- IMF staff and the Uganda authorities have reached a staff-level agreement on economic policies to conclude the combined second and third reviews of the 36-month ECF-financed program. Uganda will have access to SDR 180.5 million, about US$240 million, in financing once the review is formally completed by the IMF Executive Board in the coming weeks.
- The economic recovery is underway despite roadblocks from global demand and supply-chain shocks that are affecting inflation and growth, constraining revenues and contributing to higher spending needs.
- The authorities continue implementing their reform program with key policy actions focusing on prudent fiscal and monetary policies, growth- and debt-friendly composition of spending and financing, safeguarding a resilient financial sector, and anti-corruption measures. These reforms are helping offset challenges from the unfavorable external environment and are improving prospects.
Washington, DC: A staff team from the International Monetary Fund (IMF) led by Mr. Malhar Nabar conducted a virtual mission to Uganda from October 31 – November 22, 2022 to discuss progress on reforms and the authorities’ policy priorities in the context of the combined second and third reviews under theExtended Credit Facility(ECF) approved by theIMF Executive Board on June 28, 2021for a total amount of SDR 722 million (about US$ 1 billion at the time of program approval). The concluding meeting of the mission was held on December 19, 2022.
At the conclusion of the mission, Mr. Nabar issued the following statement:
“IMF staff have reached agreement with the Ugandan authorities on a conclusion of the combined second and third reviews of the ECF-supported program. The agreement is subject to approval of IMF management and the Executive Board in the coming weeks. Upon completion of the Executive Board review, Uganda would have access to SDR 180.5 million (equivalent to about US$ 240 million), bringing the total IMF financial support under the ECF-financed program to SDR 451.25 million (equivalent to about US$ 625 million).
“Growth is projected at 5.3 percent in FY22/23, 0.7 percentage point lower than at the time of the first review in March reflecting weaker global demand and the impact of rising inflation and interest rates on domestic demand. Medium-term prospects remain favorable with oil production coming on board by FY24/25. Headline inflation is expected to rise to 8.3 percent this fiscal year due to elevated commodity prices and higher imported input costs and is anticipated to decline thereafter reflecting the expected easing of commodity price pressures and the impact of monetary tightening. Risks to the outlook are elevated and include lower global growth, persistently higher inflation in advanced economies and associated tighter global financial conditions; an intensification of the Ebola outbreak; and more frequent disruptions in activity due to climate change.
“The Bank of Uganda (BoU) has tightened the policy rate in recent months and announced its readiness to take appropriate action to contain second-round effects of higher global prices. Given the broadening of inflation pressures and upside risks, continued tightening would help guide core inflation back to the target. Continued exchange rate flexibility is an important shock absorber and would help rebuild external buffers.
“Revenue-based fiscal consolidation enshrined in the authorities’ Domestic Revenue Mobilization Strategy remains crucial for keeping debt at a sustainable level and providing much-needed funds for Sustainable Development Goals. To this end, the authorities have adopted a plan to rationalize inefficient and costly tax expenditures. Expenditure prioritization will continue but a small widening of the fiscal deficit this year, relative to the target set in the first review of the ECF, is necessary to account for additional needs to support the vulnerable, including subsistence households, while remaining focused on fiscal consolidation. Uganda’s debt remains sustainable, with a moderate risk of debt distress.
“The banking sector is well-capitalized, yet existing vulnerabilities point to the need for continued monitoring and strengthening of financial stability. The BoU is improving its supervisory framework. Implementation of the Safeguards Assessment recommendations will help solidify independence and the new risk management framework will address governance and contain risks.
“Structural reforms remain key to unlocking Uganda’s growth potential. Priorities include strengthening the anti-corruption framework and the AML/CFT regime, improving the social safety net, advancing the financial inclusion agenda, and adapting to climate change. The anticorruption agenda is progressing with the Companies Act amended to prepare the ground for the implementation of a beneficial ownership register allowing timely access to information. Tools for AML/CFT risk-based supervision for the financial sector are being developed and implemented. The authorities published information on compliance statistics for asset declarations and on applications to access the declarations, on the Inspectorate of Government’s website.
“The IMF staff team is grateful to the authorities for the fruitful and constructive discussions and the authorities’ effort to maintain stability in a difficult environment. The staff team met with the Permanent Secretary and Secretary to the Treasury, Mr. Ggoobi; Deputy Governor of the BoU, Mr. Atingi-Ego; and other BoU and senior government officials. Staff also had productive discussions with representatives of the private sector, civil society organizations, and development partners in their usual practice of taking stock of economic conditions and reform priorities.”
Table 1. Uganda: Selected Economic Indicators, FY2020/21-FY2023/24
Real GDP Growth (%)
Headline Inflation – average (%)
Core Inflation – average (%)
Central Government Finances
Revenue and Grants (% of GDP)
Expenditure (% of GDP)
Primary Balance (% of GDP)
Fiscal Balance (% of GDP)
Public Debt (% of GDP)
Money and Credit
Broad money (% change)
Credit to Private Sector (% change)
Policy Rate, EOP (%)
Balance of Payment
Current Account Balance (% of GDP)
(in months of next year’s imports)
External Public Debt (% of GDP)
REER (% change)
|Source: Uganda authorities and IMF staff estimates and projections.|