## EXECUTIVE SUMMARY (1ugaea2020001)

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---

### Context and immediate impact
- Confirmed Covid-19 cases: 79 on April 27; first case reported on March 21.
- Pandemic compounded by: heavy rains earlier in the year and a locust invasion in northern Uganda.
- Authorities’ containment measures: closure of schools and universities; restriction of public gatherings; ban on public transport; closure of borders and the airport; suspension of refugee reception services; 14-day full country lockdown later extended by 21 days with a night curfew.
- Social vulnerability:
  - Between 780,000 and 2.6 million Ugandans could move into poverty (Ministry of Finance estimate).
  - Informal sector workers—where women are the majority—are particularly at risk.
  - Uganda hosts around 1.4 million refugees.
- Pre-pandemic macro conditions:
  - Growth projected at 6 percent for FY2019/20 (before shock).
  - Rebasing increased economy size by 11.6 percent.
  - Headline and core inflation around 3 percent.
  - Reserves: US$3.2 billion = 4.4 months of imports (end-February 2020).
  - Private sector credit growth: 12 percent.
- FY2019/20 budget implementation issues prior to pandemic:
  - Revenue shortfall about Ush 600 billion (0.4 percent of annualized GDP) in H1.
  - Authorities issued a supplementary budget and negotiated a commercial loan from the banking sector.

### Request for Fund support and planned use
- Authorities request financial assistance under the Rapid Credit Facility (RCF).
- Requested disbursement: 100 percent of quota — SDR 361 million (about US$490 million).
- Planned allocation:
  - 70 percent to support Bank of Uganda’s reserve position.
  - Remainder for budget support.
- Staff assessment:
  - Uganda meets RCF qualification criteria.
  - Debt sustainable with low risk of external and overall debt distress.
  - Capacity to repay the Fund is strong.
- Authorities pursuing additional support from: World Bank, African Development Bank and other development partners.

### Policy response and IMF recommendations
- Authorities’ measures welcomed; recommended priorities:
  - Strengthen existing social protection tools to protect the most vulnerable.
  - Continue increasing health spending over the medium term.
  - Revisit and postpone some planned lower-priority expenditure if financing is insufficient.
  - Ensure revenue measures adopted for the crisis are temporary.
- Monetary policy guidance:
  - Bank of Uganda (BoU) to maintain an accommodative stance.
  - Allow exchange rate to act as shock absorber; keep reasonable reserve buffer.
  - Liquidity support measures to the financial sector are welcome.

### Impact on activity, external sector, and financing needs
- Growth projections (after-shock):
  - FY2019/20: 3.3 percent (2.7 percentage points below previous forecast).
  - FY2020/21: 3.7 percent.
- Most affected sectors: services (tourism, transport, trade), manufacturing, construction, agriculture.
- Health response plan cost: about US$125 million over next six months.
- Government used US$1.3 million from the Contingency Fund and passed a supplementary budget.
- External sector shocks (after-shock vs pre-shock):
  - Imports: decline by 12 percent in FY2019/20 and 17 percent in FY2020/21.
  - Exports: decline by 13 percent in FY2019/20 and 19 percent in FY2020/21.
  - Tourism receipts: decline by 54 percent in FY2019/20 and 52 percent in FY2020/21.
  - Remittances: decline by 43 percent in FY2019/20 and 51 percent in FY2020/21.
  - FDI: drop by 48 percent in FY2019/20 and 52 percent in FY2020/21.
  - Exchange rate: depreciation of about 5.7 percent in March.
  - Public sector disbursements: decline by 33 percent in FY2019/20 and 18 percent in FY2020/21.
- Financing gaps and reserves:
  - Pandemic financing gap in 2020: about US$1.3 billion total:
    - US$0.5 billion (1.4 percent of GDP) in FY2019/20.
    - US$0.8 billion (2.2 percent of GDP) in FY2020/21.
  - Without external support, BoU reserve buffer would fall from 4.4 months (FY2018/19) to below 2 months at end-FY2020/21.
  - With external financing, reserves decline from 4.4 to 3.5 months of imports in FY2019/20 and FY2020/21.
- Selected financing table figures (Text Table 2, in millions of US$ and percent of GDP):
  - Fiscal financing gap: 1,790 (4.9 percent of GDP).
  - Prospective RCF: 150 (0.4 percent of GDP).
  - Prospective financing from World Bank: 394 (1.1 percent of GDP).
  - Residual fiscal financing gap: 1,246 (3.4 percent of GDP).
  - BOP financing gap: 1,318 (3.6 percent of GDP).
  - Prospective RCF (BOP): 490 (1.3 percent of GDP).
  - Prospective financing from World Bank (BOP): 394 (1.1 percent of GDP).
  - Residual BOP financing gap: 434 (1.2 percent of GDP).

### Outlook and risks
- Short-run projections:
  - Headline inflation: 3.2 percent in FY2019/20; 4.7 in FY2020/21.
  - Core inflation to converge to 5 percent target over medium term.
  - Current account: -10.1 percent of GDP in FY2019/20, improving to -8.7 percent in FY2020/21.
  - Private sector credit growth: decline to 8.9 percent in FY2019/20; recovery over medium term.
- Medium-term scenario:
  - Growth could reach 9.2 percent with start of oil production in FY2024/25 (high uncertainty given low oil prices).
- Fiscal and debt trajectory:
  - Fiscal position temporarily deteriorates due to lower growth, incentives, health spending, social protection and stimulus measures.
  - In FY2019/20, lower-than-expected externally-financed development spending more than compensates for covid-related deterioration; deficit excluding externally-financed projects and project grants increases by 1.1 percent of GDP.
  - Public debt projected to rise above 54 percent of GDP in FY2021/22 and peak at 59.6 percent of GDP in FY2023/24 (Annex I).

### Selected medium-term macro projections (Text Table 3, selected entries)
- Real GDP: 6.5 (2018/19), 3.3 (2019/20), 3.7 (2020/21), 5.7 (2021/22), 6.0 (2022/23), 6.0 (2023/24), 9.2 (2024/25).
- Headline inflation (period average): 3.1 (2018/19), 3.2 (2019/20), 4.7 (2020/21), 5.0 (2021/22–2024/25).
- Credit to private sector: 12.7 (2018/19), 8.9 (2019/20), 10.2 (2020/21), 14.8 (2021/22), 13.9 (2022/23), 14.0 (2023/24–2024/25).
- Fiscal overall balance (percent of GDP): -5.0 (2018/19), -7.7 (2019/20), -8.9 (2020/21), -5.5 (2021/22), -5.7 (2022/23), -5.0 (2023/24), -3.8 (2024/25).
- Public debt (percent of GDP): 42.2 (2018/19), 45.7 (2019/20), 49.0 (2020/21), 50.7 (2021/22), 50.4 (2022/23), 48.9 (2023/24), 48.9 (2024/25).
- Current account (percent of GDP): -8.6 (2018/19), -10.1 (2019/20), -8.7 (2020/21), -5.5 (2021/22), -5.0 (2022/23), -3.8 (2023/24), -2.0 (2024/25).
- Reserves (months of imports): 4.4 (2018/19), 3.5 (2019/20), 3.5 (2020/21), 3.9 (2021/22), 4.5 (2022/23), 4.5 (2023/24), 6.1 (2024/25).

*Source: EXECUTIVE SUMMARY (1ugaea2020001) — Uganda IMF staff report, April 29, 2020.*

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### Risks to the Outlook and Policy Responses

### Downside risks highlighted
- Staff baseline assumes pandemic is temporary, recovery starting in second half of FY2020/21.
- If outbreak is more severe:
  - Fiscal costs could be significantly higher.
  - Recovery could be delayed.
- Other risks:
  - Less favorable external environment affecting tourism, remittances, exports and FDI.
  - Civil unrest tied to containment measures.
  - Oil price evolution may delay start of oil production; pandemic and low oil prices unfavorable to Final Investment Decision discussions.
  - Locust invasion could become very damaging.
  - Proximity of early 2021 general elections adds uncertainty and potential spending pressures.

### Fiscal measures taken by authorities (Text Table 4 summary)
- Covid-related expenditure total: 2,469 (Ush billions); 1.7 percent of GDP.
  - Health: 704; 0.5
  - Support to vulnerable populations (food and utilities relief, social protection): 537; 0.4
  - Security: 74; 0.1
  - Support to private sector (UDB): 755; 0.5
  - Other expenditure (points of entry; communications; clearance of arrears): 398; 0.3
- Revenue shortfall (Compared to January projections): -3,984; -2.8 percent of GDP.
- Total covid impact: 6,389; 4.5 percent of GDP.
- Projected domestic revenue shortfall: 1 percent of GDP in FY2019/20 and 1.7 percent of GDP in FY2020/21 (vs January projections).
- Covid-related expenditure expected to be 1.7 percent of GDP for calendar year 2020: 0.6 percent of GDP in FY2019/20 and 1.1 percent in FY2020/21.
- Parliament approved supplementary budget providing Ush 304 billion to respond to the pandemic.
- Staff projects overall deficit at 8.9 percent of GDP for FY2020/21.

