significant inequities persist between urban and rural areas. The national Gini coefficient<sup>1</sup> rose from 0.35 percent in 1997 to 0.41 percent in 2006, in part because Uganda’s growth path has created greater opportunities in urban areas in the central and western parts of the country, while more remote rural areas, particularly wide swathes of the north and east, , have not grown as fast. Nrthern Uganda, which has now emerged from conflict, recorded high and persistent levels of income poverty at 60 percent of the population. While new opportunities are opening up in the post-conflict environment, agricultural production has yet to reach levels that would have a sustained impact on poverty.

Uganda is on track to meet at least two of eight Millennium Development Goals (MDGs). The country is close to halving poverty and has made substantial progress toward achieving universal primary education and addressing gender inequality. Uganda may even achieve the targets for combating HIV/AIDS, malaria, and other communicable diseases, ensuring environmental sustainability, and developing global partnerships. MDGs on reducing child mortality and improving maternal health, however, are unlikely to be met. Despite progress, Uganda ranked 156 of 179 in the fiscal 2009 Human Development Index (HDI) of the United Nations Development Programme (UNDP). The low overall ranking reflects the low starting point for Uganda along many development related indicators.

Uganda has one of the youngest and most rapidly growing populations in the world. The country’s population growth rate, at 3.3 percent in 2010, is well above the African average. Population growth has been consistently high aside from during the AIDS epidemic in the early 2000s. The total fertility rate is estimated at 6.7 children per woman according to the government’s data and 6.4 according to UN data. About half (48.7 percent) of Uganda’s population is below 15 years of age, well beyond Sub-Saharan Africa’s average of 43.2 percent and the world average of 26.8 percent. Both the high level of fertility and the youthfulness of the population have created a very high youth dependency ratio (World Bank 2011b).

Improvements in services—health, education, and infrastructure—have been unable to keep pace with rapid population growth. Sustaining the positive trends in growth will require massive investments in all of these areas, but in infrastructure in particular. Improved transport services will be needed to connect economically depressed areas and producers to markets and improve mobility of labor. Industry also needs reliable electricity to boost productivity and competitiveness. Levels of urbanization in Uganda in 2002 were relatively low compared to other African countries at 12 percent, but are expected to more than double over the next 15 years to reach almost 35 percent. Rapid urbanization needs to be accompanied by better urban services such as adequate access to water and sanitation.

The recent discovery of oil reserves promises significant fiscal and development gains to the country. Even under conservative price assumptions, oil production could increase annual government revenues by about 10 percent of GDP within 6–10 years (World Bank 2011a) Higher oil income presents greater economic opportunities as well as challenges. Increased oil income can be expected to have positive repercussions in the economy as a whole, but evidence across the world points to a mixed story. In particular most cases of increased oil wealth and dependence on natural resources have produced outcomes of increased income disparity, often resulting in political instability (Angola, Bolivia, and

> 1 The Gini coefficient is a measure of the inequality of income distribution. It ranges between zero (describing a situation where everybody has the same income level) to one (describing a situation where all income is concentrated in the hands of one person). In practice, Gini coefficients typically fall in the range of 0.2 to 0.6.

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