 Figure 15: Children (age 3-18) attending school or participating in any learning activities in March/April 2021 (percentage of children) Q2 Q3 Q4 Q5 Box 1: School closures and the worsening of existing inequalities The COVID-19 pandemic has created an unprecedented crisis related to school closures. Most of the students in Uganda have not been able to attend school since March 2020. Schools partially re-opened for selected classes in October 2020, only to face another shutdown in June 2021. Uganda has experienced one the longest periods of school closures in the region, and is currently an outlier amongst its neighbors who have either fully or partially reopened schools.i It is estimated that approximately 15 million learners are currently out of school. Early data indicates that school closures have already exacerbated existing inequalities. By March/April 2021, only 41 percent of children (3-18 years) participated in any remote learning activity with an unequal distribution by wealth and location. While 60 percent of children from the richest pre-COVID-19 consumption quintile reported some learning activity, only 28 percent of those among the poorest quintile did.ii Furthermore, Primary 6 learners rated proficient in English literacy dropped by 4.7 percentage points between 2018 and 2021, and their numeracy proficiency achievement also decreased by 12.4 percentage points in this period.iii Notably, these were further drops from levels of literacy and proficiency that were already a matter of concern.iv Emerging evidence indicates that girls and young women also face additional and unique challenges related to protracted school closures and lockdown measures. These include, inter alia, a larger burden of home-based work, a need to turn to income generating activities to cope with economic shocks in households, as well as higher incidence of cyber-bullying in the context of increased reliance on digital tools.v In addition, recent reports suggest that pre-existing issues related to gender-based violence (GBV) and teenage pregnancies have been exacerbated during school closures, which may lead to lower re-enrolment numbers for girls. Indeed, the number of young girls, between 10 and 14, who sought their first antenatal care increased by over 4.5 times from 290 in March 2020, when the country entered the first lockdown, to 1,353 in September 2020.vi Section 3 considers this further. ___________________________________________ i UNESCO (2021). ii UBOS (2021). iii MoES (2021). iv World Bank (2019, May) v Population Council, Regional Education Learning Initiative, & Daniels M. (2021). vi FAWE (2021) 11 1.5 Monetary measures preserved the interbank money market, government financial stability, yet private sector securities market, and on commercial bank credit continues to decelerate deposits declined noticeably in the second half of FY21 and into the first quarter of FY22 20. Given the weak domestic economy and (Figure 16). On the other hand, lending rates only modest external inflation through remained high and volatile, and then swiftly most of FY21, pressure on domestic prices declined to a record low of 16.3 percent in has remained limited, largely coming the first quarter of FY22. This high cost of through supply side factors. Inflation in credit, combined with operational difficulties the transport sector stayed in double-digits for businesses, and a risk-averse banking due to COVID-19 related vehicle occupancy system affected the growth in private sector restrictions, but overall inflation remains credit (Figure 17). In real terms, annual private muted given weak domestic demand and sector credit growth averaged 6 percent in exchange rate appreciation pressures (see the six months to July 2021, compared to 6.8 section 1.6). As a result, core inflation has percent and 12 percent in the corresponding slowed to 2.2 percent in September 2021, periods of 2020 and 2019. Credit to the while headline inflation remained stable at trade and business sectors remains low, 2.2 percent. even as some businesses benefit from the 21. The exceptional monetary policy measures COVID-19 support programs of the Uganda have effectively reduced government’s Development Bank. Lending qamounts to cost of domestic debt, leading to increased community and social services also slumped, government borrowing and the associated after government’s one-off disbursement risk of crowding out private sector credit. through microfinance institutions and the The Bank of Uganda (BOU) reduced the Emyoga program to support social groups. In policy rate by 50 basis points to 6.5 percent in contrast, government net lending remained June 2021 and has sustained liquidity buffers steady in FY21 – similar to FY20 at about 20 in the financial system.15 Interest rates in percent in real terms, but at a lower cost. Figure 16: Policy and market rates (percent per annum) Figure 17: Private sector credit growth (y/y percentage change) Source: BOU 22. The macro-prudential policies and liquidity in June 2021, compared to USh25.4 trillion buffers kept the financial system capital- a year earlier, and supported by increased ized and liquid. In addition to lower mon- holding of government securities, this has ey market rates, the credit relief measures sustained comfortable levels of liquidity in the (CRM), that were in place between April 2020 banking system. By June 2021, the liquid assets and September 2021, exceptionally permitted to deposits ratio was 51.6 percent, compared Supervised Financial Institutions (SFIs), at their to 49.1 percent a year ago. Non-performing discretion, to restructure loans of borrowers loans (NPLs) also decreased to 4.8 percent of affected by the pandemic. The other liquid- total gross assets in June 2021, from 6 percent ity buffers, that were approved in April 2021, a year earlier. Capital assets remain above continue to provide support.16 Combined with the minimum requirements for banks and a steady growth of deposits to USh27.7 trillion non-bank financial institutions. 15 Through its Credit Relief Measures (CRM) – which expired at the end of September 2021 – and the on-going COVID-19 Liquidity Assistance Program and Emergency Assistance Liquidity Facility. 16 These include the COVID-19 Liquidity Assistance Program and Emergency Assistance Liquidity Facility. 12 1.6 Strong import growth helped the 25. Exports have contributed to the recovery in recovery, but contributed to a current economic activity amidst the second wave of account deterioration COVID-19 and subsequent lockdown. A doubling in gold shipments (now Uganda’s top export) 23. The current account deficit widened sharply drove total export revenues to a record US$5.3 to 10 percent of GDP in FY21, from 6.7 percent billion during FY21, compared to a pre-COVID-19 in FY20, as a result of a stronger recovery in level of US$3.9 billion (Figure 18). The steady imports compared to exports (Annex 1). Trading increase in export volumes for coffee (Figure activity (represented by the total value of 18 and Table 2) was on the back of improved exports and imports) increased to 44.8 percent domestic production practices, which is crucial of GDP during FY21, from 39 percent recorded for economic recovery, employment, and poverty in FY20. Nonetheless, imports accelerated to reduction. Even though Uganda realized a lower nearly US$12 billion in FY21, driven by pent-up unit price per kilogram in FY21, international coffee domestic demand for both consumption and prices improved in Q1 of FY22, on account of lower investment goods, reopening of global supply supplies from major producers such as Brazil, chains, and a sustained real appreciation of the which had been affected by drought and frost, shilling – recorded at 1.3 percent in FY21, which and Vietnam, which had faced major disruptions for the third straight year has lowered the cost of due to COVID-19 outbreaks and container imports. This overshadowed the sizable rebound shortages. Hence Uganda’s coffee export values in exports, given gross inflows from travel and continued to rise, reaching US$155.7 million during remittances remained below pre-COVID-19 Q1 of FY22.17 Other traditional and non-traditional levels (Figure 18), amidst accelerated repatriation exports had recovered to pre-pandemic levels of incomes earned by foreign investors. by the end of FY21, including through formal 24. Both investment and consumption imports and informal cross border trade that has been surged, as firms re-opened, supported by a threatened by intermittent administrative real appreciation of the shilling and easing measures imposed by importers.18 The better of global supply chains in the aftermath of performance of goods exports was in contrast to the initial COVID-19 shock in late FY20. The the sluggish recovery of the travel industry, which total goods import bill was 34 percent above despite the steady increase through the second the depressed levels of FY20. Almost a third of half of FY21, brought in only about 43 percent these imports, valued at US$2.5 billion, were in value of pre-pandemic levels during FY21 mineral products (excluding petroleum) and (Figure 18). base metals and their products, which were almost 83 percent above their levels in FY20. With Uganda’s own source of gold still limited to artisanal miners, a large part of these imports were raw gold from neighbors like DRC, that helped to feed Uganda’s nascent refining industry. Further support to investments came from private imports of machinery, equipment, vehicles, and accessories, that increased by 24 percent, partially funded by borrowing from the domestic financial system, while government imports remained steady for ongoing infrastructure projects and classified items. Consumption was supported by imports of food and related items that accounted for 10 percent of the total import bill. Services imports also grew strongly, unabated by the disruptions from the second COVID-19 wave and subsequent lockdown (Table 2). 17 BOU (2021, June) 18 In March 2021, Kenya issued a ban on importation of maize from Uganda and Tanzania on account of high levels of aflatoxins. 13 Figure 18: Key export and remittance flows (US$ millions) Figure 19: Financing of the current account (US$ millions) Source: BOU 26. Remittances are still lower than pre- 27. The current account deficit was financed COVID-19 levels but had started mainly through borrowing, largely on closing the gap in FY21 (in GDP terms) concessional terms (Figure 19). With compared to the end of FY20 (Table 2). international companies still grappling While remittances are critical to support with recovery, FDI to Uganda has remained consumption and income of households (see sluggish, at only US$847 million ( just over section 1.4), their average of US$264 million 2 percent of GDP) in FY21, compared to during the first half of 2021, is still more than US$967 million in FY20 and US$1,217 million in 10 percent lower (in nominal terms) than FY19 (Annex 2). This reflects the slowdown in what was received in the corresponding equity and intercompany loan inflows, and period of 2019.19 This decline is alongside an more cautious reinvestment of earnings. increase in income repatriation by foreign Net government borrowing, on the other investors and workers in Uganda, further hand, totaled US$1,427 million or 3.5 percent deteriorating the current account. of GDP in FY21, of which US$533 million was COVID-19 emergency budget support from the World Bank and IMF.20 This borrowing has led to a fast increase in public debt, as discussed in section 1.7. Furthermore, whereas some of these loans went to BOU to reinforce foreign reserves, as a stronger buffer in the face of the COVID-19 shock, the level of these reserves actually dropped to US$3.6 billion or 4.4 months of import cover in June 2021, from 4.7 months in June 2020. This happened as government withdrew some of these reserves to finance increased spending pressures. Nonetheless, the IMF’s August 2021 general allocation of SDR346 million (about US$489 million) boosted reserves. Moreover, with the strong real appreciation, BOU has room to build reserves through purchases of foreign exchange from the market. 19 IFAD (2021, May). Uganda is one of few countries to have estimates on remittances sent through informal channels and to include these flows in their national statistics. As a result, Uganda’s decline in remittances may reflect a better recording of their flows, compared to countries that have shown no decline or even an increase during the COVID-19 crisis. 20 The authorities have used a large portion of IMF financing to support BOU’s reserve position, with the rest being on-lent by BOU to the Ministry of Finance for budget support 14 Table 2: Balance of Payments (quarterly, % GDP)   FY19/20 FY20/21   Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Current account balance -6.3 -4.6 -10.3 -8.9 -9.9 -13.1 -8.0 -14.5 Trade in goods and services balance -9.4 -9.5 -13.2 -11.8 -12.6 -16.2 -10.3  -17.1 Exports 15.7 17.5 18.7 12.7 16.0 17.3 19.3 20.5 o/w coffee 1.3 1.3 1.8 1.5 1.5 1.3 1.6 1.8 o/w gross travel 3.6 3.9 3.3 0.0 0.5 1.3 2.4 2.8 Imports 25.1 26.9 31.9 24.6 28.6 33.5 29.6 37.6 o/w oil 2.5 2.8 3.0 1.7 1.7 2.2 2.3 2.9 o/w government imports 1.0 1.2 1.7 1.0 1.8 1.2 0.7 1.8 Primary income, net -1.8 -1.6 -2.3 -1.8 -1.9 -1.7 -2.1 -2.0 o/w public interest payments (debit) 0.5 0.2 0.3 0.3 0.6 0.2 0.7 0.3 Secondary income, net 4.8 6.4 5.2 4.7 4.6 4.9 4.5 4.6 o/w personal transfers (credit) 3.7 5.5 3.4 2.4 2.9 3.2 3.0 3.0 Capital account balance 0.1 0.4 0.2 0.1 0.5 0.8 0.4 0.2 Net borrowing -6.2 -4.2 -10.1 -8.8 -9.4 -12.2 -7.6 -14.3 (balance from current and capital a/c) Financial account balance 3.5 2.4 7.2 6.7 10.4 4.5 7.3 9.6 Direct investment, net 3.0 3.3 2.7 2.3 2.2 2.3 2.4 2.4 Portfolio investment, net -0.8 -1.3 -0.6 -1.1 -0.9 1.0 0.3 0.2 Other investment, net 1.2 0.4 5.1 5.4 9.1 1.2 4.5 7.0 o/w Government loans, net 1.3 2.3 7.3 5.1 7.2 3.2 -0.2 5.1 Disbursements 1.7 2.8 8.0 5.7 8.1 3.7 1.1 5.6 Repayments -0.5 -0.6 -0.7 -0.6 -0.8 -0.5 -1.3 -0.5 Net errors and omissions 2.4 2.4 3.2 3.4 0.5 7.6 -1.6 7.1 Overall balance -0.3 0.5 0.3 1.3 1.5 -0.1 -1.9 2.4 Financing 0.3 -0.5 -0.3 -1.3 -1.5 0.1 1.9 -2.4 Central bank net reserves (- increase) 0.3 -0.5 -0.3 -7.8 -1.5 0.1 1.9 -5.3 Use of Fund Credit 0.0 0.0 0.0 6.5 0.0 0.0 0.0 2.9 Memorandum GDP, nominal (in mil US$) 9386 8705 8022 7711 9684 9144 8809 8809 Source: BOU and World Bank calculations 15 1.7 Revenue shortfalls and COVID-19 tax payments, total taxes were almost 10 related spending pushed the fiscal percent lower than had been budgeted.21 deficit to a record high Meanwhile, total expenditures rose by over 20 percent in FY21, and, in GDP terms, were above 28. Suppressed revenues and a sharp increase the projected pre-COVID trajectory (Figure in spending widened the overall fiscal 20). Domestic financing, including from BoU, deficit to 9.2 percent of GDP in FY21, which has increasingly become more important is about double its pre-crisis levels (Table in financing the fiscal deficit, increasing 3). Although there was a slight improvement to new highs in FY20 and FY21 (Figure 21). on FY20 as the economy started to recover, Budget support – provided by international domestic revenues continued to underperform finance institutions (IFIs) and syndicated in FY21, missing the national budget target by commercial loans from Stanbic and the Trade about 1.5 percent of GDP. With businesses still Development Bank – has also provided critical constrained by COVID related restrictions, and support since FY20 (Figure 21). Commercial fiscal support to the private sector sustained loans for general budget support are unusual largely through exemptions and deferral of given the non-concessional terms involved.22 Figure 20: Fiscal deficit (RHS axis) and total tax revenues Figure 21: Financing the fiscal deficit (% GDP) and expenditures (% GDP) Source: MoFPED and World Bank calculations Note: Dashed lines in Figure 20 show pre-COVID projected tax revenues and expenditures from the FY20 medium term fiscal framework. Although budget support is part of gross external financing, it is included in Figure 21 to give a sense of its increase since the start of the COVID crisis. 29. At 12.4 percent for FY21, the tax-to-GDP order to reach the long standing government ratio is about the same as pre-crisis levels target of 16 percent of GDP, this will need to and well below both pre-COVID projections be accompanied by better implementation and revenue targets (Table 3). Despite the of the Domestic Revenue Mobilization COVID effects on businesses and failure of Strategy (DRMS, 2019).23 Some specific revenue some tax measures initiated during FY21 to be measures have already been proposed for fully rolled out, tax collections improved on the FY22, including removing certain exemptions, back of a moratorium for taxpayers to clear outstanding obligations and arrears without increasing fuel excises, and tax administration penalty. There was also an improvement in efforts to collect arrears, increase registered revenues collected from all tax heads in FY21 taxpayers, and enhance tax audits and compared to FY20, even though the effects investigations. Going forward, a stronger of the COVID-19 crisis continue to weigh on focus on enforcing recent tax revenue and both domestic and international taxes. As the administration reforms should be prioritised, economy recovers, so too will taxes, but in rather than introducing any new tax policy measures. 21 This underperformance in tax revenues was also driven by Parliament’s rejection of certain revenue enhancement measures, and a delay in approving the increase in excise duty on fuel. There were also delays in implementing tax administration reforms by URA, including the establishment of the Electronic Fiscal Receipting and Invoicing System (EFRIS). 22 It is understood that the terms for the first EUR600 million syndicated loan in June 2020 were a maturity of 7 years, grace period of 2 years, amortization over 5 years, and at an interest rate of Euribor plus 4 percent. 23 MoFPED (2019, October) 16 30. Given pressures to respond to the spending was also driven by much higher COVID crisis, exacerbated by weak levels of supplementary spending in FY21, budget processes, current spending rose which increased to almost 11 percent of significantly above budget to 12.5 percent the approved budget, more than double of GDP compared to 10.8 percent in FY20. pre-crisis levels. Of this spending, about a This was driven primarily by increased quarter went to support the direct COVID-19 spending on goods and services, a spike response – including an almost 20 percent in transfers to other agencies, and higher increase on the original health budget – but interest payments on debt. Elevated interest with the bulk (37 percent) going to Ministry payments are to be expected given the of Defence and State House for classified shift in recent years to increased domestic purposes.24 In addition to revealing issues financing (Figure 21) – which hit 4.6 percent in the budget process, supplementary of GDP in FY21 or about 3 percent of GDP budgeting ought to be limited to emergency higher than the average pre-crisis levels situations, otherwise it could distort national – and externally financed commercial spending priorities. borrowing. Some of the increase in current Table 3: Key fiscal indicators, FY18 – FY21 (% GDP) FY21 FY22 FY18 FY19 FY20 FY21 Budget Budget Total revenue and grants 12.7 13.5 13.2 14.4 15.9 14.9 Revenue 12.0 12.6 12.4 13.2 14.7 14.0 Tax 11.7 12.2 11.4 12.4 13.7 13.0 o/w Income and profits 3.9 4.2 4.2 4.5 o/w Goods and services 6.3 6.6 5.9 6.5 o/w International trade taxes 1.4 1.4 1.2 1.3 Non tax 0.4 0.4 1.0 0.9 Grants 0.6 0.9 0.8 1.2 1.2 0.9 Expenditures and net lending 16.8 18.4 20.3 23.6 24.7 21.4 Current expenditures 9.1 9.4 10.8 12.5 11.9 11.9 Wages and salaries 2.9 3.2 3.5 3.4 Interest payments 1.9 1.9 2.1 2.7 domestic 1.6 1.5 1.7 2.1 foreign 0.3 0.4 0.4 0.7 Other current 4.3 4.3 5.2 6.4 Development expenditures 6.3 7.6 8.6 10.1 11.6 9.2 External 2.7 3.1 2.8 3.6 Domestic 3.6 4.5 5.8 6.5 Net lending and investment 1.2 1.1 0.6 0.4 Hydropower projects 1.2 1.1 0.5 0.1 Recapitalization BoU 0.0 0.0 0.1 0.3 Other spending 0.3 0.3 0.3 0.6 Clearance of domestic arrears 0.3 0.3 0.3 0.6 Primary balance -2.2 -3.0 -5.0 -6.4 -6.1 -3.6 Overall Balance -4.1 -4.9 -7.1 -9.2 -8.8 -6.5 Financing 4.1 4.9 7.1 9.2 External Financing (net) 2.9 2.8 4.0 4.5 6.4 4.5 disbursements 3.6 3.7 4.6 5.0 projects 3.5 3.6 2.8 2.8 3.1 2.3 budget support 0.1 0.1 1.7 2.2 4.1 3.4 repayments 0.7 0.9 0.6 0.6 Domestic Financing (net) 1.1 1.9 3.0 4.6 2.4 2.0 banks (net) 0.2 1.0 1.6 1.7 1.4 1.0 non-banks (net) 0.9 0.9 1.3 3.0 1.0 0.9 Errors and omissions 0.1 0.2 0.2 0.1     Source: MoFPED Note: These figures are preliminary given possible data revisions on fiscal outcomes for FY20/21. Although the fiscal framework is prepared on a cash basis, errors and omissions are understood to include payables accrued in the previous FY. 24 MoFPED (2020, July – 2021, June). 