### Central government fiscal operations (selected, in billions of Ugandan Shillings; percent of post-shock GDP)
- Revenue and grants:
  - 2018/19: 17,840
  - Pre-shock (Jan 2020) 2019/20: 20,306
  - Proj. 2019/20: 18,468; Proj. difference (% GDP): -1.3
  - Pre-shock (Jan 2020) 2020/21: 22,808
  - Proj. 2020/21: 20,511; Proj. difference (% GDP): -1.6
- Tax and non-tax revenue:
  - 2018/19: 16,638
  - Proj. 2019/20: 17,589; Proj. difference (% GDP): -1.0
  - Proj. 2020/21: 19,391; Proj. difference (% GDP): -1.7
- Expenditure:
  - 2018/19: 24,268
  - Pre-shock 2019/20: 31,300
  - Proj. 2019/20: 28,904; Proj. difference (% GDP): -1.8
  - Proj. 2020/21: 33,624; Proj. difference (% GDP): 0.4
- Coronavirus related spending (selected entries): 88; 0.7 (2018/19); 119; 0.8 (Pre-shock Jan 2020).
- Overall balance (excl. externally financed projects and project grants):
  - 2018/19: -2,280
  - Pre-shock 2019/20: -6,158
  - Proj. 2019/20: -7,666; Proj. difference (% GDP): -1.1
  - Proj. 2020/21: -8,362; Proj. difference (% GDP): -2.6

### External financing and support
- Prospective RCF on-lending worth 0.4 percent of GDP would help close fiscal financing gap in FY2019/20.
- Work ongoing with World Bank, AfDB, UN organizations and bilateral partners.
- Uganda interested in G-20 Covid-19 debt relief initiative; US$94 million worth of debt service falling due could benefit from moratorium.
- Residual fiscal gap after expected pledges: 0.3 percent of GDP in FY2019/20; about 3.1 percent of GDP in FY2020/21.

### Staff cautions and recommendations
- Covid-related fiscal measures are critical and should be accommodated.
- Emphasize careful cash management to avoid domestic arrears.
- Strengthen social protection mechanisms and consider temporary expansion—less than 4.5 percent of Ugandans has access to any form of social protection.
- Ensure transparency and accountability: publish large procurement contracts and conduct an independent audit of Covid-19 emergency expenditure.
- Ensure covid-related tax exemptions are temporary.
- Continue to increase and sustain health sector budget allocations.
- Authorities confirmed intention to continue recapitalizing Bank of Uganda.
- Caution on financing risks from large FY2020/21 fiscal financing gap; additional domestic debt issuances not advisable due to crowding out concerns.
- If external financing insufficient, prioritize expenditure and consider new revenue measures; prepare a contingency plan for potential deepening of shock.

### Monetary, exchange rate and financial sector measures
- BoU reduced Central Bank Rate by 100 basis points on April 6.
- March inflation: headline 3 percent; core 2.5 percent.
- Staff supports accommodative monetary policy; monitor inflation risks from food prices, supply disruptions, and depreciation.
- Exchange rate policy: maintain flexibility; interventions should be limited and fully sterilized.
  - March intervention calmed markets but cost nearly US$200 million.
  - Staff view: ensure reserve buffer covers at least 3.5 months of imports.
- Financial sector measures:
  - BoU directed SFIs to defer discretionary distributions for at least 90 days.
  - Waived limitations on restructuring credit facilities; permitted restructuring and moratoria for affected borrowers.
  - December 2019 indicators: stable capital position, improved profitability, comfortable liquidity, but deteriorated asset quality.
  - Staff recommends prudent loan restructuring; do not relax loan classification and provisioning rules; closely monitor NPLs.
  - BoU collaborated to reduce mobile money and digital payment charges.

### Access and capacity to repay IMF
- RCF request: SDR 361 million (100 percent of quota) ≈ US$490 million.
- Uganda qualifies under the “exogenous shocks” window.
- Planned allocation: 70 percent to preserve BoU reserves; remainder for budget support (health supplies; support to vulnerable; boost UDB lending capacity).
- Authorities agreed to place UDB under BoU supervision; MoU to:
  - Maintain IMF funds in a government account at the central bank pending use.
  - Require government to hold foreign exchange balances only with BoU.
  - Clarify responsibilities for repaying Fund resources.
- Capacity to repay:
  - Obligations to Fund would remain below 0.8 percent of exports of goods and services, and up to 2.3 percent of net international reserves.
  - Authorities committed to update safeguards assessment of BoU (last update completed April 10, 2007); update required before Executive Board approval of any subsequent arrangement.

---

### Staff Appraisal, Debt Sustainability, and Medium-Term Policy Guidance

### Staff appraisal (summary)
- Covid-19 is severely hitting Uganda: growth expected to reduce to half; severe contraction in manufacturing, tourism and transportation; poverty expected to increase.
- Fiscal accounts will deteriorate; large external financing needs will arise.
- Staff welcomes authorities’ prompt measures; WHO singled out Uganda as an example of quick response.

### Fiscal position, debt outlook, and policy guidance
- Temporary deterioration in fiscal position is appropriate; debt expected to remain sustainable conditional on authorities’ commitment.
- Planned authority actions:
  - Enhance revenue collection.
  - Strengthen public investment management.
  - Reprioritize non-essential expenditure if financing not mobilized.
  - Consider new revenue measures.
  - Ramp up social protection during emergency and recovery.
  - Protect health allocations over medium term.
  - Ensure transparency and accountability in emergency response.

### Key macro and fiscal projections (selected)
- Real GDP: 6.2 (2017/18), 6.5 (2018/19), 3.3 (2019/20), 3.7 (2020/21), 5.7 (2021/22), 6.0 (2022/23), 6.0 (2023/24), 9.2 (2024/25).
- Public gross debt (percent of GDP): 35.0, 37.3, 45.1, 51.5, 54.4, 57.9, 59.6, 58.4 (series).
- Overall balance (percent of GDP): -4.2, -5.0, -7.7, -8.9, -5.5, -5.7, -5.0, -3.8.
- Gross international reserves (billions of US$): 3.1, 3.2, 2.5, 2.5, 2.9, 3.6, 4.3, 6.4.
- Selected fiscal headline levels (billions of Ush):
  - Revenue and grants (2020/21 Est.): 15,281; Revenue (2020/21 Est.): 14,507; Tax (2020/21 Est.): 13,782.
  - Expenditures and net lending (2020/21 Est.): 20,183.
  - Overall balance (2020/21 Est.): -4,902.
  - Financing (2020/21 Est.): 5,009.

### Debt sustainability analysis — summary findings
- Uganda’s debt is sustainable with low risk of external and overall debt distress under baseline Covid framework.
- Debt-to-GDP trajectories higher than prior DSA but remain below indicative thresholds in baseline.
- Multiple indicators approach or breach thresholds under stress tests; debt service-to-revenue elevated given revenue decline risk.
- Near-term financing assumed covered by reserve drawdown, IMF RCF, World Bank resources, and other partners.
- Policy implication: sound fiscal management over medium term critical due to vulnerability to shocks.

### Selected debt and DSA numbers (highlights)
- Public sector debt (percent of GDP): 32.0 (2016/17), 35.0 (2017/18), 37.3 (2018/19), 45.1 (2019/20), 51.5 (2020/21), 54.4 (2021/22), 57.9 (2022/23), 59.6 (2023/24).
- PV of PPG external debt-to-GDP ratio (selected): 17.9, 22.5, 24.5, 25.4, 25.9, 25.3, 24.0, 22.0 (series).
- PPG debt service-to-revenue ratio (selected): 19.5, 19.9, 12.7, 10.2, 14.1, 14.5, 16.7, 17.4 (series).
- Gross external financing need (US$ millions): 1,345.5, 1,790.9, 2,709.2, 4,101.6, 3,605.4, 2,223.7, 1,926.6, 2,042.8 (series).
- Stress tests (selected outcomes):
  - Tailored test C1 (combined contingent liabilities) raises PV of debt-to-GDP to: 22.5, 29.5, 31.7, 32.6, 32.1, 31.9, 29.1, 29.3, 29.8, 30.5, 31.1 (series).
  - Alternative scenario A2 (oil price shock) reduces PV of debt-to-GDP over longer horizon: 22.5, 22.5, 23.9, 24.5, 22.9, 21.9, 17.4, 12.7, 8.4, 5.6, 3.4 (series).

### Policy implications from DSA
- Maintain sound fiscal management and prioritize near-term external financing via reserves, IMF RCF, World Bank and donor resources.
- Pursue bilateral debt relief under the G-20 Covid debt service relief initiative to ease near-term pressures.
- Monitor debt-service-to-revenue metrics closely as indicators of heightened vulnerability.

*Prepared by the staff of the International Monetary Fund (IMF) and the International Development Association (IDA). Approved by Annalisa Fedelino (IMF, AFR), Chris Lane (IMF, SPR), and Marcello Estevão (IDA). April 29, 2020.*

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### Appendix I — Letter of Intent (key commitments and measures)

### Immediate macro and fiscal needs (authorities’ statements)
- Preliminary GDP growth estimates cited by authorities:
  - FY2019/20: 3.9 percent (down from pre-pandemic projection of 6.0 percent).
  - FY2020/21: 4.5 percent (down from pre-pandemic projection of 6.0 percent).
- Immediate fiscal needs:
  - Remainder of FY2019/20: US$565.5 million (1.5 percent of GDP).
  - FY2020/21: close to US$1.5 billion.
- Current account deficit projections (authorities’ figures):
  - FY2019/20: 8.7 percent of GDP.
  - FY2020/21: 10.3 percent of GDP.
- FDI flows projection by authorities:
  - FY2019/20: decline by one-third vs pre-pandemic projections.
  - FY2020/21: decline by two-thirds vs pre-pandemic projections.

### RCF request and intended allocation (authorities’ plan)
- Request: SDR 361 million ≈ US$490 million (100 percent of quota).
- Intended allocation:
  - US$340 million to help Bank of Uganda bridge balance of payments gap.
  - US$150 million as budget support for Government response (health supplies, support to vulnerable, support to private sector via UDB).
- BoU to on-lend part of RCF to the Treasury; MoU between BoU and Ministry of Finance to specify conditions and repayment responsibilities.

### Other external engagements and amounts (authorities’ plans)
- World Bank: Government plans to seek US$300 million for health interventions this financial year and US$50 million for locust invasion.
- African Development Bank: requested US$350 million for budget support for next financial year (receipt amounts unclear).

