## Uganda: Selected IMF Staff Findings and Policy Recommendations (from source PDF)

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### Executive summary — context and priorities
- Uganda’s post-pandemic performance: broad-based growth, contained inflation, improving external position supported by coffee exports and portfolio inflows.
- FX reserves increased significantly in 2025 amid a favorable external environment.
- Fiscal policy space constrained; widening fiscal deficits and high debt servicing burden increase vulnerabilities.
- Key policy priorities:
  - Create durable fiscal space through revenue and expenditure reforms.
  - Implement a strong framework for oil revenue management.
  - Maintain macroeconomic stability amid significant external uncertainties.

### Fiscal policy — recent outturns, projections, and risks
- Recent outcomes and FY24/25 fiscal outturn (percent of GDP):
  - Real GDP growth: 6.3 percent (FY24/25).
  - Total revenue and grants: 14.7
  - Tax Revenue: 13.0
  - Non-tax Revenue: 1.0
  - Oil Revenue: 0.1
  - Budget and Project Grants: 0.6
  - Expenditures and net lending: 20.7
  - Wages and salaries: 3.5
  - Interest payments: 3.7
  - Other current: 8.0
  - Development spending: 5.2
  - Net lending and other spending: 0.3
  - Overall balance: -6.0
  - External financing (net): 0.5
  - Bank of Uganda financing: 0.4
  - Banks: 1.1
  - Non-banks: 4.2
  - o/w which offshore portfolio flows: 1.4
  - Errors and Omissions: -0.2
  - Memo items: Public debt: 52.4; Interest payments to domestic revenues: 26.2
- Outlook and staff projections:
  - FY25/26 budget deficit projected to widen to 6.6 percent of GDP.
  - Public debt projected to rise to 54.5 percent of GDP (FY25/26).
  - Staff baseline without significant reforms: overall budget deficit around 5 percent of GDP over the medium term.
  - Oil production expected to start in late 2026 and generate average revenues worth 2 percent of GDP annually over the next ten years (with a large share expected to be saved).
- Fiscal risks highlighted:
  - Higher interest payments (projected increase by 0.9 ppt of GDP) and allocation for clearance of domestic arrears (0.5 ppt of GDP).
  - Offshore inflows into domestic bond market around 1½ percent of GDP in FY24/25.
  - Interest payments projected to reach almost a third of domestic revenues.
  - 2024 public pension reform likely to add fiscal costs (yet to be estimated).

### Debt sustainability assessment (DSA) — judgement and vulnerabilities
- Overall DSA conclusion: public debt remains sustainable with a moderate risk of debt distress.
- Key DSA findings:
  - External debt burden indicators and total public debt remain below thresholds and benchmarks through the projection horizon, except a one-off breach of external debt-service-to-revenue ratio in FY25/26-FY26/27.
  - Stress tests reveal breaches of thresholds; under median shock some indicators breach thresholds.
  - Domestic debt/GDP and domestic debt service-to-revenue ratios projected to remain well above LIC medians.
- Contingent liabilities and arrears:
  - Arrears to Nigeria: US$11.5 million; Iraq: US$657 (deemed away under revised policy); disputed arrears to Tanzania: US$58 million.
- Selected DSA numeric projections (percent of GDP series where applicable):
  - Total revenue and grants: 14.7, 14.9, 15.8, 16.0, 16.5, 16.6, 16.9
  - Tax Revenue: 13.0, 13.1, 13.3, 13.2, 13.3, 13.5, 13.6
  - Oil Revenue: 0.1, 0.1, 0.1, 1.2, 1.7, 1.8, 2.1
  - Expenditures and net lending: 20.7, 21.5, 22.8, 21.9, 21.9, 21.6, 21.9
  - Interest payments: 3.7, 4.6, 4.6, 4.5, 4.8, 5.0, 5.1
  - Overall balance: -6.0, -6.6, -7.0, -5.9, -5.4, -5.0, -5.1
  - External financing (net): 0.5, 1.7, 2.7, 0.9, 0.7, 0.7, 0.6
  - Public debt: 52.4, 54.5, 53.7, 54.1, 54.4, 54.3, 54.3
  - Interest payments to domestic revenues: 26.2, 32.0, 30.5, 29.0, 30.0, 30.7, 30.5

### Staff fiscal recommendations and illustrative consolidation
- Objective: bring public debt below 50 percent of GDP (Charter of Fiscal Responsibility).
- Illustrative consolidation package:
  - Additional tax revenue mobilization: 0.3 percentage points of GDP.
  - Reduction in current spending to pre-pandemic levels: 1.6 percentage points of GDP.
  - Combined effect: additional cumulative fiscal consolidation of around 2 percentage points of GDP in the primary balance by FY29/30, bringing public debt to 48 percent of GDP.
  - Would allow positive primary balance by FY27/28 (vs FY30/31 under baseline) and reduce interest payments to domestic revenue ratio by some 5 percentage points over medium term.
- Reinvigorate DRMS-2:
  - DRMS-2 target: increase revenues to 18.3 percent of GDP by FY29/30 (about three quarters from administrative reforms).
  - Staff view target as "rather ambitious" without stronger political commitment.
  - Tax policy priorities: apply VAT to fuel products (with offsetting excise reductions), narrow VAT exemptions for raw foodstuffs, eliminate tax holidays in favor of expenditure-based incentives, properly cost tax expenditures.
- PFM and expenditure priorities:
  - Enforce overall spending limits during bottom-up budget preparation; improve supplementary budget process; improve revenue and expenditure forecasting; annual assessment and rationalization of public investment plan.
  - IMF/WB TA requested for a social spending diagnostic.

### Monetary policy, financial deepening, and BoU–government links
- Monetary stance and indicators:
  - BoU monetary policy appropriately tight amid upside inflation risks.
  - Real policy rate currently around 7 percent; estimated neutral rate 4.5 percent.
  - Expected shift to neutral as inflation converges to 5 percent medium-term core target.
- Transmission and structural measures:
  - Credit channel weak; policy rate has little short-run impact on lending rates.
  - Elevated government domestic borrowing limits passthrough to lending rates.
  - Measures: BoU platform for government securities purchases via mobile money; introduce FX swaps; extend tenor of BoU Bills; explore green bonds, diaspora bonds, sukuk; operationalize close-out-netting frameworks; require regulated institutions to use Credit Reference Bureau; partnerships to expand FinTech-enabled lending.
- BoU financing of government:
  - BoU’s claims on government around 40 percent of total assets.
  - Securitization of advances in October 2024 under a 10-year amortization; outstanding stock dropped from 4.1 percent of GDP to 0.8 percent of GDP by end-FY24/25.
  - Principal repayment for FY25/26 under revised schedule has been made; by end-August 2025 government cleared all BoU advances due at end-FY24/25.
- Staff recommendations:
  - Gradual easing as inflation risks recede, accompanying fiscal consolidation and transmission strengthening.
  - Adhere to repayment schedule agreed between MoFPED and BoU and comply with PFM Act regulation on BoU advances; continue to address 2021 Safeguards Assessment recommendations.

### External position, reserves, and FX policy
- External indicators and FX reserves:
  - Current account deficit narrowed to 6.1 percent of GDP in FY24/25 (projected to narrow to 3.1 percent in FY26/27).
  - REER: EBA assessment suggests 2024 REER overvalued by 6.7 percent (estimate uncertain due to oil-related imports).
  - FX reserves: USD 5.8 bn (3.1 months of imports) by October 2025.
  - BoU purchases: USD 2.2 billion in FY24/25 and over USD 1.3 billion in first quarter FY25/26.
  - Fund recommended reserve range for credit-constrained economies: 3.5–4.5 months of import coverage.
  - Medium-term projection: FX reserves projected to reach close to 4.5 months of imports in FY28/29.
- Staff guidance:
  - Continue reserve buildup while preserving exchange rate flexibility.
  - Limit FX swaps due to rollover and haircut risks.
  - Let exchange rate act as shock absorber; limit FX intervention to disorderly market conditions.
- Domestic gold purchase program:
  - BoU pilot to support foreign reserves buying monetary gold in Ugandan Shillings.
  - Risks: gold price volatility, liquidity constraints, storage security, traceability and KYC failures.
  - Operational safeguards: finalized framework, KYC/traceability mechanism, planned hedging program, use of existing practices for liquidity and storage; need transparent pricing to avoid quasi-fiscal liabilities.

### Financial sector resilience and vulnerabilities
- Banking sector:
  - Asset quality improved to pre-pandemic levels; liquidity and capital buffers strengthened.
  - As of March 2025, government securities represented 30.4 percent of banking-sector assets.
  - Exposures high in some mid-tier banks (sovereign holdings 50–60 percent of assets).
  - Regionally Uganda ranked 4th among SSA countries in banks’ exposure to government in 2024.
  - Stress tests: all banks remain well-capitalized under adverse interest rate shock; more stringent capital requirements will reinforce positions.
- Risks:
  - Sovereign-bank nexus and crowding out of private credit if rising domestic bank financing continues.
  - Operational risks: cyber-attacks and fraud amid growing digital services; cybersecurity guidelines approved December 2024.
  - Liquidity coverage ratio framework increased assumed outflow rate for demand and savings deposits from 10 to 20 percent.
- Staff recommendations:
  - Gradually rebalance banks’ portfolios to reduce sovereign exposure, limit crowding out, and reduce vulnerabilities.
  - Strengthen supervision, risk management, and regulatory frameworks; intensify engagement with FinTechs and strengthen consumer protection.

### Capacity to Repay (CtR) the Fund — status and projections
- Outstanding Fund credit: USD 1,315 million at end FY24/25 (2.1 percent of GDP, 275 percent of quota, and 30.6 percent of gross international reserves).
- Outstanding Fund credit expected to start declining in December 2025.
- Repayments projected to peak in FY29/30 at USD 279 million (1.2 percent of exports and 3.2 percent of GIR).
- In absence of new IMF arrangement, net use of Fund credit expected to turn negative starting FY25/26.
- Under downside scenario, FX reserves could decline to 2.6 months of imports by end-FY25/26 and to 2.3 months by end-FY26/27 before recovering.

