IMF Executive Board Completes Sixth Review Under Policy Support Instrument for Uganda and Approves a New Three-Year PSI

Press Release No. 13/239
June 28, 2013

The Executive Board of the International Monetary Fund (IMF) today completed the sixth review under the Policy Support Instrument (PSI) for Uganda and approved a new three-year PSI. To this end, the Executive Board took note of Uganda’s cancellation of the current PSI, which was scheduled to expire on August 10, 2013 (see Press Release No. 10/195).

The PSI for Uganda aims at maintaining macroeconomic stability and alleviating constraints to growth. The IMF’s framework for PSIs is designed for low-income countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring and endorsement of their policies. PSIs are voluntary and demand driven (see Public Information Notice No. 05/145).

Following the Executive Board’s discussion on Uganda, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:

“The Ugandan authorities are to be commended for the broadly satisfactory implementation of their economic program under the Policy Support Instrument. Prudent policies were successful in bringing inflation under control, raising economic growth, and strengthening the external position.

“Monetary and fiscal policies have been consistent with the growth and inflation objectives, and the authorities have managed large foreign exchange inflows successfully. In the short term, fiscal policy will need to focus on increasing tax revenue collection—currently low compared to the regional East African Community peers—and allocating significant resources to development spending. The central bank is encouraged to remain vigilant to potential demand pressures and stand ready to adjust the monetary policy stance if needed. Continued exchange rate flexibility will help support these efforts.

“Important progress has been achieved in institutional modernization. Public financial management has been significantly strengthened, and efforts to introduce a Treasury Single Account and pass a public finance management bill are expected to improve budget execution, transparency, and cash management. Moreover, progress toward improving the inflation targeting framework is ongoing, with the recent decision to recapitalize the Bank of Uganda representing a major milestone to enhance its independence and credibility.

“To ensure inclusive growth and deal effectively with the challenges posed by natural resource production, further structural reforms to improve the business environment, enhance competitiveness and productivity, promote diversification, and strengthen the social safety net remain essential. This will require additional efforts to strengthen governance and accountability.”


Recent Economic Developments

Uganda’s macroeconomic performance under the previous three-year PSI was satisfactory despite challenging conditions. A surge in inflation interrupted the objective of moving growth to potential, but output is now recovering from a historical low, inflation is close to its 5 percent target level and international reserves are growing rapidly.

Progress on structural reforms was also important, albeit slower than anticipated: Uganda abolished electricity subsidies and improved tax administration and public financial management. However, it missed benchmarks related to tax expenditures, arrears control, introduction of national identity cards, and budget credibility. More recently, after a fraud scandal led to donor withdrawal of budget aid, the authorities moved fast in improving payment systems and strengthening spending controls. However, plans for resumption of budget support remain unclear.

Oil exploitation, economic diversification, and prospects for improved governance underpin a favorable medium-term outlook. Oil production, expected to start in 2018, has significant potential, but poses resource wealth management challenges. Insufficient implementation capacity, governance, and policy coordination could threaten growth prospects.

Program Summary

Uganda’s new PSI program supports reforms to the monetary policy framework, tax revenue mobilization, public financial management, and financial sector development. It also backs efforts to improve the business environment, including by preparing the economy better for oil production. Financing of the program is set to rely less than in the past on budget support and more on improved revenue collections, domestic debt, and higher non-concessional external borrowing.

The program sets a path for core inflation to converge to the 5 percent medium-term target. It also raises the ceiling on contracting non-concessional debt to US$1.5 billion, from US$1 billion in the previous PSI, to accommodate additional infrastructure investment.

The economic reform program supported by the PSI will support the authorities’ plans to achieve broad-based and inclusive growth, and include:

  • Supporting revenue enhancement through measures to broaden and deepen the tax base and achieving more effective tax administration;
  • Reforming public financial management to enhance the effectiveness with which public funds are used;
  • Preparing the economy for oil production and optimal management of petroleum revenues;
  • Moving from inflation targeting ‘lite’ to full-fledged inflation targeting during the course of the program; and
  • Improving the business environment, supporting the development of the financial sector, and continuing to maintain financial sector stability.

Uganda: Selected Economic Indicators1
  2011/12 2012/13 2013/14 2014/15  
  Est. Proj.

GDP and prices (percent change)


Real GDP

3.4 5.3 6.0 7.0  

GDP Deflator

23.2 7.3 5.8 4.4  

CPI (end of period)

18.0 5.7 5.7 4.5  

CPI (average)

23.5 6.0 6.2 5.0  

Core inflation (average)

24.6 6.8 6.3 5.0  

Core inflation (end of period)

19.6 6.7 5.2 4.9  

External sector (percent change)


Terms of trade (based on all exports, deterioration -)

1.8 -0.5 -1.7 -2.4  

Real effective exchange rate (depreciation–)


Money and credit (percent change)


Broad money (M2)

-4.3 20.2 15.4 15.8  

Private sector credit

11.1 14.5 15.1 15.6  

Savings and investment gap (excluding grants, percent of GDP)

-13.1 -10.7 -12.6 -14.4  

Domestic investment

24.7 26.1 27.9 28.6  


5.8 5.8 8.1 8.4  


18.9 20.2 19.8 20.1  

External sector (percent of GDP)


Current account balance (including grants)

-12.0 -10.4 -12.2 -14.1  

Current account balance (excluding grants)

-13.1 -10.7 -12.6 -14.4  

Net donor inflows

3.4 3.6 2.2 1.9  

Public external debt (including IMF)

16.3 17.0 20.3 22.7  

External debt service ratio2

1.4 1.6 1.8 1.9  

Government budget and debt (percent GDP)



13.3 13.0 15.0 14.5  


2.3 1.7 1.5 1.3  

Total expenditure and net lending

18.6 18.6 20.2 21.2  

Overall balance (including grants)

-3.0 -3.9 -3.6 -5.4  

Overall balance (excluding grants)

-5.3 -5.6 -5.2 -6.7  

Memorandum items:


Nominal GDP (Ush billions)

49,794 56,287 63,122 70,512  

Nominal GDP (US$ millions)


Average exchange rate (Ush/US$)


End of period exchange rate (Ush/US$)


Gross foreign exchange reserves (US$ millions)

2,644 3,044 3,264 3,514  

(months of next year's imports of goods and


4.2 4.2 4.1 4.1  

Social and poverty indicators

Population: 34.5 million in 2011; GDP per capita: US$487 in 2011; Population below poverty line: 24.5 percent


Sources: Ugandan authorities and IMF staff estimates and projections.

1Fiscal year runs from July 1 to June 30.

2Percent of exports of goods and nonfactor services.


Media Relations
Phone: 202-623-7100