### Fiscal, social and private sector measures (authorities’ measures)
- Health and social protection:
  - Supplementary budget to mobilize resources for health spending.
  - Food distribution to vulnerable households; guarantee water and electricity supply until situation normalizes; extend public work programs.
  - One-off targeted cash transfers and cash for work being defined with partners.
- Private sector support:
  - Temporary deferral of PAYE for most affected sectors.
  - Delayed corporation tax payment for qualifying companies and SMEs with turnover < Shs 500 million by six months without interest.
  - Waive interest on tax arrears for voluntary compliant taxpayers.
  - Expedite outstanding VAT refunds while limiting fraud risks.
  - Temporary tax exemption on specified medical items.
- Industrial and investment measures:
  - Liquidity injection into UDB; amend legislation to place UDB under BoU supervision.
  - Increase funding to industrial research; expand Business Development Services and industrial business shelters.

### Monetary and financial sector commitments (authorities)
- Monetary policy: continue prudent implementation; accommodate temporary inflation increases but adjust if sustained price increases risk.
- FX regime: flexible, limit interventions to smooth volatility, reverse reserve deterioration once confidence restored.
- Financial sector resilience:
  - Provide liquidity to financial system up to one year if needed.
  - Ensure adequate capital buffers for all supervised institutions.
  - Defer discretionary distributions for at least 90 days effective March 24, 2020.
  - Waive limitations on restructuring credit facilities; permit loan repayment holidays.
  - Promote digital payments via engagement with Mobile Network Operators and commercial banks.

### Transparency, safeguards and debt policy commitments
- Safeguards: commit to new IMF safeguards assessment; authorize BoU external auditors to discuss with IMF staff.
- Tracking Covid expenditures: separate reporting mechanism within Program Based Budgeting; UDB to report use of funds.
- Procurement transparency:
  - Publish documentation for large procurement contracts: > Ush500 million (works) and > Ush200 million (goods and services); include names of awarded companies and beneficial owners.
  - Undertake independent audit of Covid-19 expenditures ~ one year later and publish results.
- Debt treatment:
  - Engaging bilateral creditors for G-20 debt service suspension initiative.
  - Commit to spend freed resources on Covid-related health, social or economic relief and monitor such expenditure.
  - Disclose all public sector financial commitments within 3 months and not later than September 1.
  - No new non-concessional debt during suspension period except under initiative or compliant with IMF DLP/WBG policy on non-concessional borrowing.

### Medium-term commitments
- Adjust FY2020/21 budget by September 2020 to reflect covid impacts.
- Pursue Domestic Revenue Mobilization Strategy aiming to increase revenue by 2.5 percent of GDP over five years.
- Design a fiscal rule to manage future oil revenues; interim debt ceiling of 50 percent in NPV terms to guide operations.
- Continue recapitalizing Bank of Uganda and strengthen public investment management.

*Appendix I. Letter of Intent — 30th April, 2020.*

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*Source: 1ugaea2020001.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- The Ugandan economy is being severely affected by the covid pandemic; confirmed cases stood at 79 on April 27, with the first case reported on March 21.
- Economic impact began before the first case through supply chain disruptions.
- The pandemic compounds earlier shocks: heavy rains at the beginning of the year and a locust invasion in the northern part of the country.
- The authorities scaled up health spending and enacted containment measures, including closure of schools and universities, restriction of public gatherings, banning public transport, closure of borders and the airport, suspension of refugee reception services, and a 14-day full country lockdown later extended by 21 days with a night curfew.
- Social impacts and vulnerabilities:
  - Between 780,000 and 2.6 million Ugandans could move into poverty as incomes decline (Ministry of Finance estimate).
  - Informal sector workers—where women are the majority—are particularly at risk.
  - Uganda hosts around 1.4 million refugees, the largest refugee presence in Africa, increasing public health challenges.
- Pre-pandemic macro conditions:
  - Growth projected at 6 percent for FY2019/20 (before shock).
  - Rebasing increased the size of the economy by 11.6 percent.
  - Headline and core inflation around 3 percent.
  - Reserves at US$3.2 billion, equivalent to 4.4 months of imports (end-February 2020).
  - Private sector credit growing at 12 percent.
- Challenges in FY2019/20 budget implementation prior to the pandemic:
  - Revenue collections short by about Ush 600 billion (0.4 percent of annualized GDP) in the first half of the fiscal year.
  - Authorities issued a supplementary budget and negotiated a commercial loan from the banking sector.

### Request for Fund support
- Authorities request financial assistance under the Rapid Credit Facility (RCF).
- Requested disbursement: 100 percent of quota (SDR361 million, or about US$490 million).
- Planned use: 70 percent of the Fund’s support to support the central bank’s reserve position; the remainder for budget support.
- Staff supports the request: Uganda meets RCF qualification criteria; debt is sustainable with a low risk of external and overall debt distress; capacity to repay the Fund is strong.
- Authorities are also pursuing support from the World Bank, African Development Bank and other development partners.

### Policy response and recommendations
- Authorities’ plans to accommodate covid-related fiscal measures and mobilize additional financing are welcome.
- Recommended priorities:
  - Strengthen existing social protection tools to protect the most vulnerable.
  - Continue increasing health spending over the medium term.
  - Revisit and postpone some planned lower-priority expenditure if financing is insufficient.
  - Ensure revenue measures adopted to respond to the crisis are temporary.
- Monetary policy role:
  - Bank of Uganda (BoU) to maintain an accommodative stance to cushion macroeconomic and financial impacts.
  - BoU to continue tracking developments closely, allow the exchange rate to act as a shock absorber, and keep a reasonable reserve buffer.
  - BoU’s liquidity support measures to the financial sector are welcome.

### Impact of the pandemic: activity, external sector, and financing needs
- Growth and sectoral impact:
  - Growth projected at 3.3 percent in FY2019/20 (2.7 percentage points below the previous forecast).
  - Growth projected at 3.7 percent in FY2020/21.
  - Most affected sectors: services (particularly tourism, transport, and trade), manufacturing, construction, and agriculture.
- Health response plan:
  - Ministry of Health plan cost: about US$125 million over the next six months.
  - Authorities have used US$1.3 million from the Contingency Fund in the FY2019/20 budget and passed a supplementary budget.
- Balance of payments and external sector projections (after-shock compared to pre-shock):
  - Imports expected to decline by 12 percent in FY2019/20 and 17 percent in FY2020/21.
  - Exports projected to decline by 13 percent in FY2019/20 and 19 percent in FY2020/21.
  - Tourism receipts expected to decline by 54 percent in FY2019/20 and 52 percent in FY2020/21.
  - Remittances expected to decline by 43 percent in FY2019/20 and 51 percent in FY2020/21.
  - FDI expected to drop by 48 percent in FY2019/20 and 52 percent in FY2020/21.
  - Some capital outflows have already occurred; exchange rate depreciated by about 5.7 percent in March.
  - Public sector disbursements projected to decline by 33 percent in FY2019/20 and 18 percent in FY2020/21.
- Financing gaps and reserves:
  - The pandemic opens a financing gap of about US$1.3 billion in 2020:
    - US$0.5 billion (1.4 percent of GDP) in FY2019/20.
    - US$0.8 billion (2.2 percent of GDP) in FY2020/21.
  - Without external support, BoU’s reserve buffer would decline from 4.4 months of imports in FY2018/19 to below 2 months of imports at end-FY2020/21.
  - Projected reserve drawdown with external financing: reserves decline from 4.4 to 3.5 months of imports in FY2019/20 and FY2020/21.
- Text Table 2 — Financing gaps, 2020 (in millions of US$ and percent of GDP):
  - Fiscal financing gap: 1,790 (4.9 percent of GDP).
  - Prospective RCF: 150 (0.4 percent of GDP).
  - Prospective financing from World Bank: 394 (1.1 percent of GDP).
  - Prospective financing from AfDB: (not provided in table entries).
  - Residual fiscal financing gap: 1,246 (3.4 percent of GDP).
  - BOP financing gap: 1,318 (3.6 percent of GDP).
  - Prospective RCF (BOP): 490 (1.3 percent of GDP).
  - Prospective financing from World Bank (BOP): 394 (1.1 percent of GDP).
  - Residual BOP financing gap: 434 (1.2 percent of GDP).