17 31. Although development spending the continued revival of Uganda Airlines, increased in FY21, it was still well and classified investments. Meanwhile, at below budget, which could constrain 0.6 of GDP, domestic arrears payments (at the recovery, particularly for the about USh840 billion) were significantly construction sector and related services. higher than target (USh450 billion) in FY21, The underperformance was largely due to which, in GDP terms, was also double the the poor execution of externally financed FY20 outcome. This would have eased investments, which was only about half of liquidity for some private sector businesses what had been budgeted. This continues to and reduced the associated risk of default be hampered by uncoordinated budgeting within the financial system. However, due for government’s own contribution to these to poor budgeting (manifested through projects and poor planning for rights of supplementary budgets) and within year way and land compensation. On the other expenditure controls, as well as the tight hand, domestically financed investments fiscal situation, significant new arrears may increased strongly in FY21, with noticeable have accumulated. emphasis on roads and bridges, aircraft for Figure 22: Total public debt (% GDP, nominal) Figure 23: Liquidity indicators (GFN-to-GDP and interest- to-revenue ratio) Source: BoU Source: WB, IMF (2021, June) 32. Against the background of low tax revealed that a debt-financed, government revenues and increasing expenditure, spending-led growth model may have run its Uganda has seemingly exhausted the course. fiscal space it would need to drive the recovery and respond to shocks. Uganda’s 33. Increased non-concessional external public debt has surged from 27 percent of borrowing, together with sizable domestic GDP in FY15 to about 48 percent in FY21, borrowing, has led to heightened liquidity with a significant accumulation in the last pressures. The latter is reflected in a two years as government responded to narrowing of the fiscal space, as shown the COVID-19 crisis (Figure 22).25 This sizable by the doubling of interest spending to 20 increase has led to a shift in Uganda’s rating percent of domestic revenue in FY21 (Figure from low to moderate risk of debt distress.26 23). This has been exacerbated by continued This deterioration is largely predicated weak revenues, and a combination of on worsening fundamentals due to the growing domestic debt, which carries impact of the COVID-19 shock, which has double digit interest rates, and higher decelerated real output growth and non- non-concessional borrowing. In addition debt-creating foreign exchange inflows such to exposing the budget to vulnerabilities, as remittances and FDI, and led to Uganda’s the large interest payment bill of close to debt carrying capacity being revised from 3 percent of GDP also consumes valuable strong to medium. The pandemic has also fiscal space – central government interest payments on domestic debt alone exceeded 25 About two-thirds (US$8.5 billion) of outstanding public debt is owed to external creditors, largely for energy and infrastructure projects, and with a weighted average interest rate of about 2 percent. Domestic debt totals about US$4.3 billion, with roughly three-fourths in Treasury Bonds with maturities from 2 to 15 years, while the rest is in short-term Treasury Bills. 26 World Bank, IMF (2021, June) 18 spending on both education and health 23). Furthermore, the increasing reliance on (excluding donor projects) in FY20. The gross domestic debt raises the risk of crowding out financing need (GFN), which includes the private investment, given that a key driver fiscal deficit and principal payments coming of large interest rate spreads are the high due, has also almost doubled to 13 percent interest rates on government bonds.27 of GDP in FY21 from 7 percent in FY15 (Figure 27 Jefferis et al. (2020). 19 2. ECONOMIC OUTLOOK, RISKS AND percent of the country’s population and POLICY ACTIONS 10 percent of the eligible population, had received at least one dose of the COVID-19 2.1. An uncertain stop-start economic vaccine by early October 2021, which is recovery is expected well short of government targets (Figure 24).28 This percentage will probably only rise 34. Significant uncertainty remains on the gradually though, due to a limited supply of evolution of COVID-19 and its effects in vaccines and reluctance by some people to Uganda, relying largely on the success vaccinate. A stronger vaccination effort – of the vaccination effort. So far, the which is critical for the economic recovery vaccination program launched in March – is expected to take place from late 2021 2021 has progressed slowly. Only about and well into 2022, with over US$120 million 2.2 million people, representing about 5 budgeted for vaccines in FY21/22. Figure 24: Total number of Ugandan’s vaccinated and government’s target Source: GoU and Our World in Data Note: Government’s December 2021 target includes health workers, teachers, security personal, people 50 years and plus, and those aged 18-50 that have comorbidities. The overall target is 49.6 percent of the population (about 22 million people) by December 2021. /ourworldindata.org 28 Our World in Data. https:/ 20 35. Under the baseline scenario, real GDP Table 4: Baseline economic outlook (annual percent is expected to grow by around 3.5–4.0 change unless indicated otherwise) percent in FY22 and about 5.5 percent   FY21 FY22 FY23 in FY23 (Table 4 and Figure 25). This is a full Real GDP growth (baseline) 3.4 3.7 5.5 percentage point lower than the projections Private consumption 3.9 2.9 4.4 in the June 2021 Economic Update and incorporates the impacts of the second Government consumption 9.8 0.9 2.5 lockdown in mid-2021 and likely evolution Gross fixed capital investment 3.5 5.1 7.8 of the pandemic in Uganda. It also aligns Exports (goods & services) 3.2 14.2 12.6 with government’s recent adjustment (in Imports (goods & services) 8.3 9.4 9.1 September 2021) of its FY22 growth projection from 4.3 to 3.8 percent. Given limited vaccine Agriculture growth 3.8 3.4 4.0 coverage, alongside relaxed adherence to Industry growth 3.4 5.1 7.6 public health and social distancing measures, this could lead to progressive waves of the Services growth 2.7 3.1 5.0 pandemic and sustained mobility restrictions, which would slow the economic recovery.29 Inflation (CPI) 2.5 4.0 5.0 Unfortunately, even with stronger growth in Current account (% GDP) -10.1 -8.2 -8.3 FY22, per capita GDP will remain well below Net FDI (% GDP) 2.1 2.4 2.9 the NDPIII target (Figure 26) – meaning Fiscal balance (% GDP) -9.2 -6.4 -4.0 Uganda will now take longer to reach the lower-middle-income target. Public debt (% GDP) 48.2 53.4 53.3 Note: Gross fixed investment in Table 4 includes both public and private investment 36. Growth is likely to be driven by a pick-up in private consumption – as household NDPIII Figure 25: Real GDP growth rate target (percent) incomes recover – investment, and a recovery in exports as the global economy stabilizes. This forecast is also supported by baseline NDPIII target PMI data (Figure 8), which shows how quickly business and demand conditions have downside baseline recovered after the previous two lockdowns. Under a more optimistic scenario, growth downside could even be closer to 4 and 6 percent in FY22 and FY23, respectively, if the overall Final Investment Decision (FID) on oil production is taken before the end of 2021 or in early 2022,30 and investments are ramped up quite quickly thereafter. Given the increase in private and Figure 26: Real GDP per capita (US$) public sector investments that would follow, up to US$20bn is expected to flow into the country to develop oil infrastructure, some of which could be tapped by local suppliers – as per the country’s local content policy – and NDPIII target NDPIII target local communities. However, these suppliers and communities will only benefit if they have the skills to support the development (and Post-COVID Post-COVID production) phase of a globally orientated oil sector, as well as the necessary information on opportunities in the sector. Thus, efforts to improve skills and information sharing over the next few years are critical. Source: UBOS, NDPIII and World Bank estimates 29 GoU MoH (2021, May) 30 See World Bank (2021, June) 21 37. Due to the expected lingering effects by vaccination trends and evolution of the of the pandemic on private sector pandemic.32 With the slow recovery of FDI to finances, monetary policy is likely to 2.4 and 2.9 percent of GDP in FY22 and FY23, remain accommodative to support the respectively, the current account deficit is fragile recovery in economic activity. expected to be financed largely through The combination of pent-up domestic government borrowing – partly through demand, as economic activity picks up, concessional financing from IFIs – and a and strengthening global growth may drawdown of foreign exchange reserves, exert pressure on prices. Nonetheless, this is which could include use of the special expected to remain modest, as the output SDR allocation. Financing through non- gap is unlikely to close and create significant concessional means is likely to be limited inflationary pressures. Thus, core inflation given ongoing efforts by government to is projected to remain within the range improve Uganda’s debt profile. of 3.5 to 4 percent during FY22, and only approach its target of 5 percent in FY23, as 39. Fiscal consolidation over the next few the economic recovery strengthens. Unless years will be anchored on the recently inflationary pressures surprise upwards, due approved (June 2021) IMF Extended to sustained increases in global commodity Credit Facility program. The fiscal deficit is prices, particularly oil, and/or depreciation expected to reduce to 6.4 and 4.0 percent of pressures as global financial conditions GDP in FY22 and FY23, respectively. This will tighten, an easier monetary policy stance be largely driven by non-interest expenditure and liquidity support (see section 1.6) is cuts, as revenue improvements are likely to expected to continue to support liquidity take some time, and with total expenditure in the financial system and economic projected to decline by 2.5 percent of GDP recovery. Furthermore, given the potential to 21.1 percent in FY22 from 23.6 percent in for increased NPLs and growing exposure of FY21, and average about 19.3 percent over banks to government debt that could affect the medium-term.33 However, improved financial stability, the eventual withdrawal of revenue performance as the economy monetary support is likely to be carefully and picks up also augurs well for the fiscal gradually managed. consolidation, and will likely be supported by tax policy and administration measures 38. The stabilizing global environment could that aim to increase revenues by at least support stronger exports, tourism and 0.5 percent of GDP a year. Ultimately, this remittances and hence improve the consolidation intends to shift debt back current account. For both FY22 and FY23, to a more sustainable path34 – peaking at the current account deficit is projected around 53 percent of GDP – and limit private to decline to about 8 percent of GDP, as sector crowding out. Although government exports accelerate from improved domestic is entering this period of fiscal consolidation, production and a stronger global and it is important that efforts are still made to regional recovery. The latter supports a support the recovery and revitalization of positive outlook for Uganda’s major exports key sectors (education and health), which – such as gold, tourism, coffee and maize are critical for inclusive growth and poverty – over the next three to five years. Imports reduction. This may require further emphasis will also continue to grow strongly, assuming on a fiscal strategy that creates space for the final investment decision in the oil critical spending priorities, continues to sector is made soon. Whilst an improvement rebalance expenditure away from a focus in remittances will largely depend on on hard infrastructure and back to social employment recovery in source countries sectors such as education and health, and and is expected to strengthen alongside the improves efficiency in public investment global recovery,31 the outlook for services management to maximize returns. (particularly tourism in a post-COVID world) will largely be determined 31 IFAD (2021, May). Nearly a third of remittances came from Europe in 2018, led by the UK, Sweden and Germany, whilst nearly a quarter came from the Middle East, led by the UAE. 32 According to the latest UNWTO Panel of Experts, almost half of all experts (45%) continue to see international tourism returning to 2019 levels in 2024 or later, while 43% point to a recovery in 2023 (https://www.unwto.org/news/vaccines-and-reopen-borders-driving-tourism-s-recovery) 33 The FY22 and proposed FY23 Budgets include: (i) broad spending cuts, especially to sectors that normally take a large share of the Budget such as Works and Transport (down by 13 percent in FY22) and energy and mineral development (down by over 40 percent in FY22); (ii) scaling down on non-essential expenditures such as travel, workshops and seminars; (iii) strengthening of procurement systems to eliminate waste; and (iv) better budget monitoring and use of digital PFM systems to improve efficiencies. 34 Below 50 percent of GDP in nominal terms, as per the new Charter for Fiscal Responsibility FY21/22-FY25/26. 22 2.2. Risks remain tilted to the downside of 55 percent for countries with a medium debt-carrying capacity is breached (slightly 40. The recovery over the next couple of years and temporarily) under a stress scenario could, however, be slower considering large that includes contingent liabilities related global and domestic uncertainties. Under to SOE debt, PPP liabilities and financial a downside scenario, growth may be closer markets – all together estimated at about to 3 percent in FY22 and with a more muted 16 percent of GDP (Figure 27). Additional recovery to around 4.5 percent in FY23 (Figure pressures may arise, however, from excessive 25 and Table 5). This poorer performance spending to contain further waves of the could materialize if Uganda experiences a pandemic, support the recovery and meet combination of progressively worse waves government’s commitments for developing of infections, widespread coverage of the the oil sector ahead of production in about vaccine is only achieved in 2023, heavy 2025. Furthermore, weak implementation mobility restrictions are intermittently of DRMS tax-enhancing measures and reintroduced, government’s planned a roll-back of reforms to reduce ad-hoc fiscal consolidation means scaling back tax exemptions may strain government’s significantly on the support to vulnerable ability to raise additional revenue and persons and businesses, financial sector offset higher expenditures. This may then conditions deteriorate markedly, tourists only affect the smooth decline in the debt start traveling to Uganda in larger numbers service-to-revenue ratio (Figure 27), which from 2024 onwards, and/or the overall is dependent on DRMS implementation and FID is delayed further due to unexpected oil-related revenues from 2024/25 onward. A oil price fluctuations and uncertainties in significant shift in debt towards more non- the global environment, including from a concessional borrowing and/or the issuance sustained COVID-19 shock and growing of a Eurobond would then disrupt the smooth climate change considerations. On balance, repayment profile Uganda currently enjoys, however, although there is great uncertainty raise debt burden trajectories, and further regarding the key health variables (Table 5), increase debt vulnerabilities. Further delays the economic variables (Table 5) look more beyond 2025 for oil production and exports on course towards the baseline scenario. would also compromise debt sustainability 41. Spending pressures and adjustments to given government’s expectation that government’s debt profile could jeopardize these revenues will play an important Uganda’s hard-earned macroeconomic role in managing the accumulated debt. stability. Although the present value (PV) Enhancing debt transparency, including of public debt-to-GDP ratio is expected better coverage of nonguaranteed to peak at 43.7 percent in FY22 under the debt issued by SOEs, and limiting non- baseline scenario, the indicative benchmark concessional borrowing would help to mitigate some of these risks. Table 5: COVID-19 health and economic assumptions Key variables Baseline scenario Downside scenario Health     Number of daily cases Decreasing waves through 2022 Progressively worse waves through 2022 Widespread coverage of vaccine By mid-2022 In 2023 Economic Lockdown and mobility restrictions Partial/fewer restrictions through 2022 Recurrent heavy restrictions through 2022 Support to firms and vulnerable h/holds Continued in 2022 Fully scaled back by end-2021 Financial sector conditions Mostly stable through FY22 and FY23 Deteriorate through FY22 and FY23 Oil price, Brent (average US$/bbl) $74 in 2022 and $65 in 2023 <$55 in 2022 and <$50 in 2023 Key commodity prices (coffee & gold) Moderate Weak Tourism rebound to pre-COVID levels In 2023 In 2024 Source: World Bank Note: Widespread coverage of the vaccine means having covered 90 percent of the most vulnerable population (i.e., health workers, security personnel, teachers, persons of 50 years and above, and persons with comorbidities) and at least 10 percent of the non-vulnerable population (i.e., a further 30 percent of the population) 23 Figure 27: Public debt under alternative scenarios PV of debt-to-GDP ratio Debt service-to-revenue ratio Source: WB, IMF (2021, June) 42. A tightening of monetary policy and pull 43. Any weather-related shocks in FY22 or back in liquidity support may impact FY23 would certainly impede the post- financial stability and financing of the COVID recovery. The increasing frequency post-COVID recovery. BOU may be forced of climatic shocks (e.g., drought and floods) to take these measures if inflationary pose a heavy burden on the economy, pressures build or to ensure external stability export earnings and rural livelihoods. This in response to tightening in developed is further exacerbated by generally low countries. This would then have knock-on technology adoption rates, limited access effects for Uganda’s financial system, which of rural households to alternative off-farm is currently well capitalized and liquid. Such income streams and, since the start of a situation could be exacerbated by the the COVID-19 crisis, the shift of a large growing exposure of banks to government share of the workforce into agriculture debt through treasury securities and as a safety net. The country also lags its accumulation of arrears. By end-March East African peers in water management, 2021, up to USh888.6 billion (5.1 percent of storage and irrigation, which are key to outstanding loans) was held by borrowers building resilience in the agriculture sector. with exposure to government arrears. Of However, even with these improvements, these loans, 12.7 percent were already poorer Ugandans, particularly in rural areas, classified as NPLs, and 22.2 percent were in will still face increasing climatic risks to default by 189 days. Moreover, with the expiry their livelihoods. For Uganda to minimize of the CRM and/or a sudden withdrawal of these risks, it must improve agricultural monetary support, this could lead to further productivity that will support its economic NPLs. Given the cost of finance is already transformation, requiring all stakeholders to high in Uganda – and lending rates have work together to effectively move a larger been slow to fall in response to the monetary proportion of landowners and producers easing – very few Ugandan firms have a to adopt sustainable land management bank loan or line of credit, and the ones and climate smart agriculture practices. who do face high costs and large collateral Financial incentives and instruments to requirements. Thus, any increase in NPLs overcome initial cost barriers and manage and further deterioration of asset quality risks associated with adoption are vital.35 in the banking sector will probably lead to increasingly risk averse financial institutions who respond by increasing lending rates and, thereby, further limiting access to finance and frustrating the post-COVID-19 rebound in private sector activity. 