Impact of foreign investment on economic growth in Uganda: a statistical analysis

Abstract

This study examined the impact of Foreign Direct Investment on economic growth in Uganda using descriptive and inferential statistical methods. Despite substantial increases in FDI inflows from approximately $1.19 billion in 2020 to $3.31 billion in 2024. Uganda continues to experience high poverty rates (42% below $2.15/day poverty line) and limited broad-based prosperity. The research employed a mixed-methods case study design focused on Kampala. Primary data was collected through structured questionnaires administered to 56 respondents (67.5% response rate) including government officials, foreign company representatives, entrepreneurs, and traders during August to September 2025. Secondary data was obtained from the World Bank, UNCTAD, Uganda Investment Authority, and Bank of Uganda covering 2010-2024. Statistical analysis included multiple linear regression modeling, correlation analysis, and descriptive statistics using STATA 17. The regression model (R² = 0.742, F = 8.45, p < 0.001) revealed that FDI had a statistically significant positive effect on GDP growth (β = 0.456, t = 3.24, p = 0.009), with infrastructure quality (β = 0.328, p = 0.018) and institutional effectiveness (β = 0.214, p = 0.062) serving as important determinants. Key findings indicated that FDI was heavily concentrated in extractive industries (52% in oil and minerals) with limited employment generation. Secondly, infrastructure deficits and institutional weaknesses significantly constrained FDI effectiveness. Thirdly, spatial concentration in urban areas exacerbated regional inequality and lastly weak linkages between foreign and domestic firms limited technology spillover effects. The study concluded that while FDI contributed positively to Uganda's GDP growth, structural and institutional constraints prevented its translation into inclusive prosperity. Recommendations included promoting balanced regional FDI distribution, strengthening infrastructure and institutions, diversifying FDI into labor-intensive sectors, and enhancing domestic firm linkages.