### Outlook and risks
- Near-term outlook and uncertainty:
  - Growth: 3.3 percent in FY2019/20 and 3.7 percent in FY2020/21.
  - Headline inflation projected at 3.2 percent in FY2019/20, increasing to 4.7 in FY2020/21.
  - Core inflation to gradually converge to the 5 percent target over the medium term.
  - Current account projected at 10.1 percent of GDP in FY2019/20, improving to 8.7 percent of GDP in FY2020/21.
  - Private sector credit growth expected to decline to 8.9 percent in FY2019/20 and pick up over the medium term.
- Medium-term outlook:
  - Positive if the covid crisis is contained and infrastructure and oil-sector investments proceed.
  - Growth could reach 9.2 percent with the start of oil production in FY2024/25, though uncertainty is high given low oil prices.
- Fiscal and debt trajectory:
  - Fiscal position expected to deteriorate temporarily due to lower growth, tax incentives, health expenditure, social protection and stimulus measures.
  - In FY2019/20, lower-than-expected externally-financed development spending would more than compensate for covid-related deterioration; deficit excluding externally-financed projects and project grants would increase by 1.1 percent of GDP.
  - Debt dynamics remain sustainable; Uganda remains at low risk of debt distress.
  - Public debt projected to rise above 54 percent of GDP in FY2021/22 and peak at 59.6 percent of GDP in FY2023/24 (Annex I).
- Medium-term macro projections (selected entries from Text Table 3):
  - Real GDP: 6.5 (2018/19), 3.3 (2019/20), 3.7 (2020/21), 5.7 (2021/22), 6.0 (2022/23), 6.0 (2023/24), 9.2 (2024/25).
  - Headline inflation (period average): 3.1 (2018/19), 3.2 (2019/20), 4.7 (2020/21), 5.0 (2021/22–2024/25).
  - Credit to private sector: 12.7 (2018/19), 8.9 (2019/20), 10.2 (2020/21), 14.8 (2021/22), 13.9 (2022/23), 14.0 (2023/24–2024/25).
  - Fiscal overall balance (percent of GDP): -5.0 (2018/19), -7.7 (2019/20), -8.9 (2020/21), -5.5 (2021/22), -5.7 (2022/23), -5.0 (2023/24), -3.8 (2024/25).
  - Public debt (percent of GDP): 42.2 (2018/19), 45.7 (2019/20), 49.0 (2020/21), 50.7 (2021/22), 50.4 (2022/23), 48.9 (2023/24), 48.9 (2024/25).
  - Current account (percent of GDP): -8.6 (2018/19), -10.1 (2019/20), -8.7 (2020/21), -5.5 (2021/22), -5.0 (2022/23), -3.8 (2023/24), -2.0 (2024/25).
  - Reserves (months of imports): 4.4 (2018/19), 3.5 (2019/20), 3.5 (2020/21), 3.9 (2021/22), 4.5 (2022/23), 4.5 (2023/24), 6.1 (2024/25).
- Authorities’ view:
  - Authorities largely agree with staff projections but are more optimistic on growth for FY2020/21 (Ministry of Finance projects 4.5 percent for FY2020/21).
  - Authorities concerned that low oil prices could affect demand for Ugandan exports by key trading partners.

*Source: EXECUTIVE SUMMARY (1ugaea2020001) — Uganda IMF staff report, April 29, 2020.*

### 13.      Overall, risks remain tilted to the downside. The assumptions behind staff’s projections

### 13.      Overall, risks remain tilted to the downside. The assumptions behind staff’s projections

### Risks to the Outlook
- The staff projections assume the pandemic is a temporary shock, with recovery starting in the second half of FY2020/21.
- If the outbreak proves more severe:
  - Fiscal costs could be significantly higher.
  - Recovery could be delayed.
- A less favorable external environment could delay recovery by slowing external demand and affecting tourism, remittances, exports and FDI.
- Civil unrest could increase as the population deals with the consequences of containment measures.
- Oil price evolution is a key risk factor and may contribute to further delay the start of oil production; pandemic and low oil price environment are unfavorable to Final Investment Decision discussions.
- Uganda is suffering from a locust invasion that could potentially become very damaging.
- The proximity of the early 2021 general elections brings considerable uncertainty, which could affect sentiment, economic activity and lead to high spending pressures.

### Fiscal Policy — Authorities’ Response and Impact
- Key measures to mitigate the pandemic’s impact:
  - Shielding the most vulnerable via a food distribution campaign.
  - Introducing an economic stimulus package to support the severely affected private sector.
  - Expedited repayment of domestic government arrears to private sector suppliers.
  - Boosting lending capacity of Uganda Development Bank (UDB) to provide affordable credit to support reorientation of private sector production to covid-response items.
  - Deferment of tax payment obligations for the most affected sectors.
  - Introduction of tax exemptions for items used for medical use.
  - Support with water and electricity utilities.
  - Expansion of labor-intensive public works programs.
- Text Table 4: Authorities’ response to Covid (In billions of Ush; In percent of GDP)
  - Covid-related expenditure: 2,469; 1.7
  - Health: 704; 0.5
  - Support to vulnerable populations; food and utilities relief, social protection: 537; 0.4
  - Security: 74; 0.1
  - Support to the private sector (UDB): 755; 0.5
  - Other expenditure (points of entry; communications; clearance of arrears): 398; 0.3
  - Revenue shortfall (Compared to January projections): -3,984; -2.8
  - Total covid impact: 6,389; 4.5
- Projected fiscal effects:
  - Domestic revenue shortfall of 1 percent of GDP in FY2019/20 and 1.7 percent of GDP in FY2020/21 compared to January projections.
  - Covid-related expenditure expected to be 1.7 percent of GDP for calendar year 2020: 0.6 percent of GDP in FY2019/20 and 1.1 percent in FY2020/21.
  - Parliament approved a supplementary budget providing Ush 304 bn shillings to respond to the pandemic.
  - FY2019/20 overall deficit excluding externally-financed projects and project grants projected to increase by 1.1 percent of GDP, with the overall deficit projected at 7.7 percent, from 5 percent in FY2018/19.
  - Staff projects a deficit at 8.9 percent of GDP for FY2020/21.
- Text Table 5: Uganda: Central Government Fiscal Operations (In billion of Ugandan Shillings; Percent of post-shock GDP)
  - Revenue and grants:
    - 2018/19: 17,840
    - Pre-shock (January 2020) 2019/2020: 20,306
    - Proj. 2019/2020: 18,468; Proj. difference (% GDP): -1.3
    - Pre-shock (January 2020) 2020/21: 22,808
    - Proj. 2020/21: 20,511; Proj. difference (% GDP): -1.6
  - of which: Tax and non-tax revenue:
    - 2018/19: 16,638
    - Pre-shock (January 2020) 2019/2020: 18,945
    - Proj. 2019/2020: 17,589; Proj. difference (% GDP): -1.0
    - Pre-shock (January 2020) 2020/21: 21,968
    - Proj. 2020/21: 19,391; Proj. difference (% GDP): -1.7
  - Expenditure:
    - 2018/19: 24,268
    - Pre-shock (January 2020) 2019/2020: 31,300
    - Proj. 2019/2020: 28,904; Proj. difference (% GDP): -1.8
    - Pre-shock (January 2020) 2020/21: 33,088
    - Proj. 2020/21: 33,624; Proj. difference (% GDP): 0.4
  - of which: Coronavirus related spending:
    - 2018/19: 88; 0.7
    - Pre-shock (January 2020) 2019/2020: 119; 0.8
  - Overall balance:
    - 2018/19: -6,428
    - Pre-shock (January 2020) 2019/2020: -10,995
    - Proj. 2019/2020: -10,436; Proj. difference (% GDP): 0.4
    - Pre-shock (January 2020) 2020/21: -10,279
    - Proj. 2020/21: -13,112; Proj. difference (% GDP): -1.9
  - Overall balance (excl. externally financed projects and project grants):
    - 2018/19: -2,280
    - Pre-shock (January 2020) 2019/2020: -6,158
    - Proj. 2019/2020: -7,666; Proj. difference (% GDP): -1.1
    - Pre-shock (January 2020) 2020/21: -4,575
    - Proj. 2020/21: -8,362; Proj. difference (% GDP): -2.6
  - Financing:
    - 2018/19: 6,403
    - Pre-shock (January 2020) 2019/2020: 10,995
    - Proj. 2019/2020: 8,343; Proj. difference (% GDP): -1.9
    - Pre-shock (January 2020) 2020/21: 10,279
    - Proj. 2020/21: 8,219; Proj. difference (% GDP): -1.4
  - Financing gap:
    - 2019/2020: 0; 02,093; 1.5
    - 2020/21: 04,893; 3.3
  - Prospective RCF: 571; 0.4
  - Prospective financing from World Bank: 1,143; 0.8
  - Residual financing gap:
    - 2019/2020: 379; 0.3
    - 2020/21: 4,518; 3.1
- External financing and support:
  - Proposed RCF on-lending worth 0.4 percent of GDP would help close fiscal financing gap in FY2019/20.
  - Work ongoing with the World Bank, African Development Bank, UN organizations and bilateral partners.
  - Uganda interested in seeking debt service relief under the G-20 Covid-19 debt relief initiative; US$94 million worth of debt service falling due could benefit from the moratorium.
  - Residual fiscal gap after expected pledges is estimated at 0.3 percent of GDP in FY2019/20 and about 3.1 percent of GDP in FY2020/21.
- Medium-term fiscal framework and commitments:
  - Preparations advanced to design a fiscal rule to manage future oil revenues.
  - Authorities committed to respecting an interim debt ceiling of 50 percent in NPV terms.
  - Authorities monitor debt developments including the interest to revenue ratio.
  - Continue work on Domestic Revenue Mobilization Strategy and strengthen public investment management framework.
- Staff recommendations and cautions:
  - Covid-related fiscal measures are critical and should be accommodated.
  - Emphasized careful cash management to avoid domestic arrears.
  - Suggested strengthening existing social protection mechanisms and considering temporary expansion—noting less than 4.5 per cent of Ugandans has access to any form of social protection.
  - Ensure transparency and accountability: publication of large procurement contracts and an independent audit of Covid-19 emergency expenditure.
  - Ensure covid-related tax exemptions are temporary.
  - Continue to increase and sustain health sector budget allocations.
  - Authorities confirmed intention to continue recapitalizing Bank of Uganda.
  - Cautioned about financing risks from large fiscal financing gap for FY2020/21; additional domestic debt issuances not advisable due to crowding out concerns.
  - If sufficient external financing cannot be mobilized, prioritize expenditure and consider new revenue measures; prepare a contingency plan for potential deepening of the shock.

