2014 Index of Economic Freedom

Uganda

overall score59.9
world rank91
Rule of Law

Property Rights30.0

Freedom From Corruption23.8

Limited Government

Government Spending87.3

Fiscal Freedom79.1

Regulatory Efficiency

Business Freedom45.1

Labor Freedom87.4

Monetary Freedom71.0

Open Markets

Trade Freedom75.4

Investment Freedom60.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 35.6 million
  • GDP (PPP):
    • $50.4 billion
    • 2.6% growth
    • 5.9% 5-year compound annual growth
    • $1,415 per capita
  • Unemployment:
  • Inflation (CPI):
    • 14.1%
  • FDI Inflow:
    • $1.7 billion
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Uganda’s economic freedom score is 59.9, making it the 91st freest economy in the 2014 Index. Its score is 1.2 points lower than last year due primarily to deteriorations in financial freedom, monetary freedom, and business freedom. Uganda is ranked 10th out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average.

Over the 20-year history of the Index, Uganda’s economic freedom has been stagnant, with hard-won gains in earlier years wiped out by declines in the rule of law, government size, and regulatory efficiency. Scores for eight of the 10 economic freedoms, notably property rights, business freedom, financial freedom, and investment freedom, have deteriorated markedly.

Recording its second lowest economic freedom score ever in the 2014 Index, the Ugandan economy has fallen back to “mostly unfree.” There is a serious need for greater institutional reforms to increase the legal framework’s efficiency and transparency and improve law enforcement. Widespread corruption erodes entrepreneurial incentives, and political influence undermines the independence and integrity of judicial and regulatory systems.

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Background

Milton Obote led Uganda to independence in 1962 and was ousted in 1971 by Idi Amin Dada. When Tanzanian forces ousted Amin in 1979, Obote returned to power. In 1986, insurgent leader Yoweri Museveni took power in a military coup. A multi-party government was established in 2005. Museveni won a third term in 2006 and a fourth in 2011. Limited market reforms have produced more than a decade of relatively strong economic growth. Uganda has substantial natural resources, but agriculture and fishing employ over 80 percent of the workforce. Uganda is believed to have 3.5 billion barrels of oil reserves. Instability in South Sudan, Uganda’s main export partner, threatens to destabilize the economy. Uganda continues to play a role in peacekeeping operations in Somalia and the fight against terrorism.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 23.8 Create a Graph using this measurement

Despite laws and institutions to combat corruption, Uganda remains the most corrupt country in East Africa. In 2012, the EU froze foreign aid after a report that at least $13 million had been embezzled by the prime minister’s office. Executive influence undermines judicial independence. The rule of law is weak, and the legal system is too inefficient to provide strong protection of property rights.

Limited GovernmentView Methodology

The top individual income and corporate tax rates are 30 percent. Other taxes include a value-added tax (VAT) and a property tax. Overall tax revenue amounts to 17 percent of the size of the economy. Government expenditures amount to one-fifth of the domestic economy. The government has expanded borrowing against expected oil revenues, and public debt has risen to about 35 percent of GDP.

Regulatory EfficiencyView Methodology

The regulatory environment is not conducive to entrepreneurial activity. There is no minimum capital requirement for establishing a business, but requirements for commercial licenses are time-consuming and costly. The formal labor market remains inefficient and lacks dynamism. The government is funding substantial price-distorting subsidies by financing the oil refining/distribution and hydroelectric sectors.

Open MarketsView Methodology

Uganda’s average tariff rate is 7.3 percent. The government does not generally discriminate against foreign investors, but the legal and regulatory systems may be difficult to navigate. The financial system is dominated by banking, which is relatively open to competition but subject to government influence. Bank lending to the private sector has gradually increased. Capital markets are relatively small and underdeveloped.

Country's Score Over Time

Bar Graph of Uganda Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Uganda to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.5-0.4
2Botswana721.4
3Cape Verde66.12.4
4Rwanda64.70.6
5Ghana64.22.9
6South Africa62.50.7
7Madagascar61.7-0.3
8Swaziland61.24.0
9Zambia60.41.7
10Uganda59.9-1.2
11The Gambia59.50.7
12Namibia59.4-0.9
13Burkina Faso58.9-1.0
14Gabon57.80.0
15Tanzania57.8-0.1
16Côte d'Ivoire 57.73.6
17Kenya57.11.2
18Benin57.1-0.5
19Seychelles56.21.3
20Djibouti55.92.0
21Mali55.5-0.9
22Malawi55.40.1
23Senegal55.4-0.1
24Niger55.11.2
25Mozambique 550.0
26Nigeria54.3-0.8
27Guinea53.52.3
28Mauritania53.20.9
29Cameroon52.60.3
30Liberia52.43.1
31Burundi51.42.4
32Comoros51.43.9
33Guinea-Bissau51.30.2
34Sierra Leone50.52.2
35Ethiopia500.6
36Togo49.91.1
37Lesotho49.51.6
38São Tomé and Príncipe 48.80.8
39Angola47.70.4
40Central African Republic46.7-3.7
41Chad44.5-0.7
42Equatorial Guinea44.42.1
43Republic of Congo 43.70.2
44Democratic Republic of Congo40.61.0
45Eritrea38.52.2
46Zimbabwe35.56.9
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