### Downside scenario — assumptions, quantification, and impacts (Box 1)
- Assumptions:
  - Oil price one standard deviation increase in FY25/26 and FY26/27; coffee price one standard deviation decrease in FY25/26 and FY26/27.
  - Portfolio outflows increase by one standard deviation.
  - Borrowing costs up 50 basis points in both years.
  - Oil production and exports start one year later than baseline.
- Selected quantified shocks and impacts (mln USD and percent of GDP noted where provided):
  - Oil imports baseline (mln USD): FY24/25 1,631; FY25/26 1,522; FY26/27 1,621. Shock (mln USD): 403 (FY25/26), 365 (FY26/27) — (% of GDP) 0.6, 0.5.
  - Coffee exports baseline (mln USD): FY24/25 2,211; FY25/26 2,077; FY26/27 2,048. Shock (mln USD): 357 (FY25/26), 352 (FY26/27) — (% of GDP) 0.5, 0.5.
  - Portfolio outflows shock (mln USD): 284 (FY25/26), 314 (FY26/27) — (% of GDP) 0.4, 0.4.
- Impact summary:
  - CA deficit could deteriorate by 1.1 percent of GDP in FY25/26 relative to baseline.
  - FX reserves would fall to 2.6 months of imports coverage in FY25/26 (vs 3.1 baseline); FY26/27 FX reserves could drop to USD 4.4 bn covering 2.3 months.
  - Fiscal impact relatively modest: about 1.5 ppt of GDP for overall deficit in FY26/27.
- Quantified macro paths (selected series from Table 2):
  - Real GDP growth (percent): Proj FY24/25 6.3; Current baseline FY25/26 6.2; FY26/27 9.4; Downside FY25/26 6.2; FY26/27 6.0.
  - CPI Inflation (percent): Proj FY24/25 3.5; Baseline FY25/26 3.3; FY26/27 4.5; Downside FY26/27 5.2.
  - Current account (percent of GDP): Proj FY24/25 -6.1; Baseline FY25/26 -4.1; FY26/27 -3.1; Downside FY25/26 -5.2; FY26/27 -6.1.
  - Gross international reserves (US$ billions): Proj FY24/25 4.3; Baseline FY25/26 5.8; FY26/27 7.5; Downside FY25/26 4.8; FY26/27 4.4.
  - Budget Deficit (percent of GDP): Proj FY24/25 6.0; Baseline FY25/26 6.6; FY26/27 5.9; Downside FY26/27 7.4.
  - Public Debt (percent of GDP): Proj FY24/25 52.4; Baseline FY25/26 54.5; FY26/27 54.1; Downside FY26/27 57.2.

### NDP IV — objectives and macro framework (Annex II)
- Coverage: 2025/26-2029/30; first of three 5-year phases to achieve tenfold economic growth via doubling every five years.
- Headline targets:
  - Reduce poverty from 20.3 percent in FY2019/20 to 14 percent in FY2029/30.
  - Attain annual growth of 10.1 percent by FY2029/30.
  - Create about 900,000 jobs annually on average.
- Macroeconomic and fiscal framework targets:
  - Fiscal deficit projected to decline to below 3 percent by FY2029/30.
  - Maintain price stability defined as 5 percent core inflation.
  - Keep debt-to-GDP ratio below 50 percent in present value terms by FY2029/30.
  - Domestic revenue target: 18.3 percent of GDP by FY2029/30.
- Priorities: domestic revenue mobilization, prudent debt management, financial sector development, social protection expansion, value addition in priority sectors, private sector development, financial integrity and governance, public program efficiency, natural resource management.

### Staff appraisal — consolidated policy package (final recommendations)
- Fiscal:
  - Accelerate fiscal consolidation via durable revenue mobilization and rationalization of current spending.
  - DRMS-2 should bring forward tax policy measures including rationalization of tax expenditures and broadening the tax base.
  - Prioritize PFM reforms to enhance budget discipline and limit scope for frequent in-year spending requests.
  - Implement oil revenue frameworks with clear withdrawal rules to safeguard oil revenues and preserve fiscal discipline.
- Monetary:
  - Retain data-driven and forward-looking approach; consider gradual easing to support private credit growth as inflation risks recede.
  - Strengthen monetary policy transmission and promote financial deepening, particularly via FinTech-enabled lending and credit infrastructure improvements.
- Central bank financing:
  - Adhere to repayment schedule and limit BoU advances to statutory limits to fend off fiscal dominance and ensure monetary credibility.
- Exchange rate and reserves:
  - Maintain exchange rate flexibility; continue rebuilding FX reserves sustainably.
  - Pilot gold purchase program can support reserves but must mitigate financial and operational risks.
- Financial sector:
  - Strengthen supervision, risk management, and regulatory framework; closely monitor sovereign-bank linkages and expanding FinTech lending.

*Prepared for the IMF Executive Summary (Uganda) as provided in the source PDF.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Uganda’s post-pandemic economic performance has been robust with broad-based growth, contained inflation, and an improving external position supported by coffee exports and portfolio inflows.
- Foreign exchange (FX) reserves increased significantly in 2025 amid a favorable external environment.
- Fiscal policy space remains constrained, with rising vulnerabilities associated with widening fiscal deficits and a high debt servicing burden.

### Key policy priorities
- Create durable fiscal space through revenue and expenditure reforms.
- Implement a strong framework for oil revenue management.
- Maintain macroeconomic stability amid significant external uncertainties.

- Fiscal policy priorities:
  - Mobilize domestic revenues through tax policy and administrative reforms.
  - Rationalize current expenditures, enforce budgetary discipline, and improve cash flow controls.
  - Streamline tax expenditures and improve budget preparation and execution will require strong political commitment.
  - Adopt and steadfastly implement a prudent oil revenue management framework with clear withdrawal rules ahead of expected oil production starting in late 2026.

- Monetary policy priorities:
  - Maintain a data-driven and forward-looking monetary policy and the current tight policy stance to address risks and anchor inflation expectations.
  - As upside risks to inflation recede, consider a gradual easing to help accelerate private sector credit growth.
  - Enhance monetary policy transmission and financial deepening, including through FinTech-enabled lending.
  - Reduce the government’s reliance on central bank financing to preserve central bank autonomy.

- Exchange rate policy priorities:
  - Continue FX reserve accumulation to reach adequate buffer levels.
  - Closely monitor the BoU’s planned domestic gold purchase program to mitigate risks.
  - Let the exchange rate act as a shock absorber; limit FX intervention to addressing disorderly market conditions.

- Financial sector priorities:
  - Maintain resilience of the banking sector given improved asset quality, robust liquidity buffers, and strengthened capital positions.
  - Gradually rebalance banks’ portfolios to reduce the deepening sovereign-bank nexus, limit crowding out of private credit, and reduce vulnerabilities.

### Recent economic developments (selected indicators and outcomes)
- Real GDP growth in FY24/25 rose to 6.3 percent from 6.1 percent in FY23/24.
- Private sector credit growth remained around 10 percent (year-on-year at the end of FY24/25), below the 2010-19 average of over 16 percent.
- Headline and core inflation averaged 3.7 and 3.9 percent between July and October 2025, respectively; BoU’s medium-term target for core inflation is 5 percent.
- Current account deficit (CAD) narrowed to 6.1 percent of GDP in FY24/25 from 7.8 percent of GDP in FY23/24.
- FX reserves reached USD 5.8 bn (3.1 months of imports coverage) by October 2025.
- Nominal and real effective exchange rates appreciated by a cumulative 2.6 and 3.2 percent, respectively, during January-September 2025.
- The overall budget deficit widened to 6.0 percent of GDP in FY24/25 from 4.7 percent in FY23/24.
- Public debt reached 52.4 percent of GDP in FY24/25.
- FY24/25 fiscal outturn (percent of GDP):
  - Total revenue and grants: 14.7
  - Tax Revenue: 13.0
  - Non-tax Revenue: 1.0
  - Oil Revenue: 0.1
  - Budget and Project Grants: 0.6
  - Expenditures and net lending: 20.7
  - Wages and salaries: 3.5
  - Interest payments: 3.7
  - Other current: 8.0
  - Development spending: 5.2
  - Net lending and other spending: 0.3
  - Overall balance: -6.0
  - External financing (net): 0.5
  - Bank of Uganda financing: 0.4
  - Banks: 1.1
  - Non-banks: 4.2
  - o/w which offshore portfolio flows: 1.4
  - Errors and Omissions: -0.2
  - Memo items: Public debt: 52.4; Interest payments to domestic revenues: 26.2

### Outlook and risks
- Growth outlook:
  - Oil production projected to start in late 2026 and is expected to drive near double-digit growth in FY26/27.
  - Headline and core inflation projected at 3.3 percent on average in FY25/26, gradually converging to the BoU’s 5 percent medium-term target for core inflation.
  - CAD forecast to narrow to 3.1 percent of GDP in FY26/27 and decline further to below 2 percent over the medium term driven by oil sector developments.
  - FX reserves projected to reach 4.4 months of imports coverage in FY28/29.

- Balance of risks tilted to the downside (Annex I):
  - External risks: escalating trade measures, financial market volatility, geopolitical tensions, which could reduce growth, dampen exports, trigger sudden capital outflows, and raise sovereign borrowing costs.
  - Risk of a decline in international aid, straining fiscal resources and support for the vulnerable and refugee population.
  - Domestic risks: erosion of fiscal discipline, higher fiscal deficits and public debt, deterioration in the quality of public spending, crowding out of private credit, increased reliance on monetary financing.
  - Delay risks: delays in oil production due to logistical, legal, or financial setbacks would significantly affect medium-term external and fiscal projections.
  - Political risks: general elections scheduled for January 12 – February 9, 2026 add uncertainty and risk of post-election security and political instability.
  - Upside scenario: prolonged period of low interest rates in advanced countries combined with resumption of World Bank lending could unlock greater financing if accompanied by key reforms.

### Authorities’ views
- Authorities project non-oil sector growth of around 7 percent annually over the medium term; staff projects 6 percent.
- Authorities view lower commodity prices, global supply disruptions, tighter financial conditions, and adverse weather as main downside risks.
- Authorities expect core inflation to remain below the 5 percent target in the near term, marginally above staff’s assessment.
- External sector outlook broadly aligned with staff projections.

### Capacity to Repay
- Uganda’s capacity to repay the Fund is assessed as adequate under the baseline scenario.
- Repayments are expected to peak in FY29/30 and remain below median exposure levels for countries having benefitted from an Extended Credit Facility.
- Risks to capacity to repay: potential portfolio outflows, commodity price shocks, further oil project delays, and governance weaknesses.
- Under an adverse scenario, repayment indicators would weaken, but FX reserves are projected to remain sufficient.