35 See World Bank (2021, June) 24 2.3. Key policy actions for a resilient and be accessible to all students and continued inclusive recovery closure of schools will have significant implications for future productivity 44. The COVID-19 crisis poses significant and economic growth (see Box 1). The risks to Uganda’s socioeconomic stability implications for girls are even more grave that need to be carefully managed. (see section 3). As a result, schools need to The livelihood of many Ugandans has gradually and/or partially reopen. Uganda is been severely disrupted, and poverty is an outlier in the region, with most countries set to increase further. COVID-19 has also in southern and eastern Africa having either altered Uganda’s development options fully or partially reopened schools.36 As and priorities. Government is going to learners return, schools will need to focus have to respond with fewer resources, due on two overarching measures: minimizing to a slow uptick in revenues, and ensure disease transmission rates and accelerating fiscal sustainability by limiting public debt learning recovery. Additional resources will vulnerabilities. Although the vaccination need to be committed to ensuring SOPs program has been slow, government has are adhered to and monitoring of cases shown strong commitment to achieving is undertaken on a consistent basis. There widespread coverage by the end of 2022. should be a strategy and protocols for This is an essential policy priority for ensuring continuous assessment and identification a quicker and deeper socioeconomic of areas and schools where cases are recovery in Uganda and shifting the current spiking to enable appropriate measures for stop-start recovery to the stronger and more isolation and temporary closures. As children sustained pre-COVID-19 growth path. As return to classrooms, Uganda will also discussed in section 1.1, economies that have need to re-orient its system for a learning rebounded fastest are also those that have remediation process on an unprecedented achieved the quickest vaccine rollout. scale. Several measures tested globally have yielded positive results in terms of effectively 45. In addition to a strong vaccination addressing learning losses.37 program and given the analysis of the preceding sections, immediate policy b) Prioritizing MSMEs for job creation attention is required in three key areas to during the economic recovery. In order ensure an inclusive recovery. These areas to drive the post-COVID-19 recovery and are presently of great concern to Ugandan’s, job creation, MSMEs will need affordable critical to ensuring a balanced and strong finance to recapitalize their businesses recovery over the medium and longer-term, and make new investments – this includes and where government needs to commit being aware of and having access to to a more consistent and effective policy government’s existing relief measures. Partial agenda. They include: public credit guarantee schemes could be a) Opening the schools with safeguards explored, and MSMEs should be supported to minimize disease transmission. to access more affordable finance through Government was swift in developing digital platforms. Digitalization also offers an impressive “continuity of learning” opportunities to reach new customers, framework based on multi-media (radio and stay engaged with stakeholders, deliver television), distribution of print materials and goods and services efficiently, transact encouraging parental engagement in the remotely and ensure the post-COVID-19 process of remote learning. However, the resilience of MSMEs.38 However, for MSMEs to results show that this approach may not digitalize, it is important that government continues to facilitate access to affordable 36 UNESCO (2021) 37 Teaching at the appropriate level will be critical to address different learning losses across cohorts of students and help them catch up to grade-level standards. Establishing small group tutoring programs for the lowest achieving students can help them catch up more quickly. Self-guided learning, whether paper-based or tech-assisted, can aid the pace and effects of remediation, especially when combined with other measures. Finally, expanding learning time, by introducing schooling between terms, or modifying the school year/term, can also provide space for implementing a range of remediation activities. For further information, /www.worldbank.org/en/news/factsheet/2021/04/30/notes-on-school-reopening-and-learning-recovery see https:/ 38 As discussed in section 1.3, ICT and the digital economy have grown strongly since the onset of the pandemic. 25 electricity, ICT products and services, and macroeconomic environment in which the right technical skills and capacity. the private sector can flourish.39 Raising Formal firms have been more resilient to the revenues and using public resources pandemic than their informal counterparts. more efficiently to maximize returns on Therefore, efforts to support the recovery investments are critical for improving fiscal need to include a hands-on approach to and debt sustainability. More efficient public formalization. Using punitive measures to investment management and procurement bring more people into the tax bracket will ensure that infrastructure is built faster, at may yield short term results, but they a better quality, and with less resource waste may not be sustained. Further options for and delays. This additional infrastructure increasing voluntary formalization need to will improve total factor productivity and be explored. Given women owned MSMEs thereby increase growth, which will feed into have been disproportionately affected by higher revenues. However, for these higher the COVID-19 crisis (see section 1.4), they revenues to materialize, separate measures should be put at the center of the recovery; – as prescribed in the DRMS – need to through skilling, linkages to markets, and be implemented. Furthermore, budget provision of low-cost credit (as discussed planning and credibility must also improve, further in section 3). which are being increasingly undermined by the growing use of supplementary c) Maintaining prudent and transparent budgets, financing through domestic fiscal and debt management. Uganda still arrears, increasing allocation to classified has a reasonable fiscal and debt position expenditures, and rising costs of public that needs to be protected, especially as oil administration. The latter is driven by the revenues draw closer, to ensure a smooth creation of new districts and increase in recovery. Commodity prices can be highly Parliament, cabinet and other top executive volatile, and countries that are exposed administration units that have resulted in the to these resource flows need to build hiring of more personnel. strong institutional frameworks to limit the transmission of volatility to the domestic economy, and thereby ensure a stable 39 Kojo, N.C. (2014). 26 PART 2: WOMEN’S ECONOMIC EMPOWERMENT PUTTING WOMEN AT THE CENTER OF UGANDA’S ECONOMIC REVIVAL 27 3.1. Uganda continues to face Together, these gender gaps constrain not significant gender inequality in only women’s economic empowerment, economic outcomes they also choke off opportunities for women to push the economy forward in its 46. Women’s economic empowerment not transformation out of subsistence agriculture only is the right thing to do; it is smart and into an industrialized society with economics.40 Increases in women’s labor greater wealth for all. Gender equality has force participation and earnings are the potential to increase human capital associated with reduced poverty and faster wealth by up to US$1,619 per capita, which is economic growth. Women will benefit from an 11.8-percent increase over the base value their own economic empowerment, but so of Uganda’s total wealth per capita.42 too will men, children, and society as a whole. Women’s lack of economic empowerment, 49. Persistent gender gaps threaten to on the other hand, not only imperils growth undermine Uganda’s human capital and poverty reduction; it also has a host investments in its youth. Historically, of other negative impacts, including less increased spending on infrastructure has favorable education and health outcomes been at the expense of investing in social for children. The business case for expanding sectors such as education and health, which women’s economic opportunities and experienced a decade-long decline in real their ability to make decisions about these per capita allocations, thereby impacting opportunities is clear; this is nothing more service delivery. In efforts to reverse this than smart economics. trend, government has since prioritized human capital investments in youth, a cross- 47. Uganda has narrowed gender gaps in a cutting theme in the NDPIII. Uganda has the few key economic indicators, although world’s second-youngest population, with progress has reversed under the a mean age of 15.9 years. This population COVID-!9 pandemic. Its female labor force must enter the workforce in greater numbers participation rates historically have been and with increased productivity to harness higher than those in other countries in sub- the demographic dividend.43 Nearly three- Saharan Africa, which tends to have higher quarters of Ugandan youth still enter the rates than other developing regions. Women workforce through farm labor.44 Young comprise 40 percent of all business owners females and males must be educated, – making Uganda one of seven countries trained, and linked to growth sector paid in the world to achieve gender parity in the jobs to productively participate in the rate of entrepreneurial activity.41 Women also workforce and pull the country ahead in fare relatively well in financial inclusion: in its efforts to industrialize and economically 2019/2020, 49 percent of Ugandan women prosper. had access to some form of financial service, compared to 57 percent of Ugandan men. 50. Greater investments will be needed to boost female youth, who lag behind male 48. Substantial gender inequalities remain, youth in completion of schooling and however, particularly in outcomes attainment of marketable job skills. This correlated with sustainable income will require efforts to address barriers that generation, which is the cornerstone of are specific to female youth in the school- poverty reduction and inclusive growth. to-work transition, under which lie stubborn Gender gaps in educational attainment gender norms that give greater value to the and paid employment – accompanied by education, paid employment, and business occupational sex segregation – exclude leadership of males. These are the same women from higher-skill and higher-profit norms that allow child marriage and teen jobs and enterprise ownership. Moreover, pregnancy to continue, putting girls at great many the inequalities have been increasing risk and crippling their future income streams over past five years, and at an accelerated and overall well-being. rate during the COVID-19 pandemic. 40 World Bank Group (2015). 41 Mastercard. (2019). 42 Wodon and Onagoruwa (2019). 43 Merotto (2019), World Bank (2019, May), World Bank (2017, December). 44 Merotto (2019). 28 51. Ugandan women tend to be excluded gaps. It considers factors that constrain a from the most productive sectors of the narrowing of gender gaps in these domains: economy, a pattern that has become (i) Labor market outcomes; (ii) Ownership more pronounced during the COVID-19 and control of household assets, namely pandemic. Starker than ever, gender gaps land, and other factors in agricultural have exposed the need to address deeper productivity; (iii) Financial inclusion; and structural and institutional factors that drive (iv) Opportunities for entrepreneurship economic gender inequality. Building back and, in particular, growth-oriented better than before the pandemic is a chance women-owned enterprises. Ways in which to correct past disparities. If all Ugandans policy could be improved and better have equal opportunity and are fully implemented to facilitate greater economic engaged, economic recovery will be faster equality will also be addressed in this and stronger. section, which concludes with several key recommendations. 52. Improving women’s economic empowerment will involve, inter alia, bringing more women into SMEs. More female entrepreneurs need to transition out of microenterprises to start and grow larger businesses in priority value chains and sectors of the economy and move into higher positions in these value chains. By using new approaches and learning “what works” to bring women into sustainable jobs in priority growth sectors, these lessons can be applied to men – eventually increasing their contributions to household incomes as well, thus further accelerating Uganda’s sustainable industrialization. 53. Uganda’s policy framework is generally supportive of women’s economic activity but could improve its laws on inheritance and access to capital. NDP III and Uganda Vision 2040 prioritize gender equality and women’s empowerment as part of inclusive growth and development. An NDP III goal is to achieve “full gender equality” under its Human Capital Development Program. Government’s Uganda Women Entrepreneurship Program (UWEP) is solely dedicated to women’s economic development. 54. This section examines economic empowerment in terms of Ugandan women’s ability to advance economically and possess the agency and power to reap the benefits of economic activity.45 In addition to exploring different domains of women’s economic empowerment – primarily regarding gender gaps in key economic outcomes and control over assets – the analysis identifies the determinants of 45 This is based on the definition of women’s economic empowerment suggested by Golla et al. (2011). 29 3.2. Expansion of gender gaps in labor 55. Gender inequality in labor force outcomes has accelerated during participation and other labor market the pandemic outcomes has grown in recent years, but even more so since the start of the Figure 28: Share of working-age population (14-64 years) 55. Gender inequality in labor force pandemic. In contrast to the consistent working and working solely in subsistence agriculture, by participation and other labor market sex and year (%) rise in women’s outcomes workforce has grown participation in recent years, between but even more1992 and 2012,the so since thestart shareof ofthe working-age pandemic. women (age In contrast to the14-64) has rise consistent women’s infallen since,workforce participation from 82 percent in 2012 between to 76 1992 and 2012, percent in 2016the share and then working-age ofto 73 percent women 2019/20 (age 14-64) (Figure has 28). Withfallen since, men’s from 82 rates percent in 2012 to 76 percent in 2016 and then remaining above 80 percent, the gender to 73 percent 2019/20 (Figure 28). With men’s in participation gap remaining rates above increased 80 percent,fromthefive to gender seven percentage points. The pandemic gap in participation increased from five to has pushed seven percentagea disproportionate share ofhas points. The pandemic pushed women disproportionate a into share of women subsistence agriculture or out into subsistence of work agriculture altogether. of work or out substantial Their already altogether. Their already share in subsistence substantial agriculture hasshare grown in subsistence agriculture has grown even further, even further, from 47 percent in 2016/17 to Source: UNHS, WB calculations for 2019/20 from 47 percent in 2016/17 to 55 percent in 55 percent in 2019/20 for the entire survey 2019/20 for the entire survey period. Note: Only usual household members are included in 2019/20 period. and indicators may be slightly different from official UBOS numbers. Table 6: Percentage distribution of working population by forms of work Before 20 March 2020 After 20 March 2020 Forms of Work46 Male Female Urban Rural Total Male Female Urban Rural Total Employment 65.7 49 76.4 50.3 57.4 55.5 38.5 69.1 39.9 47 Subsistence Agriculture 33.1 49.5 22.2 48.4 41.3 43.5 60.4 29.4 59.2 51.9 Unpaid Apprenticeship 0.5 0.3 0.3 0.5 0.4 0.2 0.3 0.5 0.2 0.3 Volunteers 0.7 1.2 1.1 0.8 0.9 0.8 0.8 1 0.7 0.8 Total 100 100 100 100 100 100 100 100 100 100 Source: UBOS 2021 Figure 29: Work Stoppages by Sex, Age and 56. Following the lockdown in March 2020, Residence (Percent) more than 60 percent of all females in the working population were engaged in subsistence agriculture (Table 6). This is a whopping 17 percentage points higher than the share of males working in subsistence agriculture. Considering all forms of work, nearly one-quarter of women working before the lockdown reported a work stoppage in June 2020, compared to 16 percent of men (Figure 29). People in urban areas were more likely to stop work, especially women. In rural areas, the shares of men and women who stopped were lower and had a smaller gap between them. Younger women (age 15-30) have also experienced a high share of work Source: UHFPS 2020 Round 1, World Bank calculations. stoppages. 