Elections disrupt foreign direct investment (FDI) inflows and cause investors to hold off on decisions, leading to a "wait and see" approach.
Uganda's economy is expected to experience a slowdown in 2025 as the country heads toward the 2026 general elections.
Economic experts predict reduced investment levels and a dip in remittances, a recurring trend in election years.
They argue that elections create uncertainty, which negatively impacts economic growth, as evidenced in the previous election cycles of 2011, 2016, and 2021.
Ugandans go to the polls every five years to elect leaders, from the president to local council members. However, economists note that as election day approaches, economic fundamentals tend to falter, leaving the country in a precarious position.
Dr Jacob Otim, an economics lecturer at Kyambogo University, attributes the current economic squeeze to politicians and investors holding back funds.
"It's true that politicians, investors, and even money lenders are saving money to spend during the 2025 political season. This is why money is scarce now," Dr Otim explained.
Election-Induced Economic Slowdowns
Historical data shows that during election cycles, Uganda's economy experiences a decline in growth and rising inflation.
In 2011, the global financial crisis further aggravated this trend, leading to a sharp increase in fuel prices.
Inflation, which stood at 5% in August 2011, surged to 30%, triggering public unrest, including the infamous "Walk to Work" protests that followed a contentious presidential election.
In response to these pressures, the Bank of Uganda (BoU) initially adopted an expansionary monetary policy to stimulate demand.
However, by mid-2011, the central bank shifted to a tighter monetary policy to address rising inflation, driven by both domestic and global factors.
"The Ugandan economy is growing at a subdued rate, in part due to inflation pressures and international uncertainties," a BoU report at the time stated.
A Pattern of Economic Weakness
Similar economic challenges were observed following the 2016 elections. A World Bank report noted that Uganda's economy grew at a slower pace during the 2016-2017 financial year.
The country's growth rate dropped by 0.2% in the first quarter of 2016-2017, significantly lower than the projected growth of 5.8%. This downturn reversed the positive trajectory seen in previous quarters.
The 2021 elections further compounded Uganda's economic recovery, which was already hampered by the COVID-19 pandemic.
Stephen Kaboyo, a seasoned forex bureau operator in Kampala, has observed these cycles for decades. According to him, elections disrupt foreign direct investment (FDI) inflows and cause investors to hold off on decisions, leading to a "wait and see" approach.
"Elections destabilize economic fundamentals. You start to see FDI dwindle, investors hold onto their dollars, and expatriates relocate to neighboring capitals like Nairobi," Kaboyo noted.
Calls for Reform and a Bleak 2026 Outlook
Given the repetitive nature of election-induced economic slowdowns, there have been growing calls to extend Uganda's electoral cycle.
Proponents argue that the country does not have enough time to recover from one election before preparing for another, thereby undoing the economic gains made during recovery.
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"You have one or two years of recovery, and in the third year, you're already preparing for another election cycle. Elections undo the gains from the recovery process," one expert pointed out.
The 2026 general elections are expected to be particularly challenging. Kaboyo believes that Uganda is entering these polls in a weakened fiscal state and will likely emerge in an even more vulnerable position.
"We have always gone into elections stronger, but this time, we are heading into 2026 weaker, and we will come out weaker due to fiscal challenges," he said, warning that the current scarcity of money is not to be taken lightly.
As Uganda braces for another election cycle, experts are urging caution, noting that political uncertainty is likely to hinder economic recovery and growth once again.