### Policy discussion — Fiscal policy (selected findings and projections)
- FY25/26 budget deficit projected to widen to 6.6 percent of GDP; projections face large uncertainties.
  - Widening driven by higher interest payments (projected to increase by 0.9 ppt of GDP) and allocation for clearance of domestic arrears (0.5 ppt of GDP).
  - Other current spending likely to remain elevated relative to pre-pandemic levels.
  - Public debt projected to rise further to 54.5 percent of GDP.
- Staff projection without significant reforms: overall budget deficit around 5 percent of GDP over the medium term.
  - Revenues projected to increase notably from oil starting in FY26/27; oil production projected to generate average revenues worth 2 percent of GDP annually over the next ten years, with a large share expected to be saved.
  - Tax revenue gains projected to be modest pending finalization and implementation of the Domestic Revenue Mobilization Strategy (DRMS-2) and reluctance to streamline tax expenditures.
  - Authorities have yet to identify measures to reduce other current spending, which increased by some 3 percentage points of GDP relative to pre-pandemic levels.
- Fiscal risks:
  - Potential outflows of portfolio investment and higher borrowing costs; offshore inflows into domestic bond market were around 1½ percent of GDP in FY24/25.
  - Interest payments projected to reach almost a third of domestic revenues this year, doubling in the last decade.
  - High interest burden crowds out social spending as concessional donor funding shrinks.
  - 2024 reform of the public pension system likely to add fiscal costs in the medium term; expected to initially result in additional fiscal costs (yet to be estimated) since the scheme continues to operate as a defined benefit one.

*Prepared for the IMF Executive Summary (Uganda) as provided in the source PDF.*

### 13. Uganda’s public debt remains sustainable, with a moderate risk of debt distress (see

### 13. Uganda’s public debt remains sustainable, with a moderate risk of debt distress

### Debt sustainability assessment and risks
- The DSA shows that external debt burden indicators and total public debt remain below their respective thresholds and benchmarks throughout the projection horizon, except for a one-off breach of the external debt-service-to-revenue ratio in FY25/26-FY26/27.
- Given the small magnitude and temporary nature of the breach, ongoing fiscal consolidation efforts, and limited rollover risks, this does not impact the overall debt sustainability assessment.
- Stress tests reveal breaches of the thresholds, some of which are persistent. Under a median shock, these indicators would breach these thresholds.
- Vulnerabilities from heavy reliance on costly domestic financing have intensified:
  - Domestic debt/GDP and domestic debt service-to-revenue ratios are projected to remain well above the medians in LICs throughout the DSA projection horizon.
- Arrears note:
  - Uganda has arrears to Nigeria (US$11.5 million) and Iraq (US$657), deemed away under the revised arrears policy for official creditors; validity of arrears to Tanzania (US$58 million) is disputed.

### Key fiscal and debt figures (selected projections from Text Table 2 and memo items)
- Total revenue and grants (percent of GDP): 14.7, 14.9, 15.8, 16.0, 16.5, 16.6, 16.9
- Tax Revenue (percent of GDP): 13.0, 13.1, 13.3, 13.2, 13.3, 13.5, 13.6
- Oil Revenue (percent of GDP): 0.1, 0.1, 0.1, 1.2, 1.7, 1.8, 2.1
- Expenditures and net lending (percent of GDP): 20.7, 21.5, 22.8, 21.9, 21.9, 21.6, 21.9
- Interest payments (percent of GDP): 3.7, 4.6, 4.6, 4.5, 4.8, 5.0, 5.1
- Overall balance (percent of GDP): -6.0, -6.6, -7.0, -5.9, -5.4, -5.0, -5.1
- External financing (net) (percent of GDP): 0.5, 1.7, 2.7, 0.9, 0.7, 0.7, 0.6
- Public debt (percent of GDP): 52.4, 54.5, 53.7, 54.1, 54.4, 54.3, 54.3
- Interest payments to domestic revenues (percent): 26.2, 32.0, 30.5, 29.0, 30.0, 30.7, 30.5

### Staff recommendations on fiscal consolidation and PFM
- Objective: bring public debt below 50 percent of GDP as envisaged in the Charter of Fiscal Responsibility.
- Illustrative consolidation package:
  - More forceful tax revenue mobilization: an additional 0.3 percentage points of GDP.
  - Reduction in current spending to pre-pandemic levels: an additional 1.6 percentage points of GDP.
  - Combined effect: additional cumulative fiscal consolidation of around 2 percentage points of GDP in the primary balance by FY29/30 relative to the baseline, bringing public debt to 48 percent of GDP.
  - This would allow for a positive primary balance by FY27/28 (as opposed to FY30/31 under the baseline) and reduce the interest payments to domestic revenue ratio by some 5 percentage points over the medium term.
- Reinvigorate implementation of DRMS-2:
  - DRMS-2 target: increase revenues to 18.3 percent of GDP by FY29/30, with about three quarters of the gains from administrative reforms and the remainder from backloaded tax policy measures.
  - Staff view this target as "rather ambitious" given weak performance under the previous DRMS and without stronger political commitment.
  - Tax policy priorities recommended by staff:
    - Apply VAT to fuel products (with offsetting reductions in excises expected to produce net revenue gains).
    - Narrow the list of raw foodstuffs exempted from the VAT.
    - Eliminate tax holidays in favor of expenditure-based incentives.
    - Properly cost existing tax expenditures using methodologies recommended by recent FAD capacity development missions.
- Reduce current spending and improve composition:
  - Recurrent spending increased by some 3 percentage points of GDP since the pandemic, notably in provision of goods and services and grants.
  - Staff welcomed authorities’ request for IMF/WB TA for a social spending diagnostic to identify reasons for chronic under-execution and improve health, education, and social assistance spending.
- Public Finance Management (PFM) reforms to improve budget preparation, execution, and discipline:
  - Strengthen annual budgetary process by taking measures to:
    - Enforce the overall spending limit during bottom-up budget preparation.
    - Enhance the process and criteria for managing the supplementary budget process in the PFM legal framework within the bounds of the Constitution.
    - Improve revenue and expenditure forecasting.
    - Undertake an annual assessment and rationalization of the public investment plan.

### Oil revenue framework
- Current framework:
  - The Charter of Fiscal Responsibility caps oil revenue transfers for government use at 0.8 percent of the previous year’s estimated non-oil GDP; the remainder is intended for the Petroleum Revenue Investment Reserve (PRIR) under the PFM Act, 2015.
- Staff recommendations:
  - Establish clear withdrawal rules for oil savings/use.
  - Any future recalibration of the cap for transfer of oil revenues to the budget in the upcoming FY26/27–FY30/31 CFR should be anchored to safeguard oil revenues and prudent use.

### Authorities’ stated intentions and views
- Authorities acknowledged the need for fiscal adjustment and intend to proceed with budgetary consolidation via revenue mobilization and curtailing recurrent spending.
- They expect recurrent spending to decline as a share of GDP and aim to reduce dependence on domestic borrowing gradually through fiscal consolidation, stronger engagement with multilateral partners, and exploring non-debt-creating financing such as Public Private Partnerships.
- On PFM reforms, authorities prioritize strengthening technical aspects (baseline forecasting, multi-year budgeting, enhanced monitoring by MoFPED) over legislative changes to the PFM Act.
- On oil management, authorities are reviewing the framework while not envisioning changes at this stage.

### Monetary policy, financial deepening, and central bank–government links
- Monetary stance and targets:
  - The BoU’s monetary policy is appropriately tight given upside risks to inflation.
  - The real policy rate is currently around 7 percent, above the estimated neutral rate of 4.5 percent.
  - Monetary policy stance is expected to shift to neutral as inflation converges towards the BoU’s 5 percent medium-term target for core inflation.
- Structural issues and transmission:
  - The credit channel remains weak; empirical evidence suggests the policy rate has little short-run impact on lending rates.
  - Elevated domestic borrowing by the government limits passthrough from the policy rate to lending rates.
- Measures to support financial deepening:
  - Operationalization of a BoU platform enabling government securities purchases via mobile money.
  - Introduction of FX swaps, extending tenor of BoU Bills, exploring green bonds, diaspora bonds, and sukuk.
  - Operationalizing legal frameworks for close-out-netting under standard global contracts.
  - Regulated financial institutions required to use the Credit Reference Bureau to share and verify borrowers’ credit histories.
  - Use of digital platforms via partnerships among licensed financial institutions, FinTechs, and mobile network operators.
- Risks from BoU financing of the government:
  - BoU’s claims on the government now stand at around 40 percent of total assets.
  - To address direct financing, authorities amended PFM Act regulations to adopt a comprehensive definition of BoU advances—including redemption of government securities—a prior action under the fifth review of the 2021–24 ECF.
  - Authorities securitized the outstanding stock of advances in October 2024 under a 10-year amortization schedule; principal repayment for FY25/26 under the revised schedule has been made, and by end-August 2025 the government had cleared all BoU advances that were due at the end of FY24/25.
- Staff recommendations to strengthen transmission and safeguard BoU autonomy:
  - Gradual easing of monetary policy as upside risks to inflation recede, accompanying fiscal consolidation and measures to strengthen transmission; BoU should be ready to adjust policy if inflation deviates from the 5 percent target.
  - Sustain efforts to enhance banks’ operational efficiency and strengthen credit infrastructure; mobilize long-term savings; intensify financial and digital literacy; develop capital markets.
  - Step up engagement with FinTechs, provide clearer licensing guidance, stronger market outreach, and strengthen consumer protection frameworks.
  - Adhere to the repayment schedule agreed between MoFPED and BoU and comply with PFM Act regulation on BoU advances; continue to address recommendations from the 2021 Safeguards Assessment.

*Source: Ugandan authorities and IMF staff calculations.*

### 23. Uganda’s external position in 2024 is assessed to be moderately weaker than the level

### Uganda’s external position in 2024 is assessed to be moderately weaker than the level implied by fundamentals and desired policies

### External position and real exchange rate
- 2024 EBA assessment based on the current account model suggests that the REER was overvalued by 6.7 percent.  
- Estimate subject to considerable uncertainties due to volatile imports related to the oil project.7
- Export market shares in key destinations have increased, supported by favorable terms of trade developments.
- Notable diversification in non-commodity goods exports in recent years; further gains would follow from lowering non-tariff barriers and improvement in trade logistics.

### FX reserves developments and outlook
- BoU purchases: USD 2.2 billion in FY24/25 and over USD 1.3 billion in the first quarter of FY25/26.
- FX reserves level: USD 5.8 billion or 3.1 months of imports as of October 2025.
- Fund’s recommended target range for credit-constrained economies: 3.5–4.5 months of import coverage.
- Medium-term projection: FX reserves coverage projected to reach close to 4.5 months of imports benefiting from improving current account even as FDI slows due to completion of the oil project.

### Staff advice on reserve buildup and FX instruments
- Staff supported authorities’ intention to further build up FX reserves while preserving exchange rate flexibility.
- Cautioned against expanding FX swap arrangements due to rollover risks and potential for large haircuts, limiting their desirability.8
- Continued build-up of FX reserves is key to reach at least 3.5 months of imports in the near term.
- Maintain two-way exchange rate flexibility to absorb external shocks and retain competitiveness.
- FX market intervention should be limited to addressing disorderly market conditions given institutional, policy, and communication constraints and market development considerations.9

### Domestic gold purchase program safeguards
- BoU launched a domestic gold purchase program on a pilot basis to support foreign reserves with monetary gold bought in Ugandan Shillings (Box 4).
- Risks to mitigate: gold price volatility, liquidity constraints, storage security, traceability and Know Your Customer (KYC) failures.
- Operational and risk-mitigation measures noted:
  - Authorities finalized the operational framework of the program and developed a mechanism to mitigate traceability and KYC risks.
  - Plan to use appropriate hedging program to manage price volatility.
  - Use existing practices to guard against liquidity constraints and storage security risks.
- Transparent pricing framework needed to ensure cost recovery without creating quasi-fiscal liabilities.