46 UBOS (2021). The Uganda Bureau of Statistics defines subsistence households as “those households that are unable to meet their basic needs regardless of whether they were engaged in any economic activity” (p.26) Subsistence agriculture is defined as “engaged in agriculture mainly for own or family use but partly for sale/barter” (p. 127); and employment work as “work performed for others in exchange for pay or profit” (p. 63). Unpaid trainee work comprises “work performed for others without pay to acquire workplace experience or skills”; and volunteer work comprises “non-compulsory work performed for others without pay” (p. 63). 30 57. Women are almost 50 percent more 59. Partly due to gender discrimination, likely than men to want employment women earn less than men in Uganda – yet not be able to seek or secure it. In particularly young women, who earn 25 2019/20, the share of women 14-64 years percent less than young men.49 Before old who were not in employment and had March 20, 2020, median monthly nominal expressed an interest in employment but wages for male wage employees on were limited by existing conditions in their their main job were USh250,000, but only active job search or availability – defined USh140,000 for female wage employees as the potential labor force (PLF) – was in their main job; the gender differential in 31.3 percent, compared to 21.3 percent of median number of hours worked is too small same-aged men.47 The gender gap in PLF to account for this gap in median wages.50 more accurately reflects Ugandan women’s After this date, women’s median monthly relative lack of access to job opportunities wages plummeted to USh100,000. Gender than does the unemployment rate, in which wage gaps in Uganda tend to be explained there is a negligible differential between not only by differences in men’s and women’s women (8.9 percent) and men (8.7 percent). labor market and other characteristics such PLF is higher in rural areas for both women as sector of employment, level of education, and men (35.1 percent and 24.3 percent, and age. A substantial portion also tend respectively) than in urban areas (24.2 to be unexplained, suggesting that male- percent and 14.5 percent, respectively), favoring gender bias (including statistical which suggests that the need to loosen and institutional gender discrimination) by constraints on employment is even greater employers is at play.51 for rural women than for urban women and rural men. One of the reasons working rates Figure 30: Pre-lockdown economic sectors of for Ugandan women exceed regional and employment, by sex (% of employed population) global averages is their predominance in subsistence agriculture. Women and men alike cannot afford not to be economically active, but the work opportunities available to them are not sufficient to increase household incomes.48 Unpaid care work and other constraints on women’s employment and job seeking are discussed further below. 58. Men predominate as paid employees in sectors associated with higher skills, higher pay, and the transition to industrialization. Prior to the first lockdown in March 2020, these sectors included transport, construction, Source: UHFPS 2020 Round 1, World Bank calculations. professional activities, and industry (Figure 30). Women, on the other hand, tend to predominate in agriculture (including but not limited to subsistence agriculture), personal services, and buying and selling. The gender gap in sectors of employment – and in the skill level of jobs in sectors –may partly explain gender wage gaps in Uganda. 47 Ibid. In the Uganda National Household Survey 2019/2020 report, the Uganda Bureau of Statistics defines the unemployment rate as “the proportion of the unemployed population to the employed and unemployed” (p. 80). 48 Merotto (2019). 49 Khamis (2019). 50 UBOS (2021). 51 Research using earlier rounds of UNHS data (the 2020 estimates of median monthly nominal wages are from UNHS 2019/2020 survey data) finds the unexplained portion of the gender wage gap to be between 61 and 78 percent in rural areas and between 41 percent and 68 percent in urban areas (Kagundu and Pavlova 2007). This earlier study finds that in rural areas of Uganda, 68 percent of the gender wage resulted from discrimination against females and one percent from nepotism toward males. In urban areas, 24 percent of the gender wage gap was due to nepotism toward males and 68 percent to discrimination against females. 31 60. The quality of women’s jobs is lower Table 7: Reasons reported for leaving school, by share of than men’s, with labor conditions more males and females aged five years and above precarious. This is in part due to women’s Reason for leaving school Female Male higher representation in the informal sector Completed desired schooling 6.02 8 and in jobs that are more vulnerable.52 Too expensive 62.76 68.55 Greater vulnerability to economic shocks Parents did not want 6.8 1.98 explains why women have experienced Not willing to attend further 7.21 12.03 work stoppages at greater rates than men following the lockdown. In general, women Poor academic progress 2.65 2.83 are less likely than men to have a written Had to help at home 1.9 0.88 contract and work in a formal or large firm.53 Pregnancy 5.74 0.03 Sickness or calamity in family 4.24 3.12 61. Due to setbacks under the pandemic, Other 2.68 Uganda faces the dual challenge of once again bringing women back into the Total 100 97.42 workforce and, beyond that, into jobs that Source: UNPS, WB calculations for 2019/20. are on par with men’s jobs. Women’s paid work has become even more precarious. Figure 31: Candidates who did not return to school and reasons for not returning, % With many schools in Uganda closed after March 2020 and children at home, a key constraint on women’s work – related to unpaid care work – has also become more binding (discussed further below). More than ever, Uganda needs to invest in girls’ and young women’s education and skills development. 62. Gender norms create additional barriers for young women in their school-to-work transition. Available data suggest three main obstacles that are specific to Ugandan women in their transition to sustainable Source: EPRC Rapid Survey March 2021. work in wage jobs or enterprise ownership: (1) gender gaps in educational attainment and skills acquisition; (2) women tend to 63. More than one-third of Ugandan women cluster in female-dominated sectors (often are illiterate; among Ugandans with any those associated with caregiving, such as formal education, the critical gender health and education) and lack awareness disparities are in completing school, of and exposure to alternative, more rather than attending. Only 66 percent of remunerative livelihoods; and (3) family care women ages 18 and above are literate, a and other household responsibilities, which 14-percentage-point difference from same- disproportionately fall on female household aged men’s literacy rate of 80 percent. Rates members. These barriers are in addition for both sexes are higher in urban than in to statistical and institutional gender discrimination, which play out in complex rural areas, with the widest gender gap ways in the economy (for example, in gender being in rural areas, where women’s and wage gaps, as noted above) and is beyond men’s literacy rates are 60 and 77 percent, the scope of this discussion. respectively. Although usage rates of Early Childhood Development (ECD) programs are low, there is gender parity in ECD attendance —around 38 percent in urban 52 Khamis (2019); Merotto (2019). 53 Khamis (2019). 32 and rural areas. Girls also outpace boys by 65. Lower levels of educational attainment 1-3 percentage points in primary (81 percent) are correlated with lower odds of wage and secondary (29 percent) net enrolment employment. Of those in the working rates. Yet, men’s higher literacy rate reflects population, 42.5 percent with some primary gender gaps in educational attainment. education are employed. This rate rises with Nationwide, completion rates for females each level of schooling, up to 67.8 percent aged 15 and above are 12 percent for for those completing secondary education primary school (14 percent for same- and 84.9 percent with post-secondary and aged men), seven percent for secondary higher education.54 Given girls’ comparatively (10 percent for same-aged men), and six low completion rates and their lower rates percent for post-secondary and above (10 of returning to school after the shutdown, percent for same-aged men). it is more critical than ever to prioritize girls’ enrolments and educational attainment 64. For more females than males in Uganda, at levels that set them up for wage educational aspirations are unmet due employment in the future. to pressure from families and family responsibilities. The top two reported Figure 32: Enrolment in BTVET by ownership, sex, reasons that both males and females and institution type left school in 2019/2020 were (i) it is too expensive for the household, and (ii) they are not willing to attend further (Table 7). Women’s lower likelihood of reporting the latter as a reason suggests a greater interest among females in continuing their education, with alternative norms-driven reasons playing a stronger role in their tendency to drop out. These norms, which prioritize the human capital development of male household members, underlie (a) parental pressure to drop out, which is higher for females than for males; (b) pregnancy (adolescent girls could be supported to stay in school and return after childbirth); and (c) having to help at home instead of going to school. During the pandemic, pregnancy may have become an even greater factor in the interruption of girls’ education (Figure 31). Among all girls and boys in candidate classes, 16 percent did not return to school when it re-opened in October 2020. Yet, the share of female candidates not returning is almost six percentage points higher than for non-returning males. Pregnancy is the second-most-reported reason for girls not returning, after school fees, suggesting Source: Annual School Census (MoES, 2017) in Ministry of Education an increased vulnerability among females and Sports (MoES), GOU 2019 (pending publication) to teenage pregnancy as well as child marriage. 54 UBOS (2021). 33 66. Female students are the minority in 68. As with stopping their educations, women Business Technical Vocational Education are more likely to report family duties as a and Training (BTVET) institutions that reason for not seeking work or starting a provide skills training in more technical, business. In 2019/2020, family responsibilities higher-paying economic sectors. BTVET or housework was the reason for 27 percent enrolments nearly tripled between 2012 and of female household members and only 9 2019, from 34,380 to 95,841, thanks in large percent of male household members. Gender part to investments in expanding, staffing norms place childcare and housework and equipping BTVET facilities. Yet, women responsibilities primarily on household remain the minority in BTVET institutions females in most parts of the world. In Uganda, that prepare students for higher-skill, more longstanding norms compete with and often remunerative occupations and sectors, most override girls’ – and their parents’ – aspirations of which tend to be male-dominated (Figure for their education, skills development, and 32). As in most economies globally, feminized time spent earning wages outside the home sectors in Uganda tend to pay lower wages. (which is more likely to pay wages than in- Female students are the minority only in home work). health and nursing institutions. The overall Figure 33: Percentage distribution of persons aged share of females among BTVET students 5 years and above engaged in UCW, by sex and ranges from 35 to 45 percent – which is lower chore than the 2018 target of 48.5 percent in the Education Sector Strategic Plan 2015-2020. 67. Adding to gender gaps in education and skills acquisition, there is reportedly a lack of awareness among women about higher- skill and higher-pay jobs. Young women (age 15-29) in particular lack knowledge about sectors that will be more remunerative for them as employees and more profitable for them as entrepreneurs (see discussion in entrepreneurship section for more detail). At 12.5 percent, the share of young women who are neither in employment nor in education or training (NEET) was more than twice that Source: UBOS 2021 of young men (5.7 percent) in 2016. Men also have greater access than women to 69. In Uganda, 83 percent of females and 53 job networks and mentors in higher-paying percent of males in households over age (typically male-dominated) fields.55 Women 5 participate in Unpaid Care Work (UCW). also have fewer apprenticeship opportunities Females engage in all tasks more than males than men, although the pandemic has do, with the greatest gender gap in cooking undercut these opportunities for everyone and cleaning (Figure 33). The largest gap is (Table 6). Although subsistence agriculture among those over age 30 in the working- could be seen as a safety net for women age population. Before the March 2020 facing economic shocks during the pandemic, lockdown, 31 percent of men and 92 percent in the longer term it is a setback in Uganda’s of women ages 31-64 were engaged in UCW. aspirations for industrialization. The recent After the lockdown, the share of women backsliding into subsistence agriculture remained at 92 percent, but men’s share underscores the urgency of interventions in declined to 28 percent. agriculture to improve labor productivity and remuneration for those who remain in the sector and to strengthen pathways out of agriculture 55 World Bank, forthcoming. 34 70. Care work and other household demands and growth-oriented enterprise. Without on women’s time are multiplied by the additional fertility adjustments, Uganda will higher-than-average number of children remain in a status quo – what the 16th Edition in Ugandan households. At 4.82 births per of the Uganda Economic Update calls the woman, Uganda’s Total Fertility Rate (TFR) “Business as Usual” scenario – in which current exceeds the average TFR for sub-Saharan access levels and quality of public services Africa (4.7), which is more than double the 2.3 persist, requiring vast fiscal increases to cover global average for developing regions.56 The services for an expanding population.60 high TFR appears to be driven by personal preferences of parents (especially fathers) as well as by an unmet demand for family planning, which was reported by 28 percent of married women and 32 percent of sexually active unmarried women.57 Especially for rural women – who, compared to urban women, average slightly higher fertility rates, shorter birth intervals, earlier average age of first sexual experience, and earlier average age of first marriage – opportunities for education and, later, decent paid work are truncated too early in life.58 71. Uganda’s TFR has been declining modestly in recent decades, and further fertility adjustments will be needed to help reduce fiscal costs of human capital investments and, in turn, allow the country to fully realize its demographic dividend.59 The lower child dependency ratio that results from decreased fertility enables households and government to spend more per child on education and other aspects of human capital development. The reduction in women’s UCW improves their availability to join the formal labor force, which brings additional income to households as well as the economy overall. This enables even greater human capital investments per child, substantially increasing odds of female and male youth acquiring the education and skills they need to move into more productive and higher-paying jobs. A second part of the demographic dividend arises from this younger cohort’s enhanced capacity to save some of the earned income and productively invest savings in priority economic sectors, thus helping advance Uganda along the path to industrialization. Greater savings also allow each cohort to better support itself in old age, leaving more income earned by younger Recommendations and global good cohorts to be invested in productive labor practices for closing gender gaps in labor market outcomes /databank.worldbank.org/source/gender-statistics). 56 World Bank Gender Statistics (https:/ 57 UBOS (2016), in 2016, the most recent year in which available Uganda Demographic and Health Survey data were collected, the ideal number of children reported by women age 15-49 was 4.8 per women, compared to 5.4 for same-aged men. For 34 percent of these men 15-49, the ideal number was six or more children. Awareness of contraceptive methods is high among both men and women, but only 52 percent of women’s demand for family planning is met by modern methods. 58 Ibid. 59 World Bank (2020). 60 Ibid. 35 72. Enabling more women to join and remain 74. Expand access to ECD programs in the labor force – and, furthermore, and invest in developing childcare to secure paid employment with higher services. The relatively low usage of ECD wages – will depend on augmenting their programs—even before closures due to human capital and increasing the time the pandemic—suggests that parents, they have available for paid work. Girls particularly mothers, also will need an need support on multiple levels to bring expanded set of options for childcare to free them back into schools and encourage them up time to pursue education, training, and to remain there until they are sufficiently paid work. Industrialization will eventually skilled to meet the demands of employers, bring greater opportunities for employer- such as in Uganda’s industrial zones. Keeping supported childcare.64 In the meantime, girls in school longer also protects them government might consider developing and from early marriage, teen pregnancy, and supporting affordable, community-based defaulting into subsistence livelihoods and childcare models that have seen success unpaid care work. in Latin America and the Caribbean and are not dependent on employers. In such models, government trains a trusted adult 73. Provide a range of complementary woman from each neighborhood (selected interventions to bring girls back and by parents in the community) and then keep them in school. Government’s School supplements a small stipend that parents Reentry Policy (drafted as of this writing) pay for her daytime care of their children in has revised the guidelines for preventing her home. Using this approach, the Hogares and managing teen pregnancy, which will Comunitarios program in Guatemala help address determinants of girls’ drop-out provided 12 hours per day of affordable and failure to return to school.61 Alongside and reliable childcare; mothers who were large-scale remediation interventions, program beneficiaries were more likely than pro-active re-enrolment activities, and mothers in the control group to be engaged adherence to health SOPs, government in formal sector – and likely more stable – will also need to provide psycho-social employment and earned higher incomes.65 support for vulnerable students coping with COVID-19 related stressors, especially 75. Support girls in school to study male- girls who might have experienced GBV or dominated subjects and then work in pregnancy during the pandemic. Health related sectors. Teachers and peer support interventions could be bundled with efforts groups can be effective in encouraging girls to educate male and female students to study science, technology, engineering about sexual and reproductive health and mathematics (STEM) fields and in (SRH) – not only about the need for modern lowering attrition rates of female students contraceptive methods, but to offer more from these fields.66 Matching female students guidance on how adolescents can physically with female role models in male-dominated access contraception to better meet young sectors increases the odds of graduates women’s demand for modern methods. pursuing jobs in such sectors, including ICT.67 Only about one-third of women who visit a Female students’ computer literacy rates health facility discuss family planning.62 In- are highest in school settings where it is school programs could also address norms universally mandated (a requirement for all underlying Uganda’s high rates of GBV, which males and females).68 In Uganda, the top- have increased since the beginning of the reported reason for not using the internet is pandemic, by adapting successful evaluated the lack of confidence, knowledge, or skills to interventions such as GEMS in India.63 use it – 62.1 percent for men and 64.7 percent for women.69 61 FAWE (2021). 