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Title page 1

Contents 4

ABBREVIATIONS 6

FOREWORD 8

ACKNOWLEDGMENTS 10

EXECUTIVE SUMMARY 12

1. RECENT ECONOMIC DEVELOPMENTS 18

1.1. Global growth remains resilient as inflation outlook improves 18

1.2. Uganda's economy continues to strengthen following improvements in net exports 20

1.3. Pressures in the external sector mounted amidst weak financial inflows, despite strong growth in exports 24

1.4. Fiscal consolidation continued for another year, which could be better balanced with a greater focus on DRM 28

2. ECONOMIC OUTLOOK, RISKS AND KEY STRUCTURAL ISSUES 35

2.1. Uganda's economic prospects hinge on oil production and strong growth in tourism and agriculture 35

2.2. Uganda urgently needs to prioritize jobs-rich economic transformation, including investment in its future labor force 37

3. INVESTING IN EARLY CHILDHOOD DEVELOPMENT FOR TRANSFORMATION OF HUMAN CAPITAL IN UGANDA 40

3.1. The Case for Investing Early 40

3.2. The State of ECD Services in Uganda 43

3.3. Building an Effective ECD System 51

3.4. Conclusion 53

3.5. Recommendations for Investing in Early Childhood Development 53

ANNEX 1: CENTRAL GOVERNMENT FISCAL OPERATIONS 56

ANNEX 2: UGANDA'S PUBLIC SECTOR RATIONALIZATION-AN OPPORTUNITY TO MANAGE COSTS AND ENHANCE PRODUCTIVITY 57

REFERENCES 58

Tables 5

TABLE 1. BALANCE OF PAYMENTS POSITION 25

TABLE 2. CENTRAL GOVERNMENT FISCAL OPERATIONS 31

TABLE 3. BASELINE ECONOMIC OUTLOOK (ANNUAL % CHANGE UNLESS OTHERWISE INDICATED) 36

TABLE 4. SELECTED INDICATORS RELATED TO THE NIECD POLICY ACTIONS 43

TABLE 5. COST/BENEFIT ANALYSIS OF INVESTING IN PRE-PRIMARY EDUCATION IN UGANDA (DISCOUNTED) 50

Figures 5

FIGURE 1. PURCHASING MANAGERS INDEX 19

FIGURE 2. CORE INFLATION 19

FIGURE 3. POLICY INTEREST RATES 19

FIGURE 4. COMMODITY PRICE PROJECTIONS 19

FIGURE 5. DOMESTIC AND EXTERNAL DRIVERS OF GROWTH (% y/y growth, contribution in ppts.) 20

FIGURE 6. REAL GDP GROWTH AND DRIVERS (% y/y growth, contribution in ppts.) 20

FIGURE 7. REAL GDP TRENDS, SSA REGION (Q4-2021=100, 4qma) 21

FIGURE 8. HIGH FREQUENCY ECONOMIC ACTIVITY INDICATORS 22

FIGURE 9. HEADLINE INFLATION IN UGANDA AND DRIVERS (% y/y change, contribution in ppts.) 22

FIGURE 10. BANK OF UGANDA'S KEY INTEREST RATES AND INFLATION (inflation in % y/y change, interest rates in % per annum) 23

FIGURE 11. TREND IN MONEY SUPPLY (% y/y change, contribution in ppts) 23

FIGURE 12. DOMESTIC CREDIT TO PRIVATE SECTOR (% of GDP, average for 2014-23) 24

FIGURE 13. GROWTH IN EXPORTS, UGANDA (% annual) 25

FIGURE 14. UGANDA'S EXPORT POTENTIAL, PRODUCT-WISE 26

FIGURE 15. IMPORTS, UGANDA (2019=100, 6mma) 27

FIGURE 16. FX RESERVES AND EXCHANGE RATE (FXR in billion US$) 28

FIGURE 17. FISCAL DEFICIT (% of GDP) 29

FIGURE 18. REVENUE AND EXPENDITURE (% of GDP) 30

FIGURE 19. UGANDA PUBLIC DEBT (% of GDP) 32

FIGURE 20. THE HECKMAN CURVE 41

FIGURE 21. UGANDA'S POPULATION PYRAMID, 2023 43

FIGURE 22. CHILDREN NOT STUNTED 45

FIGURE 23. CHILDCARE ARRANGEMENTS FOR DISADVANTAGED WOMEN ENTREPRENEURS 47

FIGURE 24. OVER- AND UNDERAGE ENROLLMENT IN P.1 IN UGANDA 49

FIGURE 25. PUBLIC EDUCATION EXPENDITURE 52

Boxes 5

BOX 1. UGANDA MACROECONOMIC SNAPSHOT IN REGIONAL COMPARSION 16

BOX 2. THE IMPORTANCE OF A MULTISECTORAL APPROACH TO ECD 44

Box Figures 5

FIGURE B1.1. Headline inflation in SSA (% y/y change ) 16

FIGURE B1.2. Central bank's ex-post real policy rate (% per annum, latest) 16

FIGURE B1.3. Real GDP trends, SSA region (Q4-2021=100, 4qma) 16

FIGURE B1.4. Real GDP growth projections v/s realized (% annual average) 16

FIGURE B1.5. Human development and GDP per capita 16

FIGURE B1.6. Population projections (2000=100, projections start from 2023) 16

FIGURE B2.1. THE NURTURING CARE FRAMEWORK 44