### Authorities’ views on reserves, swaps, and gold program
- Authorities agreed with staff’s assessment and policy recommendations but saw limited risks from the gold purchase program and FX swap arrangements.
- Remain open to additional FX swap arrangements as a hedge against heightened uncertainty, provided associated costs are low; intend to let existing swaps expire once adequate FX reserve buffers are built.
- Reaffirmed commitment to exchange rate flexibility and limited FX interventions.
- Emphasized the phased three-year pilot of the gold program to test safeguards before scaling up.

### Financial sector: resilience and vulnerabilities
- Banking sector broadly resilient; asset quality has improved to pre-pandemic levels; liquidity and capital buffers have strengthened (Table 5).
- Deposit concentration not systemic but requires monitoring for a few smaller credit institutions with concentrated corporate deposits.
- Authorities implemented enhanced macroprudential measures and upgraded Liquidity Regulations.
- Operational risks persist, notably from cyber-attacks and fraud amid growing digital services use; cybersecurity guidelines approved in December 2024.
- Liquidity coverage ratio framework: assumed outflow rate for demand and savings deposits increased from 10 to 20 percent to reflect higher plausibility of large deposit withdrawals.10

### Sovereign-bank nexus and credit crowding risks
- As of March 2025, government securities represented 30.4 percent of banking-sector assets.
- Exposures particularly high among a few mid-tier banks, where sovereign holdings reach 50–60 percent of their assets.
- Regionally, Uganda ranked 4th among SSA countries in terms of banks’ exposure to government in 2024.
- Recent stress test: all banks remain well-capitalized under an adverse interest rate shock; more stringent capital requirements will reinforce positions.12
- Rising domestic bank financing of government deficit, if continued, is likely to crowd out private sector credit.

### Authorities’ views on financial sector risks and policy actions
- Authorities agreed sovereign-bank nexus is not an immediate financial stability risk; bank exposure to government has stabilized over the last four years.
- Expect oil production to reduce reliance on domestic financing and ease government borrowing pressures.
- For small credit institutions facing corporate deposit concentration, BoU has taken actions to strengthen liquidity buffers and is exploring structured programs or alternative equity facilities.

### Capacity to Repay (CtR) the Fund
- Outstanding Fund credit: USD 1,315 million at end FY24/25 (2.1 percent of GDP, 275 percent of quota, and 30.6 percent of gross international reserves).
- Outstanding Fund credit expected to start declining in December 2025.
- Repayments projected to peak in FY29/30 at USD 279 million (1.2 percent of exports and 3.2 percent of GIR).
- In absence of a new IMF arrangement, net use of Fund credit expected to turn negative starting FY25/26.
- Under downside scenario, FX reserves projected to decline to 2.6 months of imports by end-FY25/26, and further to 2.3 months by end-FY26/27, before recovering as shocks subside and oil production commences with an additional delay.
- Even under severe scenario, outstanding obligations to the Fund would constitute at most 3.6 percent of the GIR in FY26/27; outstanding credit would be 25 percent of reserves at that time, dropping to 17 percent the next year.

### Downside scenario: assumptions and impacts (Box 1)
- Assumptions:
  - One standard deviation increase to oil price in FY25/26 and FY26/27 relative to baseline.
  - Coffee price decreases by one standard deviation in FY25/26 and FY26/27.
  - Portfolio outflows increase by one standard deviation.
  - Borrowing costs raised by 50 basis points in both years due to higher sovereign and corporate premiums.
  - Oil production and exports assumed to start one year later compared to the baseline.
- Quantified shocks (Box1. Table 1 highlights):
  - Oil imports: Baseline values (mln USD) FY24/25 1,631; FY25/26 1,522; FY26/27 1,621. Shock (mln USD) 403 (FY25/26), 365 (FY26/27) — (% of GDP) 0.6, 0.5.
  - Coffee exports: Baseline values (mln USD) FY24/25 2,211; FY25/26 2,077; FY26/27 2,048. Shock (mln USD) 357 (FY25/26), 352 (FY26/27) — (% of GDP) 0.5, 0.5.
  - Portfolio outflows (net): Baseline values (mln USD) FY24/25 -610; FY25/26 -807; FY26/27 116. Shock (mln USD) 284 (FY25/26), 314 (FY26/27) — (% of GDP) 0.4, 0.4.
  - Sovereign premiums shock: 50 basis points in FY25/26 and FY26/27.
  - Oil exports delay: Baseline oil exports (mln USD) FY24/25 0; FY25/26 0; FY26/27 3,526. Oil profit repatriation baseline FY26/27 1,306; PRIR outflows baseline FY26/27 424.
- Impact summary:
  - CA deficit could deteriorate by 1.1 percent of GDP in FY25/26 relative to baseline due to higher oil imports and lower coffee exports.
  - Financial account would deteriorate by 0.4 percentage points of GDP in FY25/26 driven by portfolio outflows.
  - FX reserves would fall to 2.6 months of imports coverage in FY25/26 (compared to 3.1 in baseline), with about 40 percent of the decline reflecting delay in oil projects.
  - In FY26/27, FX reserves could drop to USD 4.4 bn covering 2.3 months of imports.
  - Fiscal impact relatively modest (about 1.5 ppt of GDP for the overall deficit in FY26/27) due to delayed effect of higher financing costs and offsetting lower development spending and delayed transfers to the sovereign wealth fund.

### Staff appraisal and policy recommendations
- Macro performance: Real GDP growth accelerated to 6.3 percent in FY2024/25; inflation remained contained; current account deficit narrowed; FX reserves increased; investor sentiment improved.
- Risks: Fiscal vulnerabilities rising due to elevated overall deficits and a high debt servicing burden; risks from domestic financing pressures and weaknesses in budgetary process.
- Staff assesses CtR as adequate under baseline and downside scenarios; repayment indicators under baseline remain below median thresholds for ECF countries.
- Recommended policy package:
  - Fiscal: Accelerate fiscal consolidation through durable revenue mobilization and rationalization of current spending; DRMS-2 should bring forward tax policy measures including rationalization of tax expenditures and strengthening and broadening the tax base; prioritize PFM reforms to enhance budget discipline and limit scope for accommodating frequent in-year spending requests; implement adopted oil revenue frameworks to safeguard oil revenues and preserve fiscal discipline.
  - Monetary: Retain data-driven and forward-looking approach; as inflation risks recede, gradual easing could support private sector credit growth; strengthen monetary policy transmission and promote financial deepening, particularly through FinTech-enabled lending and improvements in credit infrastructure.
  - Central bank financing: Adhere to agreed repayment schedule and limit BoU advances to limits stipulated under the PFM Act to fend off risks of fiscal dominance and ensure monetary policy credibility.
  - Exchange rate and reserves: Maintain exchange rate flexibility to absorb shocks; continue rebuilding FX reserves sustainably; pilot gold purchase program can support reserves but must be carefully managed to mitigate financial and operational risks.
  - Financial sector: Strengthen supervision, risk management, and regulatory framework, especially given expanding FinTech lending; closely monitor sovereign-bank linkages.

*International Monetary Fund — Uganda: Selected chapter on external position, reserves, financial sector stability, capacity to repay, and policy recommendations.*

### Box 1. Illustrative Impact of a Downside Scenario for Uganda (concluded)

### Box 1. Illustrative Impact of a Downside Scenario for Uganda (concluded)

### Quantification of Downside Scenario (Box 1. Table 2)
- Real GDP growth:
  - Proj FY24/25: 6.3
  - Current baseline scenario FY25/26: 6.2
  - Current baseline scenario FY26/27: 9.4
  - Current baseline scenario FY27/28: 6.9
  - Downside scenario FY25/26: 6.2
  - Downside scenario FY26/27: 6.0
  - Downside scenario FY27/28: 9.2

- CPI Inflation:
  - Proj FY24/25: 3.5
  - Current baseline scenario FY25/26: 3.3
  - Current baseline scenario FY26/27: 4.5
  - Current baseline scenario FY27/28: 4.9
  - Downside scenario FY25/26: 3.4
  - Downside scenario FY26/27: 5.2
  - Downside scenario FY27/28: 4.9

- Current account (percent of GDP):
  - Proj FY24/25: -6.1
  - Current baseline scenario FY25/26: -4.1
  - Current baseline scenario FY26/27: -3.1
  - Current baseline scenario FY27/28: -2.7
  - Downside scenario FY25/26: -5.2
  - Downside scenario FY26/27: -6.1
  - Downside scenario FY27/28: -2.9

  - of which: oil imports
    - Proj FY24/25: -2.6
    - Current baseline scenario FY25/26: -2.2
    - Current baseline scenario FY26/27: -2.1
    - Current baseline scenario FY27/28: -2.1
    - Downside scenario FY25/26: -2.8
    - Downside scenario FY26/27: -2.7
    - Downside scenario FY27/28: -2.1

  - of which: coffee exports
    - Proj FY24/25: 3.6
    - Current baseline scenario FY25/26: 3.0
    - Current baseline scenario FY26/27: 2.7
    - Current baseline scenario FY27/28: 2.5
    - Downside scenario FY25/26: 2.5
    - Downside scenario FY26/27: 2.3
    - Downside scenario FY27/28: 2.6

  - of which: oil exports
    - Proj FY24/25: 0.0
    - Current baseline scenario FY25/26: 0.0
    - Current baseline scenario FY26/27: 4.6
    - Current baseline scenario FY27/28: 5.8
    - Downside scenario FY25/26: 0.0
    - Downside scenario FY26/27: 0.0
    - Downside scenario FY27/28: 4.4

  - of which: oil-export profit repatriation
    - Proj FY24/25: 0.0
    - Current baseline scenario FY25/26: 0.0
    - Current baseline scenario FY26/27: 1.7
    - Current baseline scenario FY27/28: 2.4
    - Downside scenario FY25/26: 0.0
    - Downside scenario FY26/27: 0.0
    - Downside scenario FY27/28: 1.6

- Financial and capital account balance:
  - Proj FY24/25: -6.7
  - Current baseline scenario FY25/26: -5.8
  - Current baseline scenario FY26/27: -4.6
  - Current baseline scenario FY27/28: -2.8
  - Downside scenario FY25/26: -5.4
  - Downside scenario FY26/27: -4.9
  - Downside scenario FY27/28: -3.5