### Monetary, Exchange Rate and Financial Sector Policies
- Policy rate and inflation:
  - BoU reduced the Central Bank Rate by 100 basis points on April 6.
  - March figures: headline inflation at 3 percent and core inflation at 2.5 percent.
  - Staff agrees monetary policy should be accommodative to minimize negative impact and speed recovery.
  - Significant uncertainties: lower domestic demand and lower oil prices could keep inflation low; rising food prices, supply chain disruptions, and depreciation could raise inflation quickly.
- Exchange rate and reserves:
  - Authorities committed to maintaining exchange rate flexibility as a shock absorber and preserving adequate international reserve cover.
  - BoU stands ready to intervene to smooth excess volatility; interventions should be limited and fully sterilized.
  - March intervention calmed markets but resulted in a loss of nearly US$200 million.
  - Staff agrees BoU should ensure reserve buffer covers at least 3.5 months of imports for precautionary motives.
- Financial sector measures and risks:
  - BoU directed supervised financial institutions (SFIs) to defer discretionary distributions (dividends and bonus payments) for at least 90 days to protect capital buffers.
  - Measures include waiving limitations on restructuring credit facilities at financial institutions, granting exceptional permission to SFIs to restructure corporate and individual loans, including moratorium on loan repayment for affected borrowers.
  - December 2019 financial soundness indicators show stable capital position, improved profitability and comfortable liquidity, though deteriorated asset quality.
  - Pandemic could increase NPLs in sectors such as trade, tourism and agriculture, potentially deteriorating asset quality, increasing borrowing costs, and affecting banks’ liquidity and lending capacity.
  - Staff recommends prudent loan restructuring; loan classification and provisioning rules should not be relaxed; close monitoring of NPLs and regular reassessment of provisioning.
  - BoU worked with mobile money providers and commercial banks to reduce charges on mobile money transactions and digital payment charges to foster financial inclusion.

### Access and Capacity to Repay
- Access level and modalities:
  - Authorities request a disbursement under the RCF equivalent to 100 percent of quota (SDR 361 million, or about US$490 million).
  - Uganda qualifies for disbursement under the “exogenous shocks” window based on urgent and temporary balance of payments needs.
  - Authorities plan to devote 70 percent of the RCF disbursement to preserve precautionary reserves buffers of the BoU; remainder as budget support to finance covid response.
  - Planned uses: purchases of urgent health supplies; support to protect the most vulnerable; boost UDB lending capacity to provide affordable credit to private sector companies reorienting production to covid-related items.
  - Authorities agreed to place UDB under supervision and regulation of the Bank of Uganda; a memorandum of understanding to be signed between Ministry of Finance and BoU to (i) maintain IMF funds in a government account at the central bank pending use, (ii) require government to hold foreign exchange balances only with the BoU, and (iii) clarify responsibilities for repaying Fund resources.
- Capacity to repay and safeguards:
  - Uganda’s capacity to repay Fund obligations is adequate; Uganda’s debt is sustainable.
  - Obligations to the Fund would remain below 0.8 percent of exports of goods and services, and up to 2.3 percent of net international reserves.
  - Authorities committed to an update of the safeguards assessment of BoU; last update completed on April 10, 2007. The update assessment would need to be completed before Executive Board approval of any subsequent arrangement and authorize central bank’s external auditors to hold discussions with staff.

### Staff Appraisal
- The covid pandemic is severely hitting the Ugandan economy:
  - Growth is expected to reduce to half, with severe contraction in manufacturing, tourism and transportation.
  - Poverty is expected to increase.
  - Fiscal accounts would deteriorate with additional spending and shortfall in revenue collections, and large external financing needs would arise.
- Staff welcomes authorities’ prompt reaction and measures to contain the disease and cushion the impact on the most vulnerable and the private sector.
- The World Health Organization singled out Uganda as an example of countries that quickly responded to the pandemic.
- Response measures to increase health spending and support households and private sector are welcome.

*International Monetary Fund — Uganda: Selected Excerpts on Risks, Policy Response, and Financing (from the provided content unit)*

### 30.      The temporary deterioration in the fiscal position is appropriate, and debt is expected

### 1ugaea2020001 - 30.      The temporary deterioration in the fiscal position is appropriate, and debt is expected

### Fiscal position, debt outlook, and policy guidance
- The temporary deterioration in the fiscal position is appropriate; debt is expected to remain sustainable.
- Worsening of debt indicators is projected to be temporary, conditional on authorities' commitment to ensuring debt sustainability.
- Planned policy actions by the authorities:
  - Continue efforts to enhance revenue collection.
  - Strengthen public investment management.
  - Consider reprioritizing non-essential expenditure if sufficient financing is not mobilized.
  - Consider potential new revenue measures.
  - Continue to step up social protection programs to cushion vulnerable populations during the emergency and recovery phase.
  - Continue protecting health allocations over the medium term.
  - Ensure transparency and accountability in the delivery of the emergency response.

### IMF support and authorities' commitments
- Staff supports the authorities' request for a disbursement under the RCF of SDR 361 million (100 percent of quota).
- The RCF is expected to play a key role in mitigating the impact of the pandemic while preserving macroeconomic stability.
- Authorities are:
  - Putting together reasonable policies to address the external shock.
  - Securing additional external support from development partners.
  - Committed to sound safeguards to manage transparently the resources received.
  - Committed to sound macroeconomic policies targeted at ensuring sustained and inclusive growth.

### Key macroeconomic projections and indicators (selected)
- Real GDP: 6.2 (2017/18), 6.5 (2018/19), 3.3 (2019/20), 3.7 (2020/21), 5.7 (2021/22), 6.0 (2022/23), 6.0 (2023/24), 9.2 (2024/25)
- Non-Oil real GDP: 6.2, 6.5, 3.3, 3.7, 5.7, 6.0, 6.0, 5.8 (same vintages)
- Headline inflation (period average): 3.4, 3.1, 3.2, 4.7, 5.0, 5.0, 5.0, 5.0
- Public gross debt (percent of GDP): 35.0, 37.3, 45.1, 51.5, 54.4, 57.9, 59.6, 58.4
  - External: 24.4, 26.0, 32.0, 32.0, 33.9, 34.5, 34.7, 33.1
  - Domestic: 10.6, 11.2, 13.0, 17.6, 19.9, 23.2, 26.5, 27.3
- Overall balance (percent of GDP): -4.2, -5.0, -7.7, -8.9, -5.5, -5.7, -5.0, -3.8
- Primary balance (percent of GDP): -2.2, -3.0, -5.0, -6.2, -3.0, -3.2, -2.5, -1.6
- Revenue and grants (percent of GDP): 12.8, 13.9, 13.6, 13.9, 14.1, 14.1, 14.5, 15.2
- Expenditure (percent of GDP): 16.9, 18.9, 21.2, 22.8, 19.7, 19.8, 19.5, 19.0
- Current account balance (including grants, percent of GDP): -5.4, -8.6, -10.1, -8.7, -5.5, -5.0, -3.8, -2.0
- Gross international reserves (billions of US$): 3.1, 3.2, 2.5, 2.5, 2.9, 3.6, 4.3, 6.4
- GDP at current market prices: Ush. billion 119,642 (2017/18) ... 237,006 (2024/25)
- US$ billion GDP: 32.7 (2017/18) ... 54.3 (2024/25)
- GDP per capita (Nominal US$): 862 (2017/18) ... 1,154 (2024/25)
- Population (million): 37.8 (based on revised figures after the 2014 census)

### Fiscal operations (central government) — headline figures (Billions of Ugandan Shillings)
- Total revenue and grants (2020/21 Est.): 15,281; projections: 17,840 (2021/22), 18,468 (2022/23), 20,511 (2023/24), 23,277 (2024/25), 25,674, 29,592, 35,924
- Revenue (2020/21 Est.): 14,507; Tax (2020/21 Est.): 13,782
  - Income taxes (2020/21 Est.): 4,850; projections: 5,706, 5,665, 6,300, 7,205, 8,197, 9,565, 11,559
  - Value-added tax (2020/21 Est.): 4,448; projections: 4,879, 4,852, 5,355, 6,071, 7,103, 8,154, 9,854
- Expenditures and net lending (2020/21 Est.): 20,183; projections: 24,268, 28,904, 33,624, 32,345, 36,043, 39,707, 45,020
  - Current expenditures (2020/21 Est.): 10,916; projections: 12,374, 15,640, 18,360, 18,423, 20,168, 22,340, 25,715
  - Development expenditures (2020/21 Est.): 7,566; projections: 10,047, 11,440, 13,170, 13,522, 15,475, 16,921, 19,306
  - Interest payments (2020/21 Est.): 2,260; projections: 2,526, 3,652, 4,022, 4,212, 4,455, 4,955, 5,416
- Overall balance (2020/21 Est.): -4,902; projections: -6,428, -10,436, -13,112, -9,067, -10,370, -10,115, -9,096
- Financing (2020/21 Est.): 5,009; projections: 6,403, 8,343, 8,219, 9,067, 10,370, 10,115, 9,096
  - External financing (net) (2020/21 Est.): 3,635; projections: 3,521, 5,288, 4,663, 4,209, 6,195, 6,228, 5,281
  - Domestic financing (net) (2020/21 Est.): 1,374; projections: 2,882, 3,055, 3,556, 4,858, 4,175, 3,887, 3,815
- Prospective financing items noted in table: Prospective RCF 571 (2020/21 row), Prospective financing from World Bank 114, Prospective financing from AfDB; residual financing gap entries included.

### Monetary sector (selected)
- Money and quasi-money (M3): 22,749 (2018/19), 24,405, 26,431, 28,677, 31,938, 35,414, 38,972, 45,081 (2024/25 projection)
- Credit to private sector (annual percentage change): 10.5, 12.7, 8.9, 10.2, 14.8, 13.9, 14.0, 14.0
- Base money (levels and growth): Base money listed (e.g., 6,216; 6,768; 7,370; 7,682; 9,213; 10,457; 11,858; 13,629)
- M3/GDP (percent): 19.0 across several years; specific listed variants preserved in Table 1.