62 UBOS (2016). 63 Achyut et al. (2011). 64 Select evaluated global examples of private sector, government, and PPP-provided childcare for employees have proven effective in increasing women’s odds of labor force participation and employment. See, for example, Niethammer et al. (2017). 65 Ruel et al (2002). 66 Asian Development Bank (2012); Espinosa (2011). 67 Hermann et al. (2016). 68 Lyon et al. (2012). 69 UBOS (2021). 36 76. For all of the recommendations above, communicating government’s commitment government will need to identify high- to keeping girls in school and economically level champions. High-level messaging by empowering women. government champions will be crucial in Box 2: Uganda’s legal framework: women as workers and asset owners Uganda’s legislation supports gender equality in the workplace overall, but it does not sufficiently protect paid work for women who want to continue working after childbirth. Gender-based discrimination and sexual harassment in employment are both prohibited, and sexual harassment in employment is met with civil remedies or criminal penalties. Uganda also mandates equal remuneration for work of equal value and allows women to work the same night hours and in the same industries and jobs as men (even if deemed hazardous or inappropriate). Its laws that govern women’s paid work around childbirth are weak, however. Although dismissal of pregnant workers is prohibited, there are no requirements for paid parental leave (such as at least 14 weeks of paid leave available to mothers) or for government to administer 100 percent of maternity leave benefits. The World Bank’s “Policy Note: Legal Gender Gaps and Reform Recommendations for Women’s Economic Empowerment in Uganda” recommends that the 2006 Employment Act’s current provision (Section 56) be amended to (i) ensure women’s right to a period of at least 14 weeks of maternity leave; and (ii) shift from employers to government the responsibility of administering maternity leave benefits so that the cost of employing women is not so disparate from that of employing men. It also recommends introducing paid parental leave provisions through adoption of legislation that requires the right to some form of parental leave, either as individual entitlements or as shared by the mother and father. Uganda is currently reviewing the Succession Act, Cap. 162, which fails to grant female heirs and descendants (surviving wives and daughters) rights to inheritance of land and other assets that are equal to those of male heirs and descendants (surviving husbands and sons) in intestate succession. In cases of succession, where – in the absence of a will – a widow is not entitled to the matrimonial home shared with her husband prior to his death, ownership of the home is passed to the intestate’s legal heir, who is defined as the closest male lineal descendant. Of all other property (both shared and unshared prior to the husband’s death), only 15 percent is granted to the widow, with the rest going to the lineal descendant. The review may result in reforms that entitle female heirs and descendants equal rights to male heirs and descendants, which the Policy Note also recommends. Source: World Bank (2021, November). 37 3.3. Lack of land ownership limits women’s 78. Increasing household incomes will require productivity and empowerment the creation of more productive and remunerative work in agriculture as well 77. Land is important for the survival of as jobs outside of agriculture. With such women and their families, as well as for a large share of the population engaged increasing household wealth in Uganda. in agriculture – and among it, the majority With the pandemic disproportionately belonging to smallholder farm families who pushing women into subsistence agriculture, work their own farm – increases in household as of 2019/2020 more working-age females wealth will initially need to occur through (73 percent) than males (63 percent) are enhanced agricultural productivity, until occupied in agriculture (including but other sectors have grown sufficiently to not limited to subsistence level) than in absorb more of the labor supply. Agricultural 2016/2017.70 Women’s land inheritance and businesses in Uganda outside of smallholder ownership rights – or at a minimum, land farms grew by 15 percent per year between use rights – are essential to their agricultural 2001 and 2010, as did businesses in food and productivity; however, these rights have not beverage retail, and in food and beverage been adequately protected under Ugandan processing. Together, these firms accounted law in the past (Box 2). Without access to for one-fourth of all employment in formal sufficiently large land parcels, women in firms in 2010, with large food manufacturing agriculture are less able to produce beyond firms achieving the highest rates of job what they and their household members creation.71 Transforming the country’s food need to subsist. Income from agricultural system is likely to create more paid jobs production that is above and beyond than the rest of the economic sectors put subsistence level can be used to invest in together between 2010 and 2025, according health and education of family members, to research of several sub-Saharan African non-land household assets, and capital to economies.72 start and even grow an enterprise (Box 3). 79. Women farmers will need to improve their agricultural productivity, as agricultural land managed by female farmers is 20-30 percent less productive than land managed by male farmers in Uganda.73 Closing the agricultural productivity gender gap could raise Uganda’s GDP by 0.42 percent – enough to bring 119,000 people above the poverty line.74 There are multiple determinants of women’s lower agricultural productivity in Uganda, among them a disproportionate share of childcare responsibilities, greater constraints on transport which limit access to input and output markets, lower use of and returns to pesticides and improved seeds, and a lower uptake of cash crops.75 This discussion focuses on the productivity-limiting gender gap in land ownership, an important non- financial household asset – control over which is a key measure of women’s economic empowerment. 70 Ibid. 71 Merotto (2019). 72 Townsend et al. (2017), cited in Merotto (2019). 73 UN Women, UNDP, UNEP, and World Bank (2015). 74 Ibid. 75 Ali et al. (2015). 38 Box 3: More land can enhance women’s productivity, enterprise growth, and household wealth Thirty-two-year-old Margaret Ziraba is a small-scale commercial farmer in Buikwe, a rural district in central Uganda. She uses part of the family’s two-acre land to grow vegetables and fruits which she – like other emerging commercial farmers in her village – sells to intermediaries from Kampala. She also has a small piggery with the potential to grow bigger. Both ventures have proven profitable. However, her desire to grow more vegetables and expand the piggery is limited by the small acreage of their untitled family land. She keeps her small savings under the mattress hoping to raise enough money one day to acquire another two acres of land and expand her farming business. Her husband, a village mason, has not shown keen interest in her venture although he recognizes its contribution to the income and welfare of the five-member family. In the evenings, they listen to the radio together but never discuss the wife’s business since he considers it the venture of a “mere” woman that is not worth taking very seriously. Source: MoGLSD (2021). 80. Uganda’s insecure land tenure system 81. Men outpace women in formal and aggravates gender inequalities in informal land ownership rights. As recently land ownership. As in other parts of as 2019/20, only 17 percent of women in Sub-Saharan Africa, in Uganda, formal Uganda are estimated to have any type land ownership through land titling and of land ownership rights, compared to registration is far less common than almost one-third of men (Figure 34). The customary land ownership, which is informal. share of men with freehold or leasehold Only 15-20 percent of national land is land ownership is nearly double that of registered with land rights protected under women. Both males and females are more freehold, leasehold, and mailo tenure likely to possess customary than formal systems, with the rest held under customary ownership rights, but men are nearly twice land tenure arrangements.76 Titling and as likely as women to have the latter. Female leasing are rare partly due to high costs landowners also are less likely to have a associated with surveying and demarcation, formal certificate of title or customary which are required to obtain a land title.77 certificate, a semi-formal or informal Women tend to lack the funds to cover document establishing land ownership, and these costs and so are at a disadvantage a formal sales receipt. in achieving formal ownership. They are at a disadvantage in customary ownership as well. Uganda’s Land Act does not govern customary land ownership rights; the customary tenure system is not required to allow women to serve as co-owners or managers of customary land. Rather, community-specific norms and practices determine access to, control over, and transfer of land. These norms tend to be rooted in traditional beliefs that men – not women – should make decisions about household finances and assets, and thus encourage discrimination against women.78 76 The correct text for this footnote is as follows: Freehold land ownership is considered permanent and involves a certificate of title, which constitutes formal ownership. Mailo landowners possess the same rights as freehold but must respect the rights of lawful and bona fide occupants and Kibanja holders (former field-holding chiefs appointed as civil servants by the British, starting around 1900) to occupy and live on the land. 77 Mwsigye et al. (2020). 78 Ibid.; Merotto. (2019). 39 Figure 34: Ownership rights, by tenure type and sex 83. Because it is comparatively difficult for them to purchase land, women must rely 100 on inheritance as their primary means 100 of land ownership; however, inheritance 80 80 rights are not commonly enforced or 67 60 83 even understood. Men acquire their land 67 60 83 by purchasing it at more than double the 40 0 rate that women do – about 68 percent 40 20 0 0 21 and 32 percent, respectively, in 2019/20. 20 11 21 10 Women acquire the land they own more 0 6 0 11 often through inheritance than through 0 6 female 10 male purchase, but still at lower rates than men female Freehold Leaseholdmale Mailo acquire land through inheritance (37 and 63 Freehold Leasehold Mailo Source: UNPS (2019/20), World Bank calculations. percent, respectively). Enforcement of rights Note: the number of persons with “other” ownership is so small to inheritance is weak in Uganda, especially that percentages are estimated at 0 percent relative to other types of tenure. when it is the inheritance rights of women in question. The sentence should be: Although Figure 35: Single and joint ownership of land in Uganda, by final passage of the Succession Amendment sex, among parcels of land owned Act 2021 will legally establish gender equality in inheritance, custom frowns upon women’s inheritance of land that is considered to be the property of the husband’s natal family.81 Women are much more vulnerable than men to illegal seizure of their land (“land grab- bing”), including land to which they are le- gally entitled through inheritance. In 2019/20, female landowners were more likely than male landowners to have been involved in a land dispute or disagreement with someone over their land parcel. Source: UNPS 2019/20, World Bank calculations. 84. A majority of both men and women believe that female children do not have 82. Women also own much less land than men land inheritance rights that are equal in Uganda—with smaller land parcels— to those of male children. When asked despite a relatively narrow gender gap in if female children have the right to inherit rates of sole ownership of any land parcel. family land, 54 percent of women responded Among those who have sole ownership that either female children have less right to rights over any agricultural land parcel, an inherit than male children (49.4 percent) or estimated 44 percent are women (Figure no right to inherit at all (4.5 percent) (Figure 35). A key gender disparity in land ownership 36). Among men, 3.7 percent responded is in the size and number of parcels owned. that female children have no rights and 56 As of 2019/2020, men have larger estimated percent that they have less than their male landholdings (a mean of 1.6 hectares) counterparts. Only 19 percent of men and 24 than women (a mean of 1.17 hectares); in percent of women responded that rights to other words, Women own 72.9 percent as inherit land are gender equal. Regarding the much land as men. This is a slight decline inheritance of family housing property (as since 2016/2017, when women owned an opposed to family-owned agricultural land), estimated 73.6 percent as much land.79 Men belief in equal inheritance rights is a bit more on average also own a greater number of common – reported by 28 percent of female parcels than women.80 household heads and 23 percent of male household heads. 79 Mwsigye et al. (2020). 80 Data from the 2019/2020 UNPS agricultural survey allow identification of the gender of the first (if solely owned) and second (if jointly owned) owner of each parcel of land belonging to the household. This seems to be a more accurate way of attributing land ownership by gender, as opposed to identifying the gender of the household head as the (sole) owners of the land. Being a female head of household does not ensure her ownership of a land parcel that belongs to the household, particularly given the hurdles that women face in fulfilling their land inheritance rights. The analysis of land ownership thus considers gender of the parcel owner(s) rather than gender of the household head. 81 Ibid. 40 Figure 36: Responses to question: Do female children have the right to inherit land? Source: UNPS 2019/20, World Bank calculations. 85. Women’s lower agricultural productivity 86. Finally, land tenure insecurity is not than men’s derives, in part, from gender only bad for women’s land ownership gaps in land ownership rather than gaps and agricultural productivity; it is bad in land use. 82 Ownership of land includes business for Uganda. Without ownership the rights to sell, mortgage, rent, make rights over land, women lack the main form improvements on and retain the revenue of collateral required to secure loans from generated from the land. Use rights involve formal financial institutions, which have only some of these. Gender inequalities in use the capacity to provide larger volumes of rights are less pronounced than in ownership, loans than microcredit institutions. Insecure although men’s use rights tend to be over land also is a deterrent to investments parcels that are much larger than those over in technology and other innovations in which women have use rights. Crop yields agriculture; moreover, insecurity lowers the are higher (by about 552.3 kg per hectare) on value of land to be used as collateral for plots where women have ownership rights loans.83 Less than one-fifth of Uganda’s land than on plots where women have use rights has sufficiently secure tenure to qualify as only; in fact, yields from plots where women collateral for formal loans. Land insecurity (specifically, lack of access to private land) have ownership rights are higher than those is also associated with land fragmentation, on which men have ownership rights. On in which land parcels are so small – and, plots where men have use rights, yields are in cases where households own multiple higher (by 182 kg/ha) than on plots where parcels, are typically separated from each women have use rights. other – as to severely constrain how much farmers can invest in the land. Women’s relative lack of owned land, compared to men’s, and high degrees of land fragmentation, together with Uganda’s high fertility rates, suggests an immense pressure on small parcels of land to support large numbers of household members. The combination is simply not sustainable, and it implies decreasing investments per child – the wrong direction for Uganda. 82 Ibid. 83 Merotto (2019); World Bank UEU17 (2021, June). 41 Recommendations and global good 89. Raise men’s and women’s awareness of practices for closing gender gaps in gender equality in rights to inherit land – land ownership both as spouses and as children of either sex. Awareness raising programs could 87. The land tenure system’s bias toward be carried out as soon as the Succession male landowners has negative Amendment Act is finally passed and implications for productivity, profits, under implementation. Examples from and sustainable management of land other countries are instructive and could in Uganda – as well as for women’s be adapted to the Ugandan context. For economic empowerment. Until more jobs example, the Property Rights Program in are available outside of agriculture, raising Kosovo, supported by USAID, has successfully productivity of the agricultural sector will used media campaigns – including through be critical to increasing access to wage radio, billboards, and grassroots events employment, boosting household incomes, for children – to increase awareness of and economic growth. Enforcing legislation female property rights and significantly that guarantees gender equality in land raise women’s inheritance and property ownership and inheritance is an important registration rates. Under this program, the condition of rapid growth. To boost women’s number of women who filed inheritance land ownership, enforcement of laws could claims in courts rose by a factor of 10.85 be accompanied by measures to ease Among several promising social mobilization procedural barriers to women’s ownership, programs in Bangladesh, the NGO, Center such as steep costs of certification and for Development Services (CDS), conducts registration. interactive media campaigns on women’s rights to identify customary practices and 88. Pass and enforce the amendment of discriminatory laws that obstruct women’s Sections 2(7)(n)(ii), 26(1), and 38(2) of the ability to claim property. To enable in-person Succession Act, Cap. 162 so that female transmission of this information, CDS also heirs and descendants possess inheritance identifies certain women in communities and rights that are equal to those of male heirs trains them in mobilizing their communities and descendants in intestate succession. to advocate and redress property rights Although the Ugandan parliament passed violations.86 the Succession Amendment Act, 2021 in April 2021, with this amendment as an objective, 90. Implement Sustainable Land the Bill was sent to the President, who then Management-Climate Smart Agriculture returned it to Parliament in August 2021 (SLM-CSA) as a means of making land to reconsider certain provisions.84 Once tenure more secure and more gender- amended, the policy would need to make equal.87 In a country with 80 percent of clear that it prohibits, in particular, gender land under informal and insecure ownership, discrimination in rights to inherit assets for implementing SLM-CSA can jumpstart the sons and daughters, as well as for male much-needed process of land demarcation and female surviving spouses. Ideally, along with defining land ownership and enforcement of equal rights would extend land use rights, as detailed in the 17th edition from formal land tenure arrangements to of the Uganda Economic Update, From customary tenure arrangements. To the Crisis to Green Resilient Growth-Investing extent possible, policy enforcement needs in Sustainable Land Management and to occur in parallel with implementation Climate Smart Agriculture. For example, of climate-smart land tenure reform (see government could administer land policies below) so that implementation partners that enable organized groups of female can leverage the law and supporting (as well as male) producers to access and mechanisms (such as local courts and even purchase land, while requiring them to community arbitration agents) to enforce it. commit to the adoption of SLM- CSA and judicial management of natural capital as a condition for accessing land. 84 World Bank (2021, November). 