  - of which: Portfolio investment (net) (excl PRIR)
    - Proj FY24/25: -1.0
    - Current baseline scenario FY25/26: -1.2
    - Current baseline scenario FY26/27: -0.4
    - Current baseline scenario FY27/28: -0.3
    - Downside scenario FY25/26: -0.8
    - Downside scenario FY26/27: -0.1
    - Downside scenario FY27/28: -0.4

  - of which: PRIR
    - Proj FY24/25: 0.0
    - Current baseline scenario FY25/26: 0.0
    - Current baseline scenario FY26/27: 0.6
    - Current baseline scenario FY27/28: 1.0
    - Downside scenario FY25/26: 0.0
    - Downside scenario FY26/27: 0.0
    - Downside scenario FY27/28: 0.4

- Gross international reserves:
  - In US$ Billions:
    - Proj FY24/25: 4.3
    - Current baseline scenario FY25/26: 5.8
    - Current baseline scenario FY26/27: 7.5
    - Current baseline scenario FY27/28: 8.0
    - Downside scenario FY25/26: 4.8
    - Downside scenario FY26/27: 4.4
    - Downside scenario FY27/28: 5.3

  - In months of next year's imports of goods and services:
    - Proj FY24/25: 2.7
    - Current baseline scenario FY25/26: 3.1
    - Current baseline scenario FY26/27: 3.8
    - Current baseline scenario FY27/28: 4.2
    - Downside scenario FY25/26: 2.6
    - Downside scenario FY26/27: 2.3
    - Downside scenario FY27/28: 2.8

- Budget Deficit (percent of GDP):
  - Proj FY24/25: 6.0
  - Current baseline scenario FY25/26: 6.6
  - Current baseline scenario FY26/27: 5.9
  - Current baseline scenario FY27/28: 5.4
  - Downside scenario FY25/26: 6.6
  - Downside scenario FY26/27: 7.4
  - Downside scenario FY27/28: 6.3

- Public Debt (percent of GDP):
  - Proj FY24/25: 52.4
  - Current baseline scenario FY25/26: 54.5
  - Current baseline scenario FY26/27: 54.1
  - Current baseline scenario FY27/28: 54.3
  - Downside scenario FY25/26: 54.7
  - Downside scenario FY26/27: 57.2
  - Downside scenario FY27/28: 57.1

### Key messages and implications from the box
- The downside scenario entails:
  - Wider current account deficits in FY25/26 and FY26/27 relative to the baseline (e.g., current account at -5.2 and -6.1 in the downside versus -4.1 and -3.1 in the baseline).
  - Lower gross international reserves in the near term under the downside (e.g., US$ 4.8 billion and US$ 4.4 billion in FY25/26 and FY26/27 in the downside versus US$ 5.8 billion and US$ 7.5 billion in the baseline).
  - Higher budget deficits and public debt ratios in FY26/27 under the downside (Budget Deficit 7.4 percent of GDP and Public Debt 57.2 percent of GDP in FY26/27).

*Source: IMF staff estimates.*

### Annex II. The Uganda National Development Plan (NDP IV)

### Annex II. The Uganda National Development Plan (NDP IV)

### NDP IV objectives and headline targets
- NDP IV covers 2025/26-2029/30 and is the fourth of six plans; it is the first of three 5-year phases to achieve a tenfold economic growth strategy by doubling the economy every five years.
- Primary goals:
  - Increase household incomes, fully monetize the economy, and create jobs to ensure sustainable socio-economic transformation.
  - Reduce poverty from 20.3 percent in FY2019/20 to 14 percent in FY2029/30.
  - Attain annual growth of 10.1 percent by FY2029/30.
  - Create about 900,000 jobs annually on average.
- Sectoral focus: sustainable industrialization, value addition in manufacturing, agriculture, tourism, mineral-based industries, ICT, and finance; emphasis on competitiveness and adoption of science, technology, and innovation (STI).

### Macroeconomic and fiscal framework (NDP IV priorities)
- Macroeconomic stability:
  - Fiscal deficit projected to decline to below 3 percent by FY2029/30 (aligned with EAC Convergence criteria and domestic fiscal rules).
  - Maintain price stability defined as 5 percent core inflation.
  - Keep debt-to-GDP ratio below 50 percent in present value terms by FY2029/30.
- Domestic revenue mobilization:
  - Target revenue-to-GDP ratio of 18.3 percent by FY2029/30.
  - Measures include targeting commercial agriculture, mining, informal economy; boosting digital tax technologies; enhancing Uganda Revenue Authority capacity; introducing performance-based tax incentives.
- Prudent debt management:
  - Diversify funding sources; prioritize concessional loans for key public investments; consider semi-concessional and non-concessional loans when necessary.
  - Minimize domestic borrowing to avoid crowding out private investment; deepen domestic financial markets for long-term financing.
  - Enhance revenue from state-owned enterprises, oil, gas, and minerals; develop the pension sector; explore green bonds and infrastructure bonds.
- Financial sector development:
  - Increase access to long-term finance and affordability of financial services; strengthen regulatory frameworks; enhance financial inclusion.
  - Capitalize public banks and financial institutions to provide low-interest loans for youth, women, and startups.
  - Implement financial literacy programs; integrate ESG criteria; promote movable property as security for MSME borrowing; develop a micro-pension scheme for the informal sector; establish consumer protection measures.
  - Encourage technology use: credit information systems and digital platforms.
- Social protection:
  - Expand safety nets to tackle vulnerability from income loss, natural disasters, and illnesses.
  - Integrate affirmative action into regional programs and scale up access to the Senior Citizens Grant (SAGE).
- Value addition in priority sectors:
  - Agriculture: enhance post-harvest handling, storage, and agro-processing facilities.
  - Tourism: improve accommodation standards and tourism infrastructure.
  - Minerals: establish more beneficiation centers.
  - Oil & gas: invest in oil refinery, East African Crude Oil Pipeline (EACOP), and petrochemical industry.
  - Use Public-Private Partnerships (PPPs) to drive value addition.
- Private sector development:
  - Establish modern packaging industries; support MSMEs with certification; decentralize standards and testing; promote free zones, logistical centers, and trade facilitation; advance digitalization through one-stop business registration centers and e-commerce platforms.
  - Strengthen capacity for local contractors; support SMEs via business development services and incubation centers; improve coordination across MDAs; enforce gender-equal market access policies and address anti-trade practices.
- Financial integrity and governance:
  - Enhance transparency, accountability, AML/CFT systems; enforce AML/CFT laws; strengthen international cooperation; run public awareness campaigns; implement anti-corruption measures using technology and strengthened whistleblower protections.
  - Improve monitoring mechanisms for government programs; mainstream TAAC in all MDA plans, projects, and budgets; establish an asset recovery framework.
- Public program efficiency and accountability:
  - Streamline government structures, deepen decentralization and citizen participation, enhance procurement by eliminating intermediaries and setting standardized government price lists.
  - Implement results-based performance management, digitize government services, develop and enforce service delivery standards, implement a national cashless payment system, and use community management information systems.
- Natural resource management:
  - Restore, conserve, and strengthen sustainable management of land, forests, water, and wetlands to contribute to climate change mitigation.

*Prepared by the staff of the International Monetary Fund (IMF) and the International Development Association (IDA). December 18, 2025.*

---

### Annex III. External Sector Assessment

### Overall assessment and near-term outlook
- Overall: Preliminary staff estimates suggest Uganda’s external position in 2024 was moderately weaker than implied by fundamentals and desirable policies.
- CY2024 current account (CA) deficit: -7.5 percent of GDP (elevated due to oil project-related imports).
- CY2025 CA projection: -5.2 percent of GDP (improvement driven by high coffee prices).
- Medium run: CA expected to improve further supported by oil production and export.
- Shilling: appreciated slightly supported by favorable terms of trade and portfolio inflows.
- Gross international reserves: increased significantly in 2025 but remain slightly below target levels.

### Foreign assets and liabilities — position and trajectory
- CY2024 NIIP: -56.5 percent of GDP (deterioration by 1.1 percent of GDP in CY2024).
- 2024 NIIP components (In percent of GDP):
  - NIIP: -56.5
  - Gross Assets: 16.1
  - Debt Assets: 8.6
  - Gross Liabilities: 72.7
  - Debt Liabilities: 37.1
- Composition notes:
  - Reserves held by the BoU share declined from 80 percent in early 2000 to 36 percent in 2024.
  - Majority of external liabilities: FDI (49 percent) and government external loans (39 percent).
  - Foreign portfolio holdings limited at about 2 percent.
- Assessment:
  - The sizeable negative NIIP warrants monitoring but is not an immediate sustainability concern.
  - CA deficit improvements once oil production starts should help stabilize the NIIP.
  - Debt Sustainability Analysis suggests a moderate risk of debt distress, reflecting a high share of concessional debt.

### Current account detail and model estimates
- CY2024 CA: -7.5 percent of GDP (up from -7.0 percent in CY2023).
  - Oil-project-related imports estimated at 3.6 percent of GDP in CY2024.
- Model adjustments and estimates (Table A3.1, In percent of GDP):
  - CA-Actual: -7.5
  - Cyclical contributions (from model) (-): 0.5
  - Additional temporary/statistical factors (-): -3.5
  - Natural disasters and conflicts (-): 0.0
  - Adjusted CA: -4.5
  - CA Norm (from model): -3.6
  - Adjusted CA Norm: -3.6
  - CA Gap: -0.9
  - REER Gap (in percent): 6.7
  - Elasticity: -0.1
  - REER model gap: 0.6
- Note: Additional adjustment accounts for temporary impact of large one-off oil-project related imports, estimated at 3.2 percent of GDP in FY23/24 and 4.1 percent of GDP in FY24/25 subtracting medium-term maintenance costs.
- Staff assessment: external position moderately weaker due to limited FX reserves buffers, fiscal imbalances, and uncertainties regarding oil production and exports.

### Real exchange rate (REER)
- 2024 REER: appreciated by 5.1% y-o-y.
- January–September 2025 REER: appreciated by 3.2% supported by strong portfolio flows.
- Model implication: EBA-lite CA model implies a REER overvaluation gap of 6.7 percent in 2024; EBA-lite REER model suggests REER broadly in line with model-implied level.
- Policy note: REER gap does not automatically indicate need for exchange rate adjustment given expected medium-run improvement from oil exports.

### Capital and financial accounts; financing
- CY2024 financing:
  - CA mainly financed by net FDI inflows estimated at 5.9 percent of GDP.
- CY2025 flows:
  - Net portfolio inflows increased significantly in CY2025, exceeding 1.0 percent of GDP in the first half of the year.
- Assessment:
  - Financial account anchored by strong FDI inflows (continuing near term due to oil project-related inflows).
  - Portfolio inflows likely to slow; other investment inflows expected to increase near term based on government borrowing plans.