### External sector and balance of payments (selected)
- Current account (millions of US$): -1,776 (2017/18), -2,966, -3,613, -3,200 (2020/21), -2,169 (2021/22), -2,137, -1,765, -1,082 (2024/25)
- Trade balance (millions of US$): -2,083, -2,867, -2,378, -2,230, -1,606, -1,715, -1,551, -396
- Exports, f.o.b. (millions of US$): 3,537, 3,961, 3,782, 3,936, 4,525, 4,778, 5,252, 7,768
  - Coffee export values listed: 492, 416, 412, 458, 492, 528, 581, 672
- Imports, f.o.b. (millions of US$): 5,619, 6,828, 6,160, 6,166, 6,130, 6,494, 6,803, 8,164
  - Oil import values listed: 911, 980, 793, 649, 647, 717, 788, 516
- Gross international reserves (US$ billions): 3.1, 3.2, 2.5, 2.5, 2.9, 3.6, 4.3, 6.4
- Current account balance (percent of GDP): -5.4, -8.6, -10.1, -8.7, -5.5, -5.0, -3.8, -2.0

### Banking sector indicators (selected)
- NPLs to total gross loans: range examples include 4.2 (Mar-15), 4.0, 3.9, 5.3, 6.9, 8.3, 7.7, 10.5, 6.3, 6.2, 7.2, 5.6, 5.3, 4.4, 4.7, 3.4, 3.8, 3.8, 4.4, 4.7 (Dec-19)
- Regulatory capital to risk-weighted assets: values include 23.2, 21.2, 19.7, 21.0, 21.8, 21.7, 22.5, 19.8, 22.9, 23.6, 23.8, 23.2, 23.8, 21.8, 21.6, 21.6, 22.2, 22.1, 22.1, 21.8 (series)
- Return on assets: values across quarters, e.g., 2.5, 2.8, 2.7, 2.6, 2.8, 2.2, 2.5, 1.3, 1.4, 1.7, 1.5, 2.7, 2.6, 2.8, 2.8, 2.5, 2.8, 2.7, 2.8, 2.9 (series)
- Net interest margin: values include 11.0, 10.9, 11.0, 11.3, 11.6, 11.9, 12.3, 12.8, 12.7, 12.3, 11.8, 11.6, 11.6, 11.5, 11.3, 11.1, 11.0, 11.2, 11.1, 11.3

### External financing requirements and financing gaps (selected)
- External financing requirements (millions of US$): Financing needs 1,612 (2017/18), 3,031 (2018/19), 2,924 (2019/20), 3,177 (2020/21)
- Financing sources (millions of US$): 1,192 (2017/18), 2,908 (2018/19), 2,418 (2019/20), 2,364 (2020/21)
- Financing gap (millions of US$): 0 (2017/18), 0 (2018/19), 5 (2019/20), 68 (2020/21)
- Prospective financing noted: IMF-RCF 490 (line item in Table 6), World Bank 300, AfDB; residual financing gap -284, 434 in memorandum.

### Indicators of capacity to repay the IMF (2020–30)
- IMF obligations based on existing and prospective credit (in millions of SDRs): Principal 0.0 ... 36.1 (2024/25), 72.2 (2026), 72.2 (2027), 72.2 (2028), 36.1 (2029) — series shown.
- Total IMF obligations (in millions of SDRs) series: 0.2, 0.1, 0.1, 0.1, 0.1, 36.2, 72.3, 72.3, 72.3, 36.2
- IMF credit outstanding (end-of-period, in millions of SDRs): 361.0 (2020), repeated in 2021, 2022, 2023, 361.0 (2024/25), then 324.9, 252.7, 180.5, 108.3, 36.1, 0.0
- IMF credit outstanding (end-of-period, in millions of U.S. dollars): 490.0 (2020), 501.7, 503.3, 504.5, 6.245, 7.235, 5.625, 4.0, 152.4, 50.8, 0.0 (series preserved as in Table 7)
- IMF credit outstanding (percent of GDP): 1.4 (2020), 1.4, 1.3, 1.2, 1.1, 0.8, 0.5, 0.3, 0.1, 0.0 (series)
- Memorandum items include nominal GDP, exports, government revenue, gross international reserves, and IMF quota figures used in attendant ratios.

*Source: Ugandan authorities and IMF staff estimates and projections, as presented in the chapter.*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Context and immediate impact
- Coronavirus pandemic and a locust invasion have caused severe disruptions to output, supply chains, and economic activity.
- Government measures to curb spread include closure of all borders and a partial domestic lockdown, producing supply disruptions and slowdown in economic activities.
- Significant additional public resources required for health spending and mitigation of economic impact.

### Macroeconomic projections and short-term impact
- Preliminary GDP growth estimates:
  - FY2019/20: 3.9 percent (down from pre-pandemic projection of 6.0 percent).
  - FY2020/21: 4.5 percent (down from pre-pandemic projection of 6.0 percent).
- Sectors affected: manufacturing, construction, trade and tourism.

### Fiscal needs and financing gaps
- Immediate fiscal needs:
  - Remainder of FY2019/20: US$565.5 million or 1.5 percent of GDP.
  - FY2020/21: close to US$1.5 billion.
- Revenue pressures:
  - Shortfall in tax revenue expected due to fall in domestic demand and imports.
  - International trade taxes account for about 40 percent of tax revenues.

### External accounts and reserves
- Current account deficit projections:
  - FY2019/20: 8.7 percent of GDP.
  - FY2020/21: 10.3 percent of GDP.
- Foreign Direct Investment (FDI) flows projected to decline:
  - FY2019/20: decline by one-third versus pre-pandemic projections.
  - FY2020/21: decline by two-thirds versus pre-pandemic projections.
- Anticipated pressures in domestic foreign exchange market and significant draw-down in foreign reserves to meet government foreign expenditure requirements and stabilization measures.

### Request to IMF and use of funds
- Request emergency financing under the Rapid Credit Facility (RCF):
  - Amount: 361 million SDRs—equivalent to about US$490 million (100 percent of quota).
  - Intended allocation:
    - US$340 million to help Bank of Uganda in bridging the gap in the balance of payments position.
    - US$150 million to be used as budget support to finance Government’s response plan to the pandemic (health supplies, support to vulnerable population, support to private sector via boosting lending capacity of Uganda Development Bank).
- Disbursement management:
  - Part of the RCF disbursement to be on-lent by the BoU to the Treasury.
  - BoU and Ministry of Finance, Planning and Economic Development to sign a Memorandum of Understanding (MoU) specifying conditions and repayment responsibilities.

### Other external financing engagements
- Working with other development partners to fill gaps:
  - World Bank: Government plans to seek US$300 million to fund part of health interventions this financial year, plus US$50 million towards dealing with the locust invasion.
  - African Development Bank: Requested US$350 million towards supporting the budget for next financial year (amounts to be received are still unclear).

### Fiscal and social policy measures implemented or planned
- Health and social protection:
  - Supplementary budget to make additional public resources available for health spending.
  - Support to vulnerable population: providing basic food items; guaranteed continued supply and access to water and electricity for all until situation normalizes; planning to extend public work programs.
  - Working with Ministry of Gender, Labor and Social Development and development partners to strengthen social protection, provide one-off targeted cash transfers and cash for work; operational modalities are being defined.
- Private sector support:
  - Temporary deferral of PAYE tax payments for most affected sectors (e.g., manufacturing and tourism).
  - Payment of corporation tax for qualifying companies and SMEs with turnover of less than Shs 500 million per annum delayed by six months without attracting interest.
  - Government will waive interest on tax arrears for voluntary compliant taxpayers.
  - Outstanding VAT refunds to businesses will be expedited with measures to limit fraud risks.
  - Temporary tax exemption on specified medical items required in fight against Covid (list preserved in source).

### Strategic and industrial measures
- Investment finance and industrial policy:
  - Additional liquidity injection into Uganda Development Bank (UDB) to support local manufacturing.
  - Amend legislation to place UDB under regulation and supervision of Bank of Uganda.
  - Increase funding to industrial research to strengthen domestic technological base.
  - Expand Business Development Services, including establishment of industrial business shelters to integrate SMEs in informal and formal economy into industrialization process.

### Monetary and financial sector measures by Bank of Uganda (BoU)
- Monetary policy stance:
  - Continue to implement monetary policy in a prudent manner.
  - Accommodate a temporary increase in inflation owing to exchange rate weakening and supply disruptions, but adjust stance if there is substantial risk of sustained price increases above the target range.
  - Continue implementing a flexible foreign exchange regime and limit interventions to smoothen volatilities.
  - Implement measures to reverse deterioration of international reserves once confidence is restored over medium term.
- Financial sector resilience measures:
  - Stand ready to provide liquidity to the financial system for a period of up to one year if needed.
  - Ensure all financial institutions under supervision have adequate capital buffers.
  - Instruct financial institutions to defer payments of all discretionary distributions such as dividends and bonus payments for at least 90 days effective March 24, 2020.
  - Waived limitations on restructuring of credit facilities; supervised financial institutions (SFIs) granted relief to restructure loans and provide loan repayment holidays.
  - Engage with Mobile Network Operators and commercial banks to facilitate and promote digital payments.

### Transparency, safeguards, and governance commitments
- IMF safeguards and audits:
  - Commit to undergoing a new safeguards assessment conducted by the Fund.
  - Authorize BoU’s external auditors to hold discussions with IMF staff and provide access to BoU’s most recently completed audit reports.
- Tracking and reporting of COVID-19 expenditures:
  - Provide a separate reporting mechanism for COVID-19 expenditures within Program Based Budgeting for clear tracking of partner support.
  - UDB to report on use of funds received.
- Anti-corruption and procurement transparency commitments:
  - Commit to publish, once signed, documentation on government’s website of large procurement contracts related to COVID-19 expenditures:
    - Defined as contracts above Ush500 million for works contracts, and above Ush200 million for goods and services.
    - Publication to include names of awarded companies and their beneficial owners.
  - Undertake an independent audit of COVID-19 expenditures in about a year’s time, including ex-post validation of delivery of large procurement contracts, and publish results.