85 Limani et al (2018). 86 USAID (2003). 87 World Bank UEU17 (2021, June). 42 This approach could help overcome land through improved land demarcation or fragmentation challenges as well as take provision of adequate documentation advantage of women’s greater inclinations to male and female landowners. Two toward sustainable land management while examples of effective ongoing programs improving their access to and ownership are the Systematic Land Adjudication and of land. Implementation of SLM-CSA could Certification (SLAAC) program and the build upon an array of existing programs in partnership between the Ministry of Lands, Uganda (which need support and upscaling Housing and Urban Development (MLHUD) in any case) that aim to promote tenure and GIZ.88 security 88 Ibid. 43 3.4. Women are more financially included gender gap in favor of men narrowed during than ever, but less so in formal this period from 41 to 25 percent. According mechanisms to the UNHS, in 2019/20, 53 percent of the Ugandan population age 15 and above 91. Women are catching up to men in financial either used mobile money or had access to inclusion in Uganda.89 According to Findex, formal or informal accounts (Table 8).91 Men the share of adults (age 15+) in Uganda with were more likely to be financially included an account at a financial institution or with than women using this indicator (57 versus 49 a mobile money provider increased from 44 percent, respectively). percent in 2014 to 59 percent in 2017.90 The Table 8: Access to financial accounts and usage of the mobile money service in 2019/20, age 15+ National Urban Rural Indicator male female total male female total male female Total Used mobile money services 52 39 45 66 57 61 47 32 39 Commercial bank or MDI account 11 5 8 22 12 16 7 2 4 Account or membership in SACCO, MFI 3 2 3 4 3 3 3 2 2 Membership in informal institutions or using individual informal financial 16 20 18 12 16 14 17 22 20 services Used any financial services from above 57 49 53 69 62 65 53 44 48 Source: UNHS 2019/20, World Bank calculations. Note: MDI (Microfinance Deposit Taking Institutions), SACCO (Savings and Credit Cooperative Organizations), and MFI (Micro Finance Institution). 92. Gaps in access to financial services are 94. Men more often use formal financial largest between rural and urban areas. mechanisms, whereas women tend Only 48 percent of adults in rural areas use to rely more on informal institutions, some form of informal or formal financial particularly in rural areas. Men are twice services, compared to 65 percent in urban as likely (11 percent) as women (5 percent) areas. Urban women (62 percent) are to have a formal bank account, either at a significantly more financially included than commercial bank or microfinance deposit- rural women (44 percent) and rural men (53 taking institution (MDI) (Table 8). Women percent), but lag behind their fellow male more often have membership in informal urban residents (69 percent). groups, such as Village Savings and Loan Associations (VSLAs) or use financial services 93. Mobile money has driven increased from individuals; about 20 percent of women financial inclusion for women, but women’s reported this, compared to 16 percent of phone ownership and use of mobile money men. Accounts in informal savings groups are lags behind that of men. In 2019/20 (Table especially important for women in rural areas, 8), 52 percent of men and 39 percent of where the reach of formal banks is more women over the age of 14 used mobile money limited. services, with access being much higher in urban areas (61 percent) than in rural areas (39 percent). Women were less likely (39 percent) than men (52 percent) to be connected with these services.92 89 The two most reliable sources of data on financial inclusion are the Global Findex Database (Findex), with the most recent survey conducted in 2017, and the UNHS with the latest round conducted in 2019/20, which includes questions on access to financial services. These sources use different measures of financial inclusion and therefore are not directly comparable; however, they offer some insight into trends. 90 The FinScope survey conducted in 2017 uses a broader definition of financial inclusion than the UNHS, as FinScope it includes insurance mechanisms and UNHS does not. Estimates from the FinScope 2017 survey data (that women’s access to financial services was 77 percent in and reached parity with men’s access in 2017) are higher than those using UNHS (2016/17) data – FinScope (2018). Selected findings from FinScope will be used further below for select topics on which UNHS does not collect data. 91 The more recent estimates, for 2019/20, are from the UNHS, which uses slightly different measurements than FinScope, 92 Due to differences in the way questions were asked in rounds of the UNHS prior to the UNHS 2019/20, it is not possible to accurately assess trends since 2016/17, but the numbers suggest that use of mobile money services is increasing; in 2016/17 43 percent of adults (age 16+) were registered users of mobile money, which included 51 percent of men and 37 percent of women. 44 95. Ugandan youth are the least likely to gender gap was among this oldest group. have access to financial services. Only 38 The gender gap in favor of men was only two percent of the Ugandan population age percentage points among 15-29-year-olds, 15-29 years used financial services in 2019/20 compared to 11 percentage points for those (Table 9). This was much lower than usage age 30-54 and 15 percentage points for rates by older age groups – 77 percent those over 54 years old. among those age 30-54 and 52 percent among those over age 54. The largest Table 9: Access to financial accounts and usage of the mobile money service in 2019/20, by sex   Male Female   15-29 30-54 55+ 15-29 30-54 55+ Used mobile money services 36 71 52 31 52 32 Commercial bank or MDI account 4 17 14 3 8 4 Account or membership in SACCO, MFI 1 5 4 1 4 2 Membership in informal institutions or using individual 8 23 20 11 31 23 informal financial services Used any financial services from above 38 77 60 36 66 45 Source: UNHS 2019/20, World Bank calculations. Note: MDI (Microfinance Deposit Taking Institutions), SACCO (Savings and Credit Cooperative Organizations), and MFI (Micro Finance Institution). 96. Both men and women avoid borrowing eight percent in urban and nine percent in – by either taking out loans or borrowing rural areas. An earlier survey from 2016/2017 goods on credit – if they can. Only 14 finds that 24 percent of men and 17 percent percent of women and 17 percent of men of women reported borrowed money during reported ever having borrowed any money in the 12 months before the survey, with the the 12 months prior to the survey in 2019/20, overall incidence of borrowing money (with with no significant differences between men and women pooled) declining from 20 urban and rural areas (Table 10). Even fewer percent in 2016/17 to 16 percent in 2019/20.93 respondents borrowed goods in 2019/20 – Table 10: Borrowing among individuals in 2019/20, age 15+ National Urban Rural   male female total male female total male female total Borrowed or got money in the last 12 17 14 15 15 13 14 17 14 16 months to be paid back later? Borrowed or got goods on credit in 9 9 9 8 8 8 10 9 9 the last 12 months? Source: UNHS 2019/20, World Bank calculations. 93 Reported numbers from UNHS (2016/17) and UNHS (2019/20) rounds on borrowing money are consistent with those from FinScope (2018), which found that 21 percent of men and 22 percent of women said they borrowed money in the 12 months prior to the survey. 45 Figure 37: Sources of borrowing in 2016/17 and 99. Supply-side barriers to women’s access 2019/20 by sex, 18+ to and use of financial services include, first and foremost, practices by formal lenders that afford less flexibility to women.94 Women tend to face stricter collateral requirements than men do. Female entrepreneurs studied in 2015 were more likely than their male counterparts to be asked to present collateral to access business credit.95 As a result, only about 31 percent of female entrepreneurs in the study reported borrowing capital to start a business, and they held only 38 percent of the volume of loans held by their male counterparts. The absence of legislation Source: UNHS (2019/20), World Bank calculations. prohibiting discrimination based on gender in access to credit (Box 4) also contributes 97. Both men and women have increased to inequalities in practice, as does potential their use of formal institutions for discrimination on the part of lenders (see borrowing. There was a significant reduction section on women’s entrepreneurship, below, in using informal sources for borrowing from for further discussion). 2016/17 to 2019/20 (Figure 37), accompanied by greater uptake of formal services. Women more than doubled their use of formal banks 100. Women’s greater use of group-based, for borrowing. Whereas only five percent informal savings and credit also reflects were using formal banking services and the fact that these institutions have only 12 percent using other formal financial traditionally marketed their services to services in 2016/17, by 2019/20, 11 percent women and been a source of resilience and 19 percent were using these services, during economic shocks, including the respectively. Men also increased their use of COVID-19 crisis. Over more than a decade, formal services, but at lower rates, helping to donors including CARE,96 the Bill and close the gender gap. Melinda Gates Foundation97 and others have invested many millions of dollars in Uganda creating VSLAs and scaling up a 98. Even with increasing use of formal national infrastructure to support them, services, women are still more likely than all with an explicit focus on connecting men to look to informal savings groups, women with informal financial services. A especially in rural areas. Both men and 2021 review found that these groups served women prefer informal credit sources as a critical source of resilience during overall, but women are significantly more the COVID-19 shock. Many were able to likely to use these (70 percent) than continue operating, serving as networks for men (52 percent). Usage is much higher sharing information, a cushion for economic for women in rural areas, where formal shocks and a platform for helping women institutions have less of a presence. Among transition from sectors and activities rural residents, 31 percent of women rely on most affected by the lockdown into more VSLAs, compared to 21 percent of women in profitable areas.98 urban areas. 94 The UNHS does not include questions about preferences for and experience in seeking different financial services, but other studies, such as that by Campos et al. (2015), offer some insights. 95 Campos et al. (2015). 96 CARE (2020). Village Savings and Loans Associations Annual Report. Atlanta, Georgia. 97 Bill and Melinda Gates Foundation (2021, March). 98 Ibid. 46 101. Demand-side barriers relate to a This is in stark contrast to men (considering common perception that financial both financially included and excluded services are expensive, and a lack of together), 90 percent of whom reported trust in allowing other people to handle participating in household decisions about one’s money. In 2017, 29 percent of women money and 63 percent of whom reported and 27 percent of men who were not having disposable income. Even with at the time using any financial services access to financial services, a substantial felt it cost too much, while 23 percent of portion of women do not participate in men and 15 percent of women reported household decisions about money or have not trusting others with their money.99 disposable income to spend as they like. These perceptions were stronger among This strongly suggests that additional young people: 29 percent of young adults barriers are at play, such as gender norms reported that financial services were too that recognize the authority of household expensive, and 17 percent reported a lack males to make decisions about household of trust in others to handle their money. Less finances more than the authority of common responses were related to the women to make these decisions. greater-than-preferred physical distance to travel to access the financial service, Figure 38: Empowerment of women in household which was reported by nine percent of men decision-making, among financially included and and seven percent of women. excluded 102. Apprehension about using technology and a preference to deal directly with people has limited women’s uptake of digital financial services. In 2017, 74 percent of women reported that they would rather work with people face-to- face than with machines, such as ATMs or phone applications; moreover, women are less likely (63 percent) than men (72 percent) to have an interest in learning to use new technology. 103. Access to financial services goes hand Source: FinScope 2018 in hand with economic independence. In 2017, more than half (53 percent) of 104. Women who do not have access to women who were connected with informal financial services are also more likely to or formal financial services were more be economically dependent on others. likely than women without connections to Among women without any access to such services (25 percent) to report having formal or informal or financial services, the disposable income to spend as they wish great majority (78 percent) reported being (Figure 38).100 Similarly, 80 percent of those dependent on a household member to who are financially included participate cover expenses. Notably, of all women who in household decisions about money, reported receiving some kind of income compared to 70 percent of those financially from outside the family, 95 percent said excluded. they had to spend at least some of it on other household members, and five percent said they were forced to give it to another household member. 99 FinScope (2018). 100 UNHS does not include questions about economic decision-making and empowerment; however, FinScope does assess this, so the FinScope 2017 survey findings are used here. 47 Recommendations and global good 107. Build on the success of informal group- practices for closing gender gaps in based savings and credit mechanisms financial inclusion by better connecting these to the formal economic architecture. Heavy investment 105. Improving the financial inclusion of in VSLAs and other group-based platforms women is a first step in harnessing has helped connect millions of women the potential of Ugandan women to with financing. These groups played a jumpstart economic recovery from the critical role in supporting women during pandemic. Secure savings mechanisms, the COVID-19 shock. There is a need to such as mobile banking, grant women better connect the fragmented system of greater control over their finances. VSLAs with the overall formal economic Barriers that are specific to women need architecture, so that women can transition to be addressed, such as traditional to formal financial mechanisms as they collateral requirements to secure loans. become more economically successful. Loan products that depend less on collateral enable women to invest in 108. Provide incentives for formal financial and grow their businesses. In enterprise institutions to increase flexibility in ownership, larger volumes of finance have collateral requirements and repayment a more transformational impact than procedures. Ugandan women would microfinance. benefit from greater availability of collateral-free, flexible credit to lower or 106. Continue to expand access to mobile remove related financial and transaction and digital technology that connects costs and help meet their demand for women with financial services, especially larger loans. Microfinance loans are in rural areas. Mobile money has been typically provided without demanding a game-changer for women’s financial traditional collateral as security, made inclusion in Uganda. The largest remaining possible largely through the application gaps in access are in rural areas, where of group-based lending technologies. women are less likely to have access to Uganda has seen considerable success mobile phones or the Internet. Continuing with group savings models, such as VSLAs, efforts to expand technology access in rural where women join a group of prospective areas – for example, through mobile phone borrowers who serve as guarantors of and other technology services providers’ sorts. However, such models tend to limit expanding coverage to underserved rural the size of loans and come with restrictive communities – will go a long way toward repayment schedules. Commercial bank deepening women’s access to financial practices that privilege men’s access to services. The effectiveness of enhancing savings and credit work against women’s women’s financial inclusion through financial inclusion and deprive the economy improving access to mobile money is well of contributions women could make. The supported.101 In addition, mobile money standard Grameen Bank group lending technology can address gender norms model in Bangladesh, with fixed repayment that keep women economically dependent schedules and inflexible floors and ceilings on men by allowing women to conduct on loan amounts, is increasingly regarded financial transactions and decisions as inappropriate for both extremely poor/ in private, including without needing vulnerable non-poor women and women their husbands’ permission; privacy is an seeking business growth opportunities.103 important precondition for higher savings More recently it is being adapted to offer and productive use of income among borrowers more choice about the length women and can help them overcome and size of their loan.104 Providing lenders mobility and time constraints.102 with greater information on female borrowers or using psychometric tests to assess a potential borrower’s ability to pay 101 Gammage (2017); Aron and Muellbauer (2019). 