### FX intervention and reserves level
- FX reserves:
  - November 2025: USD 5.7 bn (3.1 months of next year’s imports).
  - June 2024: USD 3.2 billion.
  - June 2025: USD 4.3 billion.
- BoU FX purchases and operations:
  - No FX market intervention since June 2022; BoU regularly purchases FX to rebuild reserves.
  - BoU purchased over USD 2.2 billion in FX reserves during FY24/25.
  - BoU purchased over USD 1.3 billion in the first quarter of FY25/26.
  - June–October 2025: BoU signed four cross-currency repo agreements totaling approximately USD 355 million (aimed at replacing USD 400 million in maturing swaps over next six months).
- Assessment and guidance:
  - BoU should continue to pursue exchange rate flexibility and limit foreign exchange sales to extreme market distress.
  - IMF reserve adequacy metric for credit-constrained economies indicates adequate reserves between 3.5 and 4.5 months of imports.
  - BoU should continue building FX reserves to reach target levels.

*Potential policy responses: Allow exchange rate flexibility to cushion external shocks and reduce external imbalances; maintain adequate reserves to anchor investor confidence; pursue policies to preserve fiscal and debt sustainability; improve export diversification to enhance external competitiveness.*

---

### Post-Financing Assessment — Debt Sustainability Analysis (DSA)

### Risk assessments and summary judgments
- Risk of external debt distress: Moderate.
- Overall risk of debt distress: Moderate.
- Granularity in risk rating: Limited space to absorb shocks.
- Application of judgment: Yes; short-lived breach of threshold.
- Conclusion: Uganda’s public debt continues to be assessed as sustainable with a moderate risk of external and overall public debt distress (application of judgement).

### DSA findings and vulnerabilities
- Most external PPG debt and total public debt burden trajectories remain below indicative thresholds and benchmarks over the medium term under the baseline.
- Two-year breach in external debt-service-to-revenue indicator is minor and short-lived.
- Stress tests show breaches of external debt burden thresholds and public debt benchmark under shocks.
- Key vulnerabilities and risks:
  - Continued high dependence on domestic financing.
  - Slower growth, environmental shocks, tight global financial conditions.
  - Delayed reform implementation, delays in oil exports.
  - Adverse impacts from escalating global trade measures and prolonged uncertainty.
  - Donor financing cuts.
- Uganda’s Composite Indicator: 2.855, signaling a medium debt-carrying capacity (based on October 2025 WEO and CPIA 2024).

### Public debt coverage and contingent liability parameters
- Public and publicly guaranteed (PPG) debt coverage includes central government, state and local government, social security fund, and central bank.
- Data limitations: debt data does not cover extra-budgetary units (EBUs) and debt issued by SOEs.
- Contingent liability stress test components and parameters (in percent of GDP):
  - Other elements of the general government not captured: 0.1
  - SoE's debt (guaranteed and not guaranteed by the government): 1.2
  - PPP (35 percent of PPP stock): 1.7
  - Financial market shock (minimum starting value): 5 percent of GDP
  - Total (in percent of GDP): 8.0
- Notes:
  - The total end-June 2025 debt of public entities, including SOEs and EBUs, was UGX 2,367 bn or 1.2 percent of GDP; three quarters owed by Uganda Electricity Distribution Company (UGX 1,789 bn). Other significant SOE debt: Uganda Development Bank (UGX 213 bn), National Water and Sewerage Corporation (UGX 157 bn), Housing Finance Bank (UGX 88 bn).
  - Disputed arrears to Tanzania: US$58 million (0.1 percent of GDP) are included in contingent liability stress test; their validity is disputed and not included in officially reported total external debt.

*Approved By Papa N’Diaye (IMF), Jay Peiris (IMF), Manuela Francisco (IDA), and Hassan Zaman (IDA). Prepared by the staff of the International Monetary Fund (IMF) and the International Development Association (IDA). December 18, 2025.*

*Source: 1ugaea2026001-source-pdf - Annex II. The Uganda National Development Plan (NDP IV).*

### 2.      The Fund technical assistance has focused on the transition to the Government Finance

### 2. The Fund technical assistance has focused on the transition to the Government Finance Statistics Manual 2014

### Background and recent developments
- The Fund technical assistance has focused on the transition to the Government Finance Statistics Manual 2014, including assisting Ministry of Finance with incorporation of advances (overdraft) issued by the Bank of Uganda (BoU) in the recent years into the historical debt figures to provide an accurate representation and ensure consistency of flows with stocks.
- The public debt ratio reached 52.4 percent of GDP in FY24/25.
- The increase of almost 2 percentage points of GDP follows three years of minor increases (0.2 ppt of GDP a year) and puts the overall level above the limit of 51.2 percent of GDP stipulated by the FY20/21-FY25/26 Charter of Fiscal Responsibility.
- The authorities report a lower number of 51.0 percent of GDP for the public debt in FY2024/25 as they exclude the BoU advances (0.8 percent of GDP) and use the cost, not nominal, valuation of the outstanding treasury paper (a difference of 0.5 percent of GDP).
- In present-value terms, total public sector debt stood at 46.8 percent of GDP, below the East African Community’s debt target of 50 percent of GDP.
- Note: domestic arrears (yet to be assessed and verified) were 1.4 percent of GDP in FY23/24.

### Debt composition and creditor structure
- Total public debt (FY24/25, in millions of US$): 33,218 (100.0 percent of total; 52.4 percent of GDP).
- External public debt (FY24/25): US$17,301 (52.1 percent of total; 27.3 percent of GDP).
- Domestic public debt (FY24/25): US$15,917 (47.9 percent of total; 25.1 percent of GDP).
- External debt nominal and domestic nominal:
  - External debt nominal: US$17.3 billion.
  - Domestic debt nominal: US$15.9 billion.
- Present-value and concessionality:
  - Highly concessional loans from the International Development Association (IDA) and the African Development Fund (ADF) account for 40 percent of the external debt portfolio.
  - Other concessional creditors include IFAD, BADEA, OPEC fund, and some bilateral Paris and non-Paris club creditors.
  - Since the COVID-19 pandemic, commercial loans now constitute around 10 percent of external public debt (mostly owed to SBSA, African Export–Import Bank, Standard Chartered, and TDB).
  - Stock of local-currency government securities held by offshore investors was 10 percent of external public debt.
- Selected creditor breakdowns (FY24/25, external debt amounts in millions of US$; shares reported in table):
  - Multilateral creditors total: 10,272 (30.9 percent of total; 16.2 percent of GDP).
    - IMF: 1,609 (4.8 percent of total; 2.5 percent of GDP).
    - World Bank: 5,302 (16.0 percent of total; 8.4 percent of GDP).
    - ADB/AfDB/IADB: 1,118 (3.4 percent of total; 1.8 percent of GDP).
    - Other Multilaterals (o/w: ADF): 2,244 (6.8 percent of total; 3.5 percent of GDP) with ADF = 1,698 (5.1 percent of total; 2.7 percent of GDP).
  - Bilateral creditors total: 3,522 (10.6 percent of total; 5.6 percent of GDP).
    - Paris Club: 1,046 (3.1 percent of total; 1.7 percent of GDP).
    - Non-Paris Club: 2,476 (7.5 percent of total; 3.9 percent of GDP) (o/w: Eximbank of China = 2,341; 7.0 percent of total; 3.7 percent of GDP).
  - Commercial creditors: 1,750 (5.3 percent of total; 2.8 percent of GDP).
  - Public guarantees: 44.6 (0.1 percent of total).
  - Local currency debt held by non-residents: 1,712 (5.2 percent of total; 2.7 percent of GDP).
- Nominal GDP (used in table): FY24/25 = 61,833; FY25/26 = 68,792; FY26/27 = 76,139.

### Public domestic debt, holdings, and BoU advances
- Public domestic debt (residency based) is dominated by medium-to long-term securities.
- T-bonds constituted more than 80 percent of total domestic debt securities at the end of FY24/25.
- Holdings of government debt (percent, as of June 30, 2025):
  - Pension and Provident Funds: T-bills 6.3, T-bonds 35.7, Both 31.5.
  - Commercial Banks: T-bills 80.2, T-bonds 19.9, Both 28.6.
  - Bank of Uganda: T-bills 0.0, T-bonds 18.0, Both 15.4.
  - Offshores: T-bills 2.0, T-bonds 11.3, Both 10.0.
  - Other Financial Institutions: T-bills 7.1, T-bonds 7.0, Both 7.0.
  - Retail Investors: T-bills 1.9, T-bonds 6.3, Both 5.7.
  - Insurance Companies and Deposit Protection Fund: T-bills 1.8, T-bonds 1.5, Both 1.6.
  - Others: T-bills 0.6, T-bonds 0.3, Both 0.3.
  - Total: 100.0, 100.0, 100.0.
- Securitization and BoU advances:
  - Following securitization of a large share of the advances from the Bank of Uganda (3.8 percent of GDP), the outstanding stock dropped to 0.8 percent of GDP at the end of FY24/25 from 4.1 percent of GDP a year earlier.
  - In October 2024, the authorities replaced the outstanding stock of BoU advances with a government-issued debt instrument, to be repaid gradually over the course of ten years.

### Borrowing costs, debt service, and private external debt
- Total interest payments increased to 3.7 percent of GDP in FY24/25 (3.1 percent of GDP in FY23/24; 2.1 percent in FY19/20), largely due to the increased stock of domestic debt with elevated interest rates.
- Interest rates on external debt have been stable since FY22/23.
- Private external debt:
  - Private external debt declined to below 8 percent of GDP.
  - Historical context: on average some 12 percent of GDP in FY14/15-FY21/22, peaking at 14.5 percent of GDP in FY20/21; dropped to less than 9 percent in FY22/23 and has gradually declined since then.