### Debt treatment and policy on new borrowing
- Interest in G-20 debt service suspension initiative:
  - In process of reaching out to bilateral creditors.
  - Commit to spend freed resources on Covid-related health, social or economic relief, monitor and identify such expenditure in budget monitoring reports.
  - Commit to disclose all public sector financial commitments (debt), respecting commercially sensitive information, within 3 months, and not later than September 1.
  - Willing to request technical assistance from IFIs to achieve disclosure.
  - Commit to contract no new non-concessional debt during the suspension period, other than agreements under the initiative or in compliance with limits under the IMF Debt Limit Policy (DLP) or WBG policy on non-concessional borrowing.

### Medium-term fiscal stance and conditionalities
- Commitment to macroeconomic stability and fiscal sustainability:
  - Maintain policy intentions guided by fiscal sustainability and inclusive economic growth.
  - Adjust FY2020/21 budget by September 2020 to reflect covid-related impacts; current version endorsed by Parliament does not include these impacts.
  - Acknowledge large residual financing gap in the expected revised budget for FY2020/21; if external financing proves insufficient, commit to readjust expenditures and consider additional revenue measures.
  - Ensure continued adequate financing to the health sector and continue to recapitalize Bank of Uganda.

*Appendix I. Letter of Intent — 30th April, 2020*

### 16. Finally,  we  authorize  the  IMF  to  publish  this  Letter  and  the  staff  report  for  the  request  for

### UGANDA — REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—DEBT SUSTAINABILITY ANALYSIS

### Summary findings
- Uganda’s debt is sustainable, with a low risk of external and overall debt distress under the Covid pandemic macro-framework.
- The pandemic impact is felt through supply chain disruptions; and lower commodity export prices, remittances, tourism, and capital inflows causing deterioration in the current and financial accounts.
- Fiscal position is expected to deteriorate and be financed with debt; debt-to-GDP burden trajectories are higher than anticipated in the last DSA despite recent rebasing of national accounts.
- All external debt and total public debt burden trajectories remain below respective indicative thresholds under the baseline scenarios.
- Multiple indicators nearly breach indicative thresholds under the stress test scenario; debt service-to-revenue remains elevated, indicating heightened vulnerabilities as budget revenues decline due to the pandemic.
- FY2019/20 financing needs are expected to be fully met through reserves drawdown, use of Fund credit under the RCF, and World Bank financial support.
- Authorities are interested in seeking debt service relief under the G-20 Covid debt service relief initiative and have initiated steps to contact bilateral creditors.
- Large near-term external financing needs are assumed covered by drawing down reserve buffers, IMF resources, World Bank resources, and resources from other development partners still under discussion.
- Sound fiscal management over the medium term is critical given significant vulnerability to shocks.

### Debt indicators and projections (selected baseline figures)
- External debt (nominal): 35.9 (2016/17), 37.6 (2017/18), 39.8 (2018/19), 46.9 (2019/20), 50.4 (2020/21), 50.0 (2021/22), 47.4 (2022/23), 43.8 (2023/24), 34.8 (2024/25), 31.0 (2029/30), 42.3 (projection column label alignment as presented)
- Public and publicly guaranteed (PPG) external debt: 21.8 (2016/17), 24.4 (2017/18), 26.0 (2018/19), 32.0 (2019/20), 33.9 (2020/21), 34.5 (2021/22), 34.7 (2022/23), 33.1 (2023/24), 31.1 (2024/25), 27.1 (2029/30), 18.2 (further projection), 30.8 (final column)
- Change in external debt: 1.6, 1.7, 2.2, 7.1, 2.7, 0.8, -0.4, -2.6, -3.6, 0.6
- Identified net debt-creating flows: -0.9, 0.2, 2.6, 6.1, 4.1, -1.1, -1.9, -2.2, -5.4, -0.4, 0.8, -0.9
- Non-interest current account deficit: 2.6, 4.7, 7.6, 8.9, 6.9, 3.5, 2.9, 1.6, 0.0, 0.0, 5.9, 2.2
- Exports (percent of GDP): 16.2, 16.5, 17.6, 13.6, 14.1, 15.8, 16.1, 16.1, 19.2, 20.9
- Imports (percent of GDP): 15.6, 17.2, 19.9, 17.2, 16.7, 15.4, 15.2, 14.5, 15.0, 13.1
- Net FDI (negative = inflow): -2.3, -3.0, -4.2, -2.7, -2.9, -3.9, -4.1, -3.3, -3.6, -0.3, -3.3, -2.3
- Endogenous debt dynamics (contribution): -1.2, -1.6, -0.7, -0.1, 0.0, -0.7, -0.7, -0.6, -1.8, -0.1
- PV of PPG external debt-to-GDP ratio (selected): 17.9, 22.5, 24.5, 25.4, 25.9, 25.3, 24.0, 22.0
- PV of PPG external debt-to-exports ratio (selected): 101.9, 165.3, 173.7, 160.3, 160.9, 157.2, 125.1, 105.2
- PPG debt service-to-exports ratio (selected): 14.4, 14.8, 9.4, 9.7, 13.1, 12.2, 14.4, 15.6, 13.4, 13.9
- PPG debt service-to-revenue ratio (selected): 19.5, 19.9, 12.7, 10.2, 14.1, 14.5, 16.7, 17.4, 17.2, 16.6
- Gross external financing need (Million of U.S. dollars): 1,345.5, 1,790.9, 2,709.2, 4,101.6, 3,605.4, 2,223.7, 1,926.6, 2,042.8, 9,916.0, 3,487.6, 13,900.1
- Nominal GDP (Million of US dollars) (selected): 30,654; 32,697; 34,307; 35,743; 36,982; 39,749; 42,681; 46,911; 54,320; 90,659
- Real GDP growth (in percent): 3.9, 6.2, 6.5, 3.3, 3.7, 5.7, 6.0, 6.0, 9.2, 4.9, 4.6, 5.7
- Effective interest rate (percent): 2.2, 2.1, 3.0, 3.1, 3.8, 4.1, 4.5, 4.7, 4.8, 4.5, 1.9, 4.2
- Growth of exports of G&S (US dollar terms, in percent): 6.3, 8.5, 11.8, -19.1, 7.2, 20.6, 9.0, 9.9, 38.1, 5.9, 7.0, 11.0
- Growth of imports of G&S (US dollar terms, in percent): 1.6, 17.9, 21.5, -9.8, 0.1, -0.6, 5.9, 4.8, 20.0, 5.1, 5.7, 3.4
- Government revenues (excluding grants, in percent of GDP) (selected): 12.0, 12.2, 13.0, 12.9, 13.1, 13.4, 13.9, 14.4, 15.0, 17.5, 11.6, 13.8
- Aid flows (Million of US dollars) (selected): 519.8, 261.2, 566.9, 910.9, 950.0, 975.2, 760.4, 695.1, 760.6, 764.5
- Memorandum: PV of external debt (selected): 31.6, 37.4, 40.3, 41.3, 41.3, 39.6, 36.7, 29.6
- Total external debt service-to-exports ratio (selected): 23.1, 21.5, 25.9, 34.4, 39.6, 36.4, 34.7, 36.0, 26.5, 18.8
- PV of PPG external debt (in Million of US dollars) (selected): 6,140.4, 8,057.2, 9,073.9, 10,095.7, 11,053.3, 11,867.4, 13,049.8, 19,911.9

### Public sector debt (selected baseline figures)
- Public sector debt (percent of GDP): 32.0 (2016/17), 35.0 (2017/18), 37.3 (2018/19), 45.1 (2019/20), 51.5 (2020/21), 54.4 (2021/22), 57.9 (2022/23), 59.6 (2023/24), 58.4 (2024/25), 56.7 (2029/30), 27.7, 54.9 (as presented)
- Change in public sector debt: 1.8, 3.0, 2.3, 7.9, 6.4, 2.9, 3.4, 1.7, -1.2, 0.4
- Identified debt-creating flows (selected): 2.1, 2.8, 2.0, 7.3, 7.5, 3.7, 4.2, 2.7, -0.6, 1.3, 1.2, 2.6
- Primary deficit (selected): 1.1, 2.1, 3.1, 5.0, 6.2, 3.0, 3.2, 2.5, 1.6, -1.5, 2.3, 2.1
- Revenue and grants (percent of GDP) (selected): 12.8, 12.8, 13.5, 13.6, 13.9, 14.1, 14.1, 14.5, 15.2, 17.5, 12.8, 15.6
- Primary (noninterest) expenditure (percent of GDP) (selected): 13.9, 15.0, 16.6, 18.5, 20.0, 17.1, 17.3, 17.1, 16.7, 16.0, 15.1, 17.7
- PV of public debt-to-GDP ratio (selected): 28.9, 36.3, 42.6, 45.8, 49.5, 51.8, 51.4, 51.8
- PV of public debt-to-revenue and grants ratio (selected): 214.8, 267.7, 306.9, 323.5, 351.5, 356.6, 339.3, 285.9, 275.5, 280.4, 288.0, 295.8
- Debt service-to-revenue and grants ratio (selected): 45.5, 44.5, 41.3, 40.2, 53.2, 70.0, 80.9, 86.4, 91.8, 80.7, 81.0, 84.4
- Gross financing need (selected): 5.1, 6.0, 8.7, 10.6, 13.9, 12.9, 14.6, 15.1, 15.5, 14.7