102 Wandibba, et al. (2014); Buvinić, et al (2013). 103 Zaman (2004). 104 Rhyne, E. (2012); Solotaroff et al. (2019). 48 back a loan can compensate for women’s 110. Address demand-side barriers by lower access to collateral as well.105 improving women’s rates of financial Alternative methods of assessing women’s literacy. Financial literacy programs for creditworthiness, given their re lative lack women need to be implemented more of credit history and traditional credit broadly, keeping in mind that without scoring, could include mechanisms that other complementary interventions, use traditional as well as alternative financial literacy alone may not be enough data, such as payment of utility bills to improve women’s financial inclusion. and transaction histories on digital Some MFIs simultaneously offer collateral- platforms—in particular, mobile and social free finance and address other barriers footprints. Recent machine-based learning to women’s financial inclusion related mechanisms that utilize substantial traces to flexible loan sizes and repayment of unstructured data from individuals’ schedules, financial literacy, geographical mobile phones show considerable promise access, and women-friendly environment, in predicting loan outcomes; by increasing among others. A package of characteristics lenders’ information about prospective that simultaneously addresses the multiple, female borrowers, such mechanisms could often-related barriers to women’s financial significantly enhance women’s access to inclusion is likely necessary to notably credit while reducing their overall default increase inclusion of women.109 Evaluated rates.106 examples from other countries illustrate how entertainment media can be used 109. Promote instruments and practices that to improve women’s financial education allow women to hold assets in their own together with financial behavior and use names and expand their use of formal of financial services. As Ugandan women financial services. Providing savings and may not have access to television or other financial products solely in women’s may be time-poor, successful examples names can increase their control of of media in other countries could be financial resources. When women have adapted to radio or to visual materials financial assets in their own names, rather posted in public spaces. For example, a than in their husbands’ names or jointly soap opera in South Africa with a financial with their husbands, they are more likely to education storyline and a 70-percent- have control over these financial resources. female viewership is linked to viewers’ lower Experiments across the world have used likelihood than a control group (which largescale cash transfers to pull households viewed a different TV show) to engage in out of poverty and economically empower high-risk financial behaviors.110 The show’s women; such programs in Brazil and Mexico success is attributable to strong community increased women’s bargaining power in the involvement in designing it, which improved household.107 Efforts within banking systems viewers’ ability to relate to the characters. to create a more supportive, a women- The Kenyan soap opera, ‘Makutano friendly environment and women-staffed Junction’, with a focus on financial literacy, banks, such as the Habib Bank’s HBL Nisa was successful in getting a large share of program in Pakistan and the Yes Bank its non-banked, low-income rural female in India, show promise in increasing the viewers to open formal bank accounts.111 confidence of would-be female clients and, in turn, increasing shares of women among clients.108 Use of female agent bankers in local stores also has seen success in increasing women’s use of financial services. 105 Alibhai, S. et al (2018).  106 Agarwal, et al. (2020). 107 Ambler & De Brauw (2017). 108 Hamm et al. (2017) and Schnabel and McNally (2017). 109 Banerjee et al. (2015) 110 Berg, G. & Zia, B (2017). 111 Women’s World Banking and Credit Suisse (2013). 49 Box 4: Uganda’s legal framework: women as financial decision-makers and entrepreneurs Ugandan law recognizes gender equality in whether men and women are able to open a bank account, sign a contract, and register a business. In practice, women do face greater obstacles than men in these areas, especially in registering a business, but this is based on a lack of law enforcement rather than inadequate policy. The law does not prohibit discrimination in access to credit based on gender, however. The effects of this discrimination on women’s entrepreneurship are discussed below. Source: World Bank. (2021, November). 50 3.5. Meeting female entrepreneurs’ 113. First, female-owned enterprises are demand to lead growth-oriented smaller, with fewer employees than businesses in male-owned firms. The most recent Uganda Enterprise Survey shows that 111. Uganda’s achievements in women’s less than 30 percent of formal sector entrepreneurship, broadly speaking, small, medium and large enterprises are impressive. At 40 percent, the share surveyed had any female participation in of women among all formal and informal ownership (Figure 39).117 Because of high business owners in Uganda is the highest poverty rates, a large share of women who in the world, including all developed start businesses in Uganda do so out of and developing regions.112 Uganda has necessity, rather than because they want been recognized among the top eight to take advantage of a market or business performers globally in the percentage of opportunity. These businesses are not female population, age 18-64, who are growth-oriented and remain on the lower nascent entrepreneurs or the owners/ ends of value chains.118 It is not uncommon managers of new businesses, relative to for women in Uganda to start businesses their male counterparts.113 Uganda is seen – albeit of the smallest kind – out of as an outlier because of its exceptional desperation driven by extreme poverty, rate of entrepreneurship, especially among economic shocks to their households, or women, and its high scores in nearly all after leaving households in which they indicators of entrepreneurial behavior are facing abuse (Box 5). Table 11 displays and attitudes that lead women to start the distribution of formal sector firms by businesses – despite being a low-income, level of employment and share of female factor-driven economy with sub-par ownership. Women entrepreneurs in entrepreneurial conditions.114 Uganda are most concentrated in small businesses (5-50 employees). Firm size does 112. These high scores mask stark gender not appear to increase with greater shares disparities in markers of entrepreneurial of women among firm owners. success, however, especially in the performance, growth, and endurance of enterprises owned by women, compared Figure 39: Proportion of formal enterprises with at least one female owner (n=762) to those owned by men in Uganda. In Uganda there is a 30 percent gap in profits between male and female microenterprise owners.115 On average, women-led enterprises are more constrained than men-led enterprises in size, access to capital, and sectoral location. As with other types of employment, women’s childcare responsibilities also play a role in the gender profit gap in enterprises. In Uganda, profits of enterprises where small children are present are 48 percent lower than those without small children present, including female-owned enterprises without children; whereas 37 percent of female entrepreneurs bring their children to work in Uganda, zero percent of male entrepreneurs do.116 Source: Computations based on the Uganda Enterprise Survey, 2013 112 Mastercard (2019). 113 Bosma et al. (2021). In Uganda this ratio is 1.10, exceeded in Sub-Saharan Africa only by Togo (1.20) and Ghana (1.19), and outside only by Oman (1.20) and Philippines (1.30). 114 Mastercard (2019); Bosma et al (2021). 115 World Bank. (2019, March). 116 Delecourt, S. & Fitzpatrick, A. (2021). 117 The most recent Business Enterprise Survey for Uganda was conducted in 2013. 118 Mastercard (2019); Mugabi (2014). 51 114. Second, female-led firms tend to have the capacity to provide larger volumes less capital than those led by men and of finance than microfinance institutions, access much smaller loans. Those women many of which are informal, and collective who can afford to start enterprises out of savings groups. Women not only lack opportunity (as opposed to necessity) still collateral in traditional forms, such as solely lack finance to grow their businesses, but or jointly owned land; they also are more smaller capital investments in women- likely than men to be asked for collateral led firms also stem from women’s relative to obtain loans.120 This underscores the financial exclusion when it comes to need for alternative means of establishing loans, particularly larger loans and longer creditworthiness (as noted above in the repayment periods.119 Their relative lack discussion on financial inclusion) and the of traditional forms of collateral such as need for legislation against gender-based land render them less credit-worthy in the discrimination by lenders. eyes of formal financial institutions with Table 11: Share of enterprises, by level of employment and degree of female ownership Number of employees All firms Any female <20% Female 20-40% 40-50% >50% (n=745) Owner owned (n=56) female female female (n=232) owned owned owned (n=40) (n=29) (n=92) Less than 5 5.1 4.31 5.36 5 0 5.43 5 to 50 79.46 76.72 73.21 62.5 93.1 81.52 50 to 100 6.58 8.62 10.71 12.5 3.45 7.61 More than 100 8.86 10.34 10.71 20 3.45 5.43 Source: Computations based on the Uganda Enterprise Survey, 2013 115. Third, women’s enterprises are more and engineering, real estate activities, likely to locate in less productive and transportation & storage, small transport less profitable sectors of Uganda’s services, trade food beverage & tobacco economy, which tend to be male retail, trade of textiles and footwear, water dominated. Less than 10 percent of supply and waste management, and wood women entrepreneurs operate in male manufacturing and repair. dominated sectors.121 Even after accounting for business characteristics not related to the sector – as well as personal and household characteristics of these female entrepreneurs – these women tend to have larger enterprises and greater sales revenues than women whose businesses are in female-dominated sectors; in fact, they attain the revenues made by male entrepreneurs in the male-dominated sector, closing the gender gap.122 For Uganda, “male-dominated” describes a sector in which at least 75 percent of firms are led by men. Male-dominated sectors in Uganda include, inter alia, automobile maintenance and sales, construction, electricity and gas supply, metal works 119 Nationwide, the average amount of loan/credit received by men is USh1,918,037 and by women is USh699,596 (a 2.7 male-to-female ratio). In urban areas, the average amount for men and women, respectively, is USh2,530,770 and USh1,533,158 (a ratio of 1.7), and in rural areas, men average USh173,9378 and women USh405,268 (4.3 ratio). 120 World Bank, (2019, March). 121 Campos et al. (2015). 122 Bardasi, et al. (2011); World Bank, forthcoming. 52 Box 5: Worsening under the pandemic, GBV harms survivors, their households, and the economy Gender-based violence (GBV) is detrimental to the health and empowerment of girls and women, with measurable costs to women’s economic empowerment. In Uganda, GBV takes different forms, ranging from intimate partner violence – especially in the home – to sexual harassment in workplaces and public spaces. An estimated 56 percent of Ugandan women report having experienced violence by a spouse, and 22 percent report having experienced sexual violence. In addition, harmful practices such as child/early marriage and female genital mutilation persist in some parts of Uganda. Gender-based violence imposes substantial emotional, physical and economic costs; evidence shows the degree to which it undermines women’s productivity and livelihoods. According to a 2013 study undertaken by the Center for Domestic Violence Prevention, an estimated nine percent of Ugandan women who had experienced violence in the previous 12 months had to take time off from work due to domestic violence; survivors took an average of 11.8 days off work per year. Domestic violence – and specifically, intimate partner violence – is a factor in women having to resort to entrepreneurship out of desperation, rather than out of perceived opportunities to start a profitable business. Violence can also have broad, negative impacts on the economy. A 2012 study on the costs of domestic violence estimated that the response to such violence costs the country 0.35 percent of GDP and 0.75 percent of the national budget. The incidence of GBV appears to have increased during the COVID-19 crisis. An estimated 3,280 cases of GBV, including intimate partner violence, were reported to the police between March 30 and April 28, 2020, while in 2019, an average of 1,137 domestic violence cases were reported each month. According to the Uganda Child Helpline (Sauti 611), calls reporting violence against children escalated to 881 in March 2020, up from an average of 248 cases per month over the previous three years. Source: AFDB (2016), CEDOVIP (2013), CEWIGO (2020), Kasirye (2012), MoGLSD (2020), UBOS and ICF (2018) & World Bank (2020). 116. There may be a growing momentum among women-led entrepreneurs in the informal sector to shift into male- dominated sub-sectors that support industrialization. Available enterprise survey data show women entrepreneurs in the formal sector being concentrated in hotel and restaurants, food, retail trade, and textiles, garments and leather products. Female entrepreneurs are largely operating in the informal sector in Uganda, however. Among households with informal-sector non-crop farming household enterprises, 889,186 (32 percent) are headed by women and 1,891,000 by men.123 The most recent UNHS data suggest a diversification of female enterprise into additional sectors,such as manufacturing (Table 12). Only in transport and storage do male-led household firms predominate. 123 UBOS (2021). This is the same share of female-headed households (2,846,811) among all households in the economy (8,901, which suggests that female-headed households are operating informal enterprises at the same rate as male-headed households. 53 Table 12: Distribution of household enterprises by industry Hotels, Agriculture, Transport Other Mining and restaurant Sex forestry Manufacturing Trade and service Others Total quarrying eating and fishing storage activities places Male 9.3 1.3 16.5 42.8 14.4 2 6.8 6.8 100 Female 5.8 1 24.4 51.3 0.4 8.3 6.8 1.8 100 Source: UBOS UNHS. World Bank calculations for 2019/2020. 117. Many women and their households 118. Factors that increase the odds of women have lost income from having to shut entrepreneurs crossing over into male- down household enterprises during dominated sectors in Uganda involve the pandemic (Figure 40). As with work acquiring more information about and stoppages, young women have borne the greater proximity to the sector through greatest losses. Throughout the 2020-21 relationship connections, particularly with period, although women’s enterprises have men.124 This “learning” can occur through had roughly the same odds of closing as different channels, such as exposure to a men’s, they have had much greater odds new line of business in the sector, access of requiring financial assistance in order to social networks that convey information to reopen. This has been particularly true about the sector, or having a male role in the services sector. Half of all businesses model operating a firm in the male- surveyed required some kind of financial dominated sector. The initial barrier is a support, but 85 percent of the female- lack of any information about the sector, owned firms needed assistance—compared including the higher profits associated with to just 31 percent of male-owned firms operating a business there. In Uganda, requiring financial support. Businesses shut 80 percent of female entrepreneurs in down at high rates among some of the most non-male-dominated sectors whose vulnerable populations in Uganda – all of earnings were lower than those of female which include women, making these women entrepreneurs in male-dominated sectors doubly vulnerable. Among the country’s believed their earnings were the same or sizeable refugee population, which has the higher than those of their counterparts in potential to be a powerful contributor to the male-dominated sectors.125 A second Uganda’s economic recovery and growth, barrier is a lack of information about market women’s work saw the greatest losses opportunities. (Box 6). 119. Women entrepreneurs who transition Figure 40: Status of family business among to these higher-profit sectors appear Ugandans, by sex and age of household head to have in common the influence of role models and mentors, with most of these influential individuals being men: fathers, male family members, male friends, and male community members. Specific factors associated with increased odds of transition by female entrepreneurs include the following:126 • Having a male contact who suggests the business idea • Receiving training (typically from a man) in skills that are specific to a male-dominated sector Source: UHFPS 2020 Round 1, World Bank calculations. • Inheriting the business that a parent – most likely a father – owns in a male- dominated sector 124 World Bank forthcoming. 125 Campos et al. (2015). 126 World Bank forthcoming. 54 • Building non-cognitive skills and 122. Finally, women entrepreneurs supporting innovative mindsets have considerably less access to so that women entrepreneurs are technology, market information, more confident, risk-tolerant and and effective business training than opportunity-oriented.127 male entrepreneurs – all of which is associated with lower profits for 120. Women entrepreneurs who operate in these women’s firms. Female heads of male-dominated sectors in Uganda have household enterprises have attended firms with higher levels of production, business development services training at more capital, and more employees lower rates (6.5 percent) than male heads than firms of non-crossover women. of enterprises (8.1 percent) nationwide, Differences in inputs and capital do not with the lowest rates and biggest gender explain the disparity in sales, however. gap among rural household heads, Among other determinants that could according to analysis of UNHS 2019/2020 explain this difference is discrimination data. Psychology-based training that against women entrepreneurs. Indeed, fosters a growth-oriented mindset in qualitative research has uncovered women entrepreneurs and increases incidents in which customers preferred both innovation and profits of enterprises to place orders with male-owned has demonstrated greater success than enterprises in the metal fabrication and standard business training approaches.130 carpentry sector. Average monthly profits Female household business owners are are USh494,000 (US$197) for a female also less likely than their male counterparts entrepreneur in a male-dominated sector to keep a complete record of accounts and USh205,000 (US$82) for a female (11 percent and 18 percent nationwide, entrepreneur in a non-dominated sector. respectively), with rural male heads more The latter is still less than the average than twice as likely as rural female heads to monthly profit for a male entrepreneur keep complete records. Only 53.7 percent of in a male-dominated sector: USh515,000 women own any kind of telephone, whereas (US$206). 