### Macro forecasts and baseline scenario assumptions
- The medium- and long-term macroeconomic framework underlying this DSA is consistent with the scenario presented in the Staff Report for the Post Financing Assessment.
- Baseline scenario assumptions and key projections:
  - Real GDP growth:
    - The real GDP growth outlook for FY25/26 is 6.2 percent.
    - Over the medium-term, growth is projected to significantly accelerate in FY26/27 and FY27/28 as oil production is expected to start and then to return to around 6 percent as the oil production plateaus.
    - Non-oil GDP is projected to grow at around 6 percent.
    - A one-year delay in oil production would lower the projected growth rate in FY26/27 by about 3 percentage points.
  - Inflation:
    - Headline inflation peaked at 10.7 percent in October 2022, bottomed at 2.4 percent in October 2023, and has been around 3.8 percent since May 2025.
    - Core inflation was 4.1 percent in August and is expected to return to the 5-percent target in FY27/28.
  - Oil revenue projections:
    - Budget revenues from oil, net of oil-related expenditures, are expected to start in FY26/27 and peak at 2.8 percent of GDP in FY32/33 before declining over the long term.
    - Under current plans, up to 0.8 percent of the previous year’s non-oil GDP would be used to finance infrastructure spending with the rest saved.
    - Institutions established include the Uganda Petroleum Fund and the Petroleum Revenue Investment Fund (PRIR).
  - Primary fiscal deficit:
    - The primary fiscal deficit increased in FY24/25 from 1.6 to 2.3 percent of GDP.
    - It is expected to improve and turn positive in FY30/31, driven by expenditure and revenue mobilization measures.
  - Interest payments trajectory:
    - Interest payments are projected to increase further and peak at just above 5½ percent of GDP in FY32/33 (32 percent of domestic revenues against 18 percent in FY20/21).
    - Afterwards they will gradually decline over the long run, though remain just above 5 percent of GDP.
  - Current account and external position:
    - Current account deficit expected to remain elevated in the near term and improve substantially over the medium term once oil exports come on-stream.
    - Nominal effective exchange rate (NEER) and real effective exchange rate (REER) appreciated by a cumulative 2.6 and 3.2 percent, respectively during January-September 2025.
    - The 2024 EBA assessment suggests the REER was overvalued by 6.7 percent (estimate subject to considerable uncertainty).
    - External position assessed as moderately weaker than the level implied by fundamentals and desired policies.
  - Net FDI inflows:
    - Expected to remain strong, largely driven by investments in oil-related projects, and gradually decline to around 3 percent of GDP over the medium term.
  - Gross official reserves (GIR):
    - Expected to gradually rise over the medium term; reserve coverage expected to reach around 4 months of imports in the medium-term.
    - GIR has been boosted by FX swap arrangements with local banks and may be further boosted by a domestic gold purchase program piloted in the near future.
  - Financing mix:
    - Net domestic financing reached an exceptionally high level in FY24/25 (5.7 percent of GDP).
    - Budget financing expected to shift gradually to external debt over the long term.
    - Composition of domestic borrowing projected to remain similar with T-bonds accounting for two-thirds of the total.
    - The BoU is expected to only provide advances up to the statutory limit of 10 percent of the recurrent revenue at times of temporary shortfalls.
  - IDA financing:
    - Assumed average disbursement over the next five fiscal years is set to increase from around US$600 mn to $900 mn.
    - Afterwards disbursements are assumed to be gradually decreasing in percent of GDP.
    - IDA financing largely delivered through project support; no budget support operations planned.

*Sources: Ugandan authorities and IMF staff calculations.*

### 9.      The realism tool outputs compare the projections to cross-country experiences and to

### 9.      The realism tool outputs compare the projections to cross-country experiences and to

### Realism tool outputs and projection comparisons
- Differences between past and projected debt-creating flows reflect changes to growth and current account trajectories given expected developments in the oil industry.
- Unexpected changes are below the median of the distribution across low-income countries for both external and public debt, reflecting the pessimism of the 2020 scenario prepared in the midst of the COVID pandemic, forecasting the public debt just below 60 percent of GDP in FY23/24 and FY24/25.
- The improvement in the primary balance over the next three years is in the top quartile of the distribution, reflecting:
  - cyclical improvement in tax revenues,
  - the adjustment following the fiscal policy response to COVID-19,
  - the implementation of the DRMS.
- Growth outlook supported by private investments and improved spending efficiency, including stronger public investment management under IMF-supported program reforms.
- Investment composition:
  - Private investment is expected to increase, offsetting a temporary decline in public investment.

### Country classification and debt-carrying capacity
- Debt-carrying capacity: classified as "medium", unchanged from the previous DSA.
- Inputs used: October 2025 WEO (real GDP growth, import coverage of foreign exchange reserves, remittances, growth of the world economy) and the World Bank’s 2024 CPIA (3.508).
- Composite indicator (CI) score: 2.855.
- CI calculation: incorporates a 10-year average (5 years of historical data and 5 years of projection).
- CI thresholds and classification:
  - CI score 2.855 lies between threshold values of 2.69 and 3.05 corresponding to medium and strong capacity, respectively.
  - Result: country categorized as having "medium" debt-carrying capacity.
- Indicative threshold values (external debt burden and debt service):
  - PV of external debt-to-exports ratio: 180 percent.
  - PV of external debt-to-GDP ratio: 40 percent.
  - Debt service-to-exports ratio: 15 percent.
  - Debt service-to-revenue ratio: 18 percent.
- Total public debt benchmark: 55 percent (PV of total public debt in percent of GDP).

### External debt sustainability (baseline and stress tests)
- Baseline assessment:
  - Solvency and liquidity indicators remain below indicative thresholds over the projection horizon, except for a mild, short-lived breach of the debt service-to-revenue ratio in FY25/26-FY26/27.
  - PV of PPG external debt-to-GDP ratio peaks at 20.9 percent in FY25/26 (threshold: 40 percent).
  - PV of external debt-to-exports ratio peaks at 89.9 percent (threshold: 180 percent) and then declines.
  - Liquidity indicators peak in FY25/26:
    - Debt service-to-exports ratio: 12.2 percent.
    - Debt service-to-revenue ratio: 19.8 in FY25/26 and 18.3 in FY26/27 (breaching the indicative threshold of 18 percent).
- Assessment judgement:
  - The breaches are described as minor and short-lived, warranting the application of judgement to maintain a moderate risk rating.
- Stress-test outcomes:
  - PV of PPG external debt-to-GDP ratio remains under the threshold even under stress tests.
  - The shock to exports is the most extreme shock: it increases the PV of external debt-to-exports ratio and debt service-to-exports ratios above respective thresholds over the medium term.
  - A one-time depreciation shock causes the external debt service-to-revenue ratio to breach its respective threshold.

### Private external debt dynamics
- Private external debt path under baseline:
  - Peaks in FY24/25 at 7.7 percent of GDP (22 percent of the total external debt).
  - Declines toward 5.3 percent of GDP (20 percent of external debt) in FY31/32.
- Assessment:
  - Under the baseline, private external debt does not elevate the risk of debt distress.
  - Contingent liability shock breaches of certain indicators suggest potential spillovers from private sector debt could affect sustainability under adverse scenarios.

### Public debt sustainability and stress scenarios
- Baseline PV total public debt-to-GDP:
  - Peaks at 48.4 percent in FY25/26.
  - Declines towards around 43 percent of GDP thereafter (benchmark: 55 percent for medium capacity).
- Debt service and revenue dynamics:
  - PV of debt-to-revenue ratio gradually declines under baseline.
  - Debt service-to-revenue ratio gradually picks up over the forecast horizon.
- Stress test (shock to growth):
  - PV of total public debt-to-GDP ratio gradually exceeds the benchmark of 55 percent in FY27/28 and continues to increase above it.
  - PV of total public debt-to-revenue ratio and the debt service-to-revenue ratio show increasing trajectories under this scenario.

### Domestic debt and related vulnerabilities
- Domestic debt trends:
  - Domestic debt is increasing and related vulnerabilities are intensifying.
  - Under baseline, domestic debt level set to peak in FY30/31 as financing mix pivots towards external sources.
- Net domestic financing:
  - Net financing from domestic banks and non-banks set to peak in FY29/30 at 6.0 percent of GDP (5.3 percent of GDP in FY24/25).
- Banking sector exposure:
  - Uganda ranks 4th among SSA economies in terms of banks’ exposure to sovereign debt.
  - While not an immediate financial stability risk, the sovereign-bank nexus requires close monitoring and gradual rebalancing of banks’ portfolios to reduce vulnerabilities and mitigate crowding out of private credit.
- Impact on interest rates:
  - An increase of one percentage point of GDP in domestic financing adds about 100 basis points to the interest rate on a 1-year government bond.
- Supervisory assessment:
  - A recent stress test showed all banks remain well-capitalized under an adverse interest rate shock.
  - Recently introduced, more stringent capital requirements will reinforce banks’ capital positions.

### Conclusions and risk assessment
- Overall risk rating: moderate risk of external and overall public debt distress, with limited space to absorb shocks.
- Key summary points:
  - External debt burden indicators and total public debt remain below thresholds and benchmark throughout projection horizon.
  - Stress tests indicate breaches of thresholds, some lasting.
  - Vulnerabilities related to domestic debt reliance have intensified and are not projected to abate over the medium term.
  - These dynamics reinforce the need for larger fiscal consolidation.
- Downside risks to the debt outlook:
  - External risks: tight external financial conditions, possible trade spillovers from global developments, further cuts to external assistance and tourism, increased frequency of natural disasters due to climate change.
  - Domestic risks: slower-than-expected implementation of reforms (including revenue mobilization), delays in oil production, potentially limited capacity of commercial banks to purchase more government securities given increasing weight in their balance sheets.

### Policy recommendations and required reforms
- Implementing the DRMS.
- Tax policy and administration reforms:
  - Urgent need for tax policy reforms, including a rationalization of exemptions, and strengthening of tax administration to improve compliance.
- Fiscal consolidation and revenue/expenditure reforms:
  - Implement sustained fiscal consolidation through durable revenue and expenditure reforms.
  - A combination of forceful tax revenue mobilization and reduction in current spending to pre-pandemic levels could bring public debt to 48 percent of GDP and allow the interest payments-to-domestic revenue ratio to fall by some 5 percentage points over the medium term.
- Strengthen public financial management (PFM):
  - Enhance budget discipline, limit scope for accommodating frequent in-year spending requests, improve cash flow controls.
- Improve spending efficiency and public investment management (PIM):
  - Use medium-term fiscal envelope forecasts for better project prioritization and capital expenditure budgeting.
  - Address PIM shortcomings by reducing overcommitment in multi-year projects, reducing or eliminating emergency procurement procedures, fostering open and competitive bidding, and refraining from procuring through direct channels.
- Strengthen debt management:
  - Ensure financing needs and payment obligations are met at lowest possible cost over medium to long run, consistent with prudent risk-taking.
  - Improve communication and coordination across government agencies on new borrowing plans.
  - Broaden scope of potential creditors, including through use of mobile money platforms for retail investors.
- Improve debt transparency:
  - Further enhance disclosure, including publication of a statement of fiscal risks in the budget framework paper listing contingent liabilities and reporting on risks to the budget.
  - Extend coverage to potential debt collateralization in the public sector and improve communication to better understand and manage risks.
- Closely monitor contingent liabilities:
  - Step up efforts to estimate, disclose, manage, contain, and shorten the lag in publication of information on contingent liabilities, especially those in the financial sector, state-owned enterprises (including potential inclusion in government finance statistics), and PPPs.
- Implement Performance and Policy Actions (PPAs) under IDA’s Sustainable Development Finance Policy (SDFP):
  - Actions in debt sustainability, debt management and fiscal sustainability to incentivize reduction in debt vulnerabilities.
- Enhance governance frameworks:
  - Safeguard quality and effectiveness of public investment and other government spending.
  - Maintain sound asset-liability management and avoid premature reliance on uncertain future oil-related flows as preconditions for debt sustainability.