### Stress tests, sensitivity analysis, and scenarios (highlights)
- External DSA baseline PV of debt-to-GDP ratio (2019/20–2029/30 baseline): 22.5, 24.5, 25.4, 25.9, 25.3, 24.0, 21.4, 21.3, 21.7, 21.8, 22.0
- Sensitivity A1 (key variables at historical averages): PV of debt-to-GDP: 22.5, 22.1, 23.8, 25.6, 26.8, 29.7, 31.3, 32.0, 32.8, 33.4, 33.4
- Alternative scenario A2 (oil price shock): PV of debt-to-GDP: 22.5, 22.5, 23.9, 24.5, 22.9, 21.9, 17.4, 12.7, 8.4, 5.6, 3.4
- Bound test B1 (real GDP growth): PV of debt-to-GDP: 22.5, 25.9, 28.3, 28.9, 28.2, 26.8, 23.9, 23.8, 24.2, 24.3, 24.5
- Tailored test C1 (combined contingent liabilities): PV of debt-to-GDP: 22.5, 29.5, 31.7, 32.6, 32.1, 31.9, 29.1, 29.3, 29.8, 30.5, 31.1
- PV of debt-to-exports ratio baseline and scenarios (selected): baseline 165.3, 173.7, 160.3, 160.9, 157.2, 125.1, 111.6, 106.9, 104.6, 103.4, 105.2; A2 oil price shock values drop to 165.3, 159.4, 150.6, 152.4, 142.1, 117.0, 94.5, 65.8, 41.5, 27.0, 16.4
- Debt service-to-exports ratio baseline and scenarios (selected): baseline 9.7, 13.1, 12.2, 14.4, 15.6, 13.4, 14.0, 13.8, 13.1, 13.4, 13.9; A2 oil price shock: 9.7, 12.7, 11.6, 13.7, 14.8, 13.5, 13.5, 13.3, 10.5, 9.3, 8.5
- Debt service-to-revenue ratio baseline and scenarios (selected): baseline 10.2, 14.1, 14.5, 16.7, 17.4, 17.2, 15.8, 15.4, 15.4, 15.9, 16.6
- Public DSA sensitivity tests show substantial increases in PV of public debt-to-GDP and PV of debt-to-revenue under combined shocks and contingent liabilities (examples: PV of debt-to-revenue baseline 267.7, 306.9, 323.5, 351.5, 356.6, 339.3, 285.9, 275.5, 280.4, 288.0, 295.8; tailored combined contingent liabilities push ratios much higher).

### Key macroeconomic, fiscal, and financing assumptions
- Real GDP growth (in percent) used across DSAs: 3.9, 6.2, 6.5, 3.3, 3.7, 5.7, 6.0, 6.0, 9.2, 4.9, 4.6, 5.7
- GDP deflator in US dollar terms (change in percent) (selected): 2.0, 0.5, -1.5, 0.8, -0.2, 1.7, 1.3, 3.7, 6.0, 1.7, 6.7, 2.2
- Effective interest rate (percent): 2.2, 2.1, 3.0, 3.1, 3.8, 4.1, 4.5, 4.7, 4.8, 4.5, 1.9, 4.2
- Grant element of new public sector borrowing (in percent) (selected): 21.2, 23.9, 23.1, 22.4, 21.7, 18.1, 13.2, 21.7
- Grant-equivalent financing (in percent of GDP) (selected): 2.2, 1.8, 1.7, 1.1, 0.9, 0.8, 0.5, 1.4
- Grant-equivalent financing (in percent of external financing) (selected): 27.6, 35.6, 35.5, 26.0, 25.6, 20.8, 14.2, 28.5
- Average nominal interest rate on external debt (in percent): 2.3, 2.0, 2.4, 1.9, 2.5, 2.4, 2.7, 3.0, 3.3, 4.0, 1.7, 3.1
- Average real interest rate on domestic debt (in percent): 0.8, -0.2, 0.3, 0.7, 1.2, 0.5, 0.7, 1.0, 1.3, 3.0, 0.0, 1.6
- Inflation rate (GDP deflator, in percent) (selected): 4.5, 4.2, 0.6, 2.8, 4.6, 5.3, 4.6, 5.2, 6.6, 4.3, 14.1, 4.9
- Primary deficit that stabilizes the debt-to-GDP ratio (selected): -0.7, -0.9, 0.8, -2.9, -0.2, 0.0, -0.2, 0.8, 2.8, -1.9, -0.2, 0.2

### Policy implications and recommendations (implied by analysis)
- Authorities should pursue sound fiscal management over the medium term to ensure fiscal sustainability given the country's significant vulnerability to shocks.
- Near-term financing is dependent on use of reserve buffers, IMF RCF, World Bank support, and donor resources; pursuing bilateral debt relief under the G-20 Covid debt service relief initiative is underway and relevant for near-term debt service pressures.
- Close monitoring of debt-service-to-revenue metrics is warranted as they remain elevated and signal heightened vulnerabilities if revenues decline further.

*Prepared by the staff of the International Monetary Fund (IMF) and the International Development Association (IDA). Approved By Annalisa Fedelino (IMF, AFR), Chris Lane (IMF, SPR), and Marcello Estevão (IDA). April 29, 2020.*

### 1.      On behalf of our Ugandan authorities, we thank management and staff for their timely

### 1ugaea2020001 - On behalf of our Ugandan authorities, we thank management and staff for their timely response to the request for emergency financial assistance under the Rapid Credit Facility (RCF).

### RCF request and intended allocation
- Authorities request emergency financing under the Rapid Credit Facility (RCF) in the amount of SDR 361 million, equivalent to 100 percent of quota to address urgent balance of payments (BOP) and fiscal needs precipitated by the pandemic.
- Intended allocation of the RCF resources:
  - 70 percent of these resources to bolster the Bank of Uganda (BoU) reserve buffers.
  - The remainder used for budget support.

### Immediate macroeconomic impact and financing gaps
- Health and humanitarian pressures:
  - First confirmed Covid-19 case reported on March 21, 2020.
  - Cases had risen to seventy-nine as at April 27, 2020, with no reported fatalities.
  - Ministry of Finance estimates that between 780,000 and 2.6 million Ugandans could be pushed into poverty as incomes decline.
- Balance of payments and external financing:
  - BOP financing gap of $1.3 billion in 2020, equivalent to 3.4 percent of GDP.
  - Projected substantial declines in FDI, exports, remittances, and capital flows.
- Growth and fiscal outlook:
  - GDP growth is expected to decline by 2.7 percentage points in FY2019/20 compared to pre-pandemic forecasts.
  - The overall fiscal deficit, excluding externally financed projects and project grants, is expected to widen by 1.1 percent of GDP in FY2019/20 and 2.6 percent of GDP in FY2020/21 due to revenue shortfalls and additional spending.

### Immediate policy responses implemented or financed
- Public health and preparedness:
  - Health preparedness plan with an initial cost of about $125 million over a six months period.
  - Financing sourced from the Contingency Fund in the FY2019/20 budget and a supplementary budget approved by the parliament.
- Containment measures and social impact mitigation:
  - Closure of schools and universities, restrictions on public gatherings, and a ban on public transport.
  - Strengthening social protection mechanisms, targeted cash transfers and cash for work, distribution of food to vulnerable households.
- Private sector and utility support measures:
  - Stimulus package measures include acceleration of repayment of government arrears to suppliers, temporary deferral of tax payments, extension of tax exemptions on medical equipment, and provision of affordable credit through the state-owned Uganda Development Bank (UDB).
  - Plans to provide support to water and electricity utilities and expand labor-intensive public works programs.
- Monetary and financial sector measures by the BoU:
  - Continue to implement prudent monetary policy to ensure price stability and maintain exchange rate flexibility as the first line of defense.
  - Limit interventions to smoothen market conditions.
  - Measures to address credit-related insolvency: relaxation of limitations on restructuring of credit facilities, and introduction of a moratorium on loan repayments for borrowers affected by the pandemic.
  - Work underway to reduce charges on mobile money transactions and other digital payment charges to promote digital payments and limit use of cash and bank branch visits.

### Coordination, external support, and debt relief efforts
- Authorities are working with development partners including the World Bank, African Development Bank, and the United Nations to fill fiscal and external gaps.
- Seeking debt service relief under the G-20 Covid-19 Debt Relief initiative and engaging bilateral creditors for that purpose.
- Committed to continue monitoring the pandemic and stand ready to implement additional measures as necessary.

### Transparency, accountability, and safeguards
- Commitments to ensure Covid-related resources are used in a transparent and accountable manner:
  - Publication of large procurement contracts.
  - Establish a separate reporting mechanism for Covid-related expenditures under program-based budget.
  - Institute an independent audit of the Covid-19 emergency expenditure.
  - Undertake an update of the safeguards assessment before Executive Board approval of any subsequent arrangements.

### Post-crisis medium-term framework
- Fiscal policy and revenue mobilization:
  - Plan to pursue sound macroeconomic policies to ensure fiscal and debt sustainability.
  - Plan to introduce a fiscal anchor, including a fiscal rule to manage future oil revenues.
  - Implement the medium-term Domestic Revenue Mobilization Strategy aiming to increase revenue by 2.5 percent of GDP over five years.
- Debt and public investment management:
  - Continue work on strengthening public investment management to bring the fiscal deficit and public debt to a downward trajectory once the crisis abates.
  - Interim guidance: debt ceiling of 50 percent in NPV terms will continue to guide fiscal operations in line with the East African Community criteria.
  - Continue to use a set of indicators to closely monitor debt developments, including the interest to revenue ratio.

### Conclusion and request for support
- Authorities remain committed to implementing sound macroeconomic policies to restore macroeconomic stability and bolster inclusive growth once the crisis fades.
- Authorities consider the RCF instrumental to catalyze additional resources from development partners to strengthen efforts to contain the pandemic and look forward to the support of the Executive Board for a disbursement under the RCF.

*Source: 1ugaea2020001.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1ugaea2020001.pdf_