74.5 percent of men do. Further, women comprise a full two-thirds of Ugandans 121. Female entrepreneurs may also need who do not use a mobile phone.131 Closing encouragement, peer support, and even this digital divide would improve women’s assurance of safety to cross over into access to financial services, market male-dominated sectors, given social proscriptions against women entering information, and networks. male-dominated spaces and the high rates of gender-based violence in Uganda, including in the workplace. Women with firms in male-dominated sectors in Uganda report feeling deficient in managerial and technical skills.128 This recalls related research findings that women who work in male-dominated sectors tend to have negative perceptions of their work identities and that female students in male- dominated classes and fields, particularly STEM, often lack confidence and have high attrition rates from these fields.129 127 World Bank (2019, March). 128 Ibid. 129 Martin and Barnard (2013). 130 Copley et al. (2021). 131 EPRC (2019). 55 Box 6: Economic impacts of the COVID-19 shock on female refugees COVID-19 has had a significant negative impact on Uganda’s labor markets, affecting women more than men, with related shocks particularly impacting refugee women. Among Uganda’s refugee population of 1.5 million, more than half of households are headed by women, compared with one-third of households nationally. High levels of refugee humanitarian aid dependence are being affected by diminishing food rations. Women and female-headed households (FHHs) are more likely than men and male-headed households to receive income from vulnerable employment. Figure B1: Pre-lockdown employment rates Figure B2: Work stoppages among refugees Source: HFPS and URHFPS, WB calculations. Urban areas cover Kampala, rural areas the Southwest and West Nile regions. Prior to the first lockdown in 2020, female refugees were much less likely to be employed than Ugandan nationals and refugee men (Figure B1). With lockdowns of settlements, refugees were more likely to cease working due to COVID-19 (Figure B2). Whereas 19 percent of Ugandans who worked before March had stopped working by June 2020, 24 percent of refugees had stopped by November 2020 – showing their inability to work again once lockdowns were lifted. Figure B3: Ownership of family business before and Refugee entrepreneurs were also more likely than after lockdown by gender of refugee household head Ugandan entrepreneurs to have their businesses close. Refugee ownership of household enterprises declined by 10 percentage points (to 27 percent) in April-December 2020 from the pre-lockdown rate of 37 percent ownership (Figure B3). Male-headed households’ ownership of family businesses declined more than female- headed ones. However, there was a much greater difference in the reduction of ownership of household enterprises for younger FHHs. This was similar to Ugandan nationals (see Figure 40 in entrepreneurship section). In particular, the ownership of a household enterprise among this 15-30-year-old group of FHHs declined from 40 percent before the lockdown to 14 percent in October/November 2020. Refugee women represent an under-utilized source of entrepreneurship and growth. Female refugees are concentrated in lower-paying, often informal jobs, primarily in agriculture, trade and services. There are some differences by region, with rural refugees more likely to work in agriculture compared to those in urban areas, where more refugees work in retail. Access to finance, skills and business inputs remains a constraint, with only about  eight percent of refugees reporting any kind of job training.  Sources: UNHCR (2021) Data portal; World Bank (2019); FAO (2018). 56 Recommendations and global good report higher capital increases and profits practices for closing gender gaps in for at least three years.132 It is also critical entrepreneurship to address procedural costs that hinder borrowing by female business owners. 123. The findings above suggest There are many good practice global interventions that could be examples of addressing costs that arise especially helpful in bringing women from a lack of credit history (among first- entrepreneurs into more productive time female entrepreneurs, for example). and profitable sectors in Uganda. Alternative means of credit testing, such as These recommendations are in addition a psychometric credit tool developed and to: (a) recommendations on how to tested in Peru, do not require traditional improve women’s financial inclusion (see forms of credit-related documentation above), which is important for women’s and thus facilitate credit to unbanked entrepreneurship; and (ii) evidence-based entrepreneurs who would otherwise be approaches that enable female business rejected by traditional credit-assessment owners to transition from necessity- approaches. An evaluation of a pilot using based, subsistence-level to opportunistic this tool found it to be effective in screening and growth-oriented entrepreneurship. a financial institution’s existing clients for Interventions will need to address women’s high-risk entrepreneurs.133 lack of business skills as well as information asymmetry. Female entrepreneurs must have means of acquiring more knowledge 125. Pass and enforce legislation that prohibits about products for which there is market discrimination in access to credit based demand, as well as the capacity to develop on gender. Despite achieving one of the products at the higher ends of value chains highest rates of women’s entrepreneurship in these more profitable sectors. Within not only in sub-Saharan Africa but in sectors, women tend to hire other women the world, Uganda is outperformed by as employees. Support that encourages 26 countries in sub-Saharan Africa in its a growth orientation among female Women, Business and the Law (WBL) index entrepreneurs will thus have a substantial score. Uganda’s relatively low ranking is in no positive effect on the labor market small part due to its failure to legally prohibit participation and employment of other gender-based discrimination in access to women in these higher-profit sectors. credit. Without passing and enforcing such a law, women will continue to be severely 124. Provide sufficient credit to meet the constrained in securing the volumes of demand of female entrepreneurs. capital they need to grow sustainable and In addition to the good practices profitable businesses, particularly in priority recommended for financial inclusion, growth sectors (Box 7). offering flexible credit to female entrepreneurs is imperative for improving enterprise performance and earning. As long as it is accompanied by financial literacy and/or business development skills training, it encourages these women to take more financial risks in an informed manner. This approach was used with poor, urban women in Kolkata, India, for example. They were granted a flexible grace period in which to repay their loans, which doubled their odds of starting a new business compared to women repaying under the short, inflexible replacement times that microfinance institutions (MFIs) typically offer. The women who had borrowed under the flexible arrangement continued to 132 Buvinic, M. & O’Donnell, M. (2016). 133 Arraiz et al. (2015). 57 3.6. Conclusion and key are particular approaches, linked to specific recommendations: taking action actions, that government, private financial to improve women’s economic institutions, women-focused NGOs, and empowerment other stakeholders can take to help women set Uganda on a course to sustained 126. Tapping into women’s economic potential economic recovery and industrialization. is essential to an integrated response to These approaches fall under five key action shorter-term recovery needs and longer- areas that are relevant to closing gender term actions that will address deeper gaps in the economic outcomes discussed gender inequalities and foster more above (where details of recommended inclusive and sustainable growth. There actions can be found) and in economic empowerment more broadly. Box 7: Unmet demand for business capital - Maude’s story Maude used to be a wholesale trader in Ntungamo district. Selling mainly beans and millet flour in her shop, she used to do quite well – with many retail traders buying from her – before the pandemic shutdown. At that time, her sister, who lived with their mother, lost her job. Maude started supporting them by sending money for food, but then her mother died. Maude spent a great deal of money to travel and bury her. This caused her to spend most of her business capital. She could no longer continue with her wholesale business, so she now has a small retail shop where she sells maize, tomatoes, onions and other small foodstuffs. She makes very little money. She belongs to a VSLA, to which each member contributes USh5,000 (about US$1.5) each week. But when she is not able to raise the weekly amount, she has to pay a fine. Although she has recently borrowed USh100,000 (US$28) from the VSLA to use as capital for her business, it is not enough – even with the small amount she takes from money that her husband gives her to support her sister’s family. There are limited opportunities for improving her business, as the lockdown restricts people’s movement. When asked what she needs to access such opportunities, she answers only, “I need more capital for my business. More capital.” Source: Willman et al. forthcoming. 58 127. Meet women entrepreneurs’ demand 128. Keep girls in school and improve their to grow enterprises and improve acquisition of technical skills to support profitability. There are enormous gains their school-to-work transition. Young to be made by women’s movement into women aspiring to well-paid wage the small, medium, and large enterprise employment as well as to entrepreneurship space, particularly in higher-profit, male- require the education and training that will dominated subsectors of Uganda’s better match them to employers in growth economy. Women entrepreneurs are more sectors and will make them more productive prone than their male counterparts to hire and profitable as entrepreneurs. It is thus women as employees,134 so the economic critical to ensure that: returns on investing in growth-oriented • Poor households that cannot afford women entrepreneurs are likely to be school fees for girls receive financial exponential. Facilitating this transition will support, such as conditional cash involve, inter alia: transfers, to enable girls to complete their • Passing and implementing legislation schooling that prohibits sex discrimination in • Male and female students are educated access to credit as early as possible about modern • Strengthening and enforcing policy that contraceptive methods protects women’s rights to inheritance • Sexual and reproductive health of land and other family assets across education (SRH) is bundled with support formal and informal land tenure services for girls experiencing GBV and/or arrangements; enforcement will need teen pregnancy to cover public and private financial institutions, as well as main branches • BTVET program curricula are directly and their subsidiaries in rural areas, informed by growth-oriented employers, which may be more bound by traditional such as those in Uganda’s industrial parks gender norms than headquarters in and in priority sectors identified in the NDP III urban areas. • BTVET institutions strengthen systems • Engaging with formal and informal that connect students, particularly financial institutions to promote female students, to apprenticeships and adoption of flexible loan repayment paid jobs in male-dominated subsectors conditions and alternatives to traditional • A high-level government official is methods of risk assessment and identified as a champion of female collateral requirements. educational attainment and women’s • Training teachers or counselors in economic empowerment and becomes general education and BTVET, as well the face of a national campaign to as community leaders, in how to link disseminate effective messages nascent or aspiring female entrepreneurs to role models and mentors who run businesses in male-dominated sectors • Rolling out programs, media campaigns and community mobilization efforts to increase women’s use of mobile technology to access financial services and market information • Expanding women’s access to social networks for doing business, and technology for improving efficiency and productivity 134 See, for example, Chiplunkar and Goldberg (2021); Cirera and Qasim (2014); Weisul (2018); and West and Sundaramurthy (2019). Research of women entrepreneurs in five Sub-Saharan African countries finds that the average share of female workers in female-owned businesses is 75 percent (compared to 20 percent in male-owned businesses), even when accounting for the sector of operations (World Bank, 2019, March).134 59 129. Help reduce the household time burden 130. Re-orient government employment on women. Women, especially young programs to create pathways for women women, need more time and freedom than to move from subsistence-level to more they currently have to attain sufficient growth-oriented sectors and jobs. There levels of education; and to seek, obtain, is a need to re-orient government policies and remain in jobs that lift them out of and programs to consider the diversity of poverty. Childcare and other unpaid care skills and strengths women could bring to the work responsibilities are an obstacle to economy. To date, most programs targeting women’s economic empowerment, whether women’s economic empowerment have women are running businesses, working as focused on a blanket conceptualization paid employees, or (as adolescents and of women as subsistence level workers, young women) trying to complete their particularly in the agricultural sector. Guiding education. Given the relatively low access labor market policies and employment to ECD programs – especially in the event of programs, including the National Green shutdowns – government needs to explore Jobs Creation Strategy and Plan (GJCSP) different models of childcare provision (2020/21–2030/31) the Green Jobs and Fair that are appropriate for Uganda. In the Labour Market Program (GJFLMP), and the short-term, these models could replicate Uganda Women’s Entrepreneurship Program community-based approaches that do (UWEP), tend to consider women within not depend on parents’ employers to offer the broad category of ‘vulnerable groups’, childcare services. For the longer-term, employed mostly in the informal sector. when Uganda advances further on its path to urbanization and industrialization, 131. It will be important to translate national government needs to consider examples strategies into programs with clear of public-private partnerships and private targets and guidelines for women’s sector employer-provided childcare participation. While the overarching that have succeeded in lower-middle Uganda Green Growth Development and upper-middle income countries. In- Strategy (UGGDS) includes targets for country stakeholders, such as women’s women’s employment in job-creating empowerment-focused NGOs, could also sectors, the GJCSP and its key program, the adopt community-focused programs GJFLMP, do not specify targets for women’s that promote more gender-equal division participation, although government officials of unpaid care labor in the household. have said they are working toward a 50 Programs such as the Bandebereho Couples percent target. Government programs could Intervention in Rwanda and the MenCare be re-oriented to better support women to Child Care and Protection Program in South move into better-quality, more sustainable Africa have successfully changed norms work in higher growth sectors. For example, and behaviors regarding childcare and at present government employment other household tasks.135 Interventions programs tend to reinforce occupational related to fertility adjustments could sex segregation by training women in more accompany messaging on gender- female-dominated sectors and lines of equal sharing of unpaid care work and work, such as hairdressing, tailoring, and provision of childcare services. food service. As the economy moves toward greener jobs, there is a strong opportunity for women to transition into higher-paying jobs in growth sectors such as renewable energy, waste management and greener agriculture. 136 135 Doyle et al. (2018); Van den Berg et al. (2013). 136 ILO (2018). 60 132. Fill gaps in sex-disaggregated Although most of these surveys are updated microeconomic data and make existing at regular and frequent intervals (every 1-4 data easier to access. Thanks in large part years, depending on the survey), there is a to the efforts of UBOS and its collaboration notable time lag for some. One example is with development partners, Uganda offers the Uganda Enterprise Survey, which has a wide array of rich data sources with which not been administered since 2013. Lack of to analyze gender disparities in economic recent data about gender gaps in formal outcomes and economic empowerment. entrepreneurship create great challenges Analysis of sex-disaggregated data to in trying to understand patterns of women identify gender gaps – and, importantly, the in entrepreneurship – such as barriers and determinants of gender gaps – is imperative facilitators to women’s growth-oriented for recommending appropriate responses business leadership – and in pinpointing to address and effectively narrow these areas in need of intervention and support. gaps. 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Shanghai, (May 25–27). 67 ANNEX 1: Balance of Payments (annual, % GDP) FY18 FY19 FY20 FY21e Current account balance -5.3 -7.1 -6.7 -10.1 Trade in goods and services balance -7.3 -9.4 -9.8 -12.5 Exports 16.9 18.3 14.6 16.2 o/w coffee 1.5 1.2 1.3 1.4 o/w gross travel 2.7 2.6 2.5 1.6 Imports 24.1 27.7 24.5 28.6 o/w oil 2.8 2.6 2.3 2.0 o/w government imports 1.8 2.0 1.1 1.2 Primary income, net -2.8 -2.6 -1.7 -1.7 o/w public interest payments (debit) 0.3 0.3 0.3 0.4 Secondary income, net 4.8 5.0 4.8 4.1 o/w personal transfers (credit) 3.8 3.9 3.5 2.7 Capital account balance 0.3 0.3 0.2 0.4 Net borrowing (balance from current and capital a/c) -5.0 -6.8 -6.5 -9.7 Financial account balance 3.4 6.9 4.3 7.1 Direct investment, net 2.8 3.5 2.6 2.1 Portfolio investment, net -1.0 -0.5 -0.9 0.1 Other investment, net 1.6 3.9 2.6 4.9 o/w Government loans, net 3.2 3.3 3.5 3.5 Disbursements 3.9 4.0 4.0 4.2 Repayments 0.7 0.7 0.5 0.7 Net errors and omissions 1.1 0.1 2.6 3.0 Overall balance -0.5 0.2 0.4 0.4 Financing 0.5 -0.2 -0.4 -0.4 Central bank net reserves (- increase) 0.5 -0.2 -1.7 -1.1 Use of Fund Credit 1.3 0.6 Memorandum GDP, nominal (in mil US$) 32910 35157 37377 41036 Source: BOU and World Bank calculations 68 The World Bank Africa Region 1818 H Street, NW Washington, DC 20433 www.worldbank.org/africa africateam@worldbank.org