*Source: IMF staff projections and analysis as presented in the provided content unit.*

### 20.      The authorities broadly agreed with the results of this DSA and the overall conclusion of

### 1ugaea2026001-source-pdf - 20.      The authorities broadly agreed with the results of this DSA and the overall conclusion of

### Authorities' response and commitments
- Authorities broadly agreed with this DSA and the overall conclusion of a moderate risk of external debt distress.
- They acknowledged the need for fiscal adjustment and intend to proceed with budgetary consolidation through revenue mobilization and curtailing recurrent spending.
- Authorities recognize vulnerabilities from growing public debt and contingent liabilities and remain committed to ensuring debt sustainability while bringing debt below 50 percent of GDP (in nominal terms).
- They commit to continued engagement with IDA/IMF staff on debt management issues, building policy credibility, and deepening markets.
- Authorities regularly conduct their own debt sustainability analyses and focus on maintaining a low risk of debt distress.

### Debt sustainability assessment results and classification
- DSA conclusion: moderate risk of external debt distress.
- Public sector debt (historical and projections):
  - Public sector debt: 52.4 (2024/25); 54.5 (2025/26); 54.1 (2026/27); 54.3 (2027/28); 54.3 (2028/29); 54.2 (2029/30); 54.3 (2030/31); 53.8 (2031/32); 52.1 (2035/36); 42.7 (2045/46); Average/Projections: 52.8.
  - Of which: external debt (public): 27.3 (2024/25); 27.3 (2025/26); 25.8 (2026/27); 24.6 (2027/28); 23.6 (2028/29); 22.6 (2029/30); 21.9 (2030/31); 21.5 (2031/32); 21.8 (2035/36); 26.6 (2045/46); Average/Projections: 22.2.
- Target: bring nominal public debt below 50 percent of GDP.

### Key external debt indicators (selected figures from Table 1)
- External debt (nominal): 35.0 (2024/25); 34.5 (2025/26); 32.5 (2026/27); 31.0 (2027/28); 29.7 (2028/29); 28.4 (2029/30); 27.5 (2030/31); 26.8 (2031/32); 25.6 (2035/36); 24.5 (2045/46).
- Change in external debt: -1.3 (2024/25); -0.5 (2025/26); -2.0 (2026/27); -1.5 (2027/28); -1.3 (2028/29); -1.3 (2029/30); -0.9 (2030/31); -0.7 (2031/32); -0.1 (2035/36); -0.1 (2045/46).
- Identified net debt-creating flows: -4.2 (2024/25); -2.1 (2025/26); -4.8 (2026/27); -3.4 (2027/28); -3.4 (2028/29); -3.0 (2029/30); -2.9 (2030/31); -3.1 (2031/32); -2.3 (2035/36); -1.9 (2045/46).
- Non-interest current account deficit: 5.2 (2024/25); 2.7 (2025/26); 1.6 (2026/27); 1.4 (2027/28); 0.3 (2028/29); 0.5 (2029/30); 0.3 (2030/31); 0.2 (2031/32); 0.8 (2035/36); 0.6 (2045/46).
- Net FDI (negative = inflow): -5.8 (2024/25); -4.3 (2025/26); -5.0 (2026/27); -4.0 (2027/28); -3.0 (2028/29); -2.9 (2029/30); -2.9 (2030/31); -3.0 (2031/32); -2.8 (2035/36); -1.9 (2045/46).
- Gross external financing need (Million of U.S. dollars): 2,054 (2024/25); 2,292 (2025/26); 1,146 (2026/27); 1,622 (2027/28); 1,786 (2028/29); 2,020 (2029/30); 1,674 (2030/31); 1,364 (2031/32); 2,526 (2035/36); 5111.9 (2045/46).

### Sustainability indicators (selected)
- PV of PPG external debt-to-GDP ratio: 22.2 (2024/25); 20.9 (2025/26); 19.2 (2026/27); 17.9 (2027/28); 16.7 (2028/29); 15.5 (2029/30); 14.6 (2030/31); 14.0 (2031/32); 12.9 (2035/36); 13.0 (2045/46).
- PV of PPG external debt-to-exports ratio: 104.2 (2024/25); 89.9 (2025/26); 70.2 (2026/27); 64.4 (2027/28); 64.0 (2028/29); 63.3 (2029/30); 62.0 (2030/31); 61.2 (2031/32); 64.2 (2035/36); 82.3 (2045/46).
- PPG debt service-to-exports ratio: 10.7 (2024/25); 12.2 (2025/26); 10.4 (2026/27); 9.2 (2027/28); 9.6 (2028/29); 11.0 (2029/30); 10.2 (2030/31); 9.7 (2031/32); 8.3 (2035/36); 10.1 (2045/46).
- PPG debt service-to-revenue ratio: 16.2 (2024/25); 19.8 (2025/26); 18.3 (2026/27); 15.9 (2027/28); 15.3 (2028/29); 16.2 (2029/30); 14.3 (2030/31); 12.8 (2031/32); 10.4 (2035/36); 10.5 (2045/46).

### Public debt drivers and dynamics (selected figures)
- Drivers highlighted include contributions from nominal interest rate, real GDP growth, price and exchange rate changes, and residual/exceptional financing.
- Endogenous debt dynamics contribution: -3.6 (2024/25); -0.5 (2025/26); -1.5 (2026/27); -0.7 (2027/28); -0.7 (2028/29); -0.5 (2029/30); -0.3 (2030/31); -0.3 (2031/32); -0.3 (2035/36); -0.6 (2045/46).
- Residual (including exceptional financing): 3.0 (2024/25); 1.7 (2025/26); 2.8 (2026/27); 1.9 (2027/28); 2.1 (2028/29); 1.6 (2029/30); 2.0 (2030/31); 2.4 (2031/32); 2.1 (2035/36); 1.8 (2045/46).

### Key macroeconomic assumptions (selected)
- Real GDP growth (in percent): 6.3 (2024/25); 6.2 (2025/26); 9.4 (2026/27); 6.9 (2027/28); 6.7 (2028/29); 6.4 (2029/30); 5.7 (2030/31); 5.6 (2031/32); 5.5 (2035/36); 5.9 (2045/46); Average/Projections: 4.9; 6.0.
- GDP deflator in US dollar terms (change in percent): 7.9 (2024/25); 4.8 (2025/26); 1.2 (2026/27); 2.0 (2027/28); 1.8 (2028/29); 2.0 (2029/30); 1.8 (2030/31); 1.8 (2031/32); 2.1 (2035/36); 2.0 (2045/46); Average/Projections: 1.8; 2.1.
- Effective interest rate (percent): 3.0 (2024/25); 4.5 (2025/26); 4.7 (2026/27); 4.4 (2027/28); 4.4 (2028/29); 4.5 (2029/30); 4.6 (2030/31); 4.5 (2031/32); 4.1 (2035/36); 3.4 (2045/46); Average/Projections: 2.2; 4.1.
- Growth of exports of G&S (US dollar terms, in percent): 31.6 (2024/25); 21.2 (2025/26); 30.3 (2026/27); 10.5 (2027/28); 2.2 (2028/29); 1.9 (2029/30); 3.7 (2030/31); 4.0 (2031/32); 4.1 (2035/36); 4.0 (2045/46); Average/Projections: 11.9; 6.9.
- Government revenues (excluding grants, in percent of GDP): 14.1 (2024/25); 14.3 (2025/26); 15.5 (2026/27); 16.1 (2027/28); 16.3 (2028/29); 16.6 (2029/30); 16.8 (2030/31); 17.4 (2031/32); 16.1 (2035/36); 15.1 (2045/46); Average/Projections: 12.9; 15.9.

### Public debt sustainability (Table 2 selected)
- PV of public debt-to-GDP ratio: 46.8 (2024/25); 48.4 (2025/26); 47.8 (2026/27); 47.8 (2027/28); 47.6 (2028/29); 47.4 (2029/30); 47.2 (2030/31); 46.5 (2031/32); 43.5 (2035/36).
- PV of public debt-to-revenue and grants ratio: 318.9 (2024/25); 325.5 (2025/26); 299.0 (2026/27); 290.4 (2027/28); 286.8 (2028/29); 281.0 (2029/30); 277.3 (2030/31); 264.5 (2031/32); 284.2 (2035/36).
- Debt service-to-revenue and grants ratio: 35.9 (2024/25); 65.7 (2025/26); 64.8 (2026/27); 75.4 (2027/28); 76.5 (2028/29); 88.2 (2029/30); 92.5 (2030/31); 94.9 (2031/32); 110.3 (2035/36).
- Gross financing need: 7.6 (2024/25); 11.8 (2025/26); 11.8 (2026/27); 13.0 (2027/28); 12.7 (2028/29); 14.9 (2029/30); 15.2 (2030/31); 15.3 (2031/32); 16.6 (2035/36).

### Stress tests, sensitivity, and tailored scenarios
- Stress tests include historical scenario, commodity price shocks, natural disasters, growth shocks, one-time depreciation, and combined contingent liabilities.
- Examples of sensitivity results (PV of debt-to-GDP ratio, selected years):
  - Baseline: 20.9 (2025/26); 19.2 (2026/27); 17.9 (2027/28); 16.7 (2028/29); 15.5 (2029/30); 14.6 (2030/31); 13.5 (2031/32); 13.2 (2033/34); 13.0 (2034/35).
  - Alternative A1 (historical averages 2022-2032): 20.9 (2025/26); 25.3 (2026/27); 28.8 (2027/28); 32.3 (2028/29); 35.5 (2029/30); 38.8 (2030/31); 42.6 (2031/32); 46.3 (2033/34); 49.8 (2034/35); 52.8 (projection).
- Tailored test C1 (combined contingent liabilities) shows limited increases relative to baseline (example PV of debt-to-GDP remaining near baseline levels in early years).

### Indicators of domestic public debt and issuance
- Domestic debt to GDP ratio and domestic debt service to revenues are tracked across FY2020/21-2035/36 with net domestic debt issuance estimates.
- Borrowing assumptions and shares in new domestic debt issuance include domestic short-term debt and domestic medium and long-term debt, with average real interest rates and maturities used for projections.
- Memorandum: PV of external debt (percent of GDP): 30.0 (2024/25); 28.1 (2025/26); 25.9 (2026/27); 24.3 (2027/28); 22.8 (2028/29); 21.3 (2029/30); 20.2 (2030/31); 19.3 (2031/32); 17.4 (2035/36); 15.7 (2045/46).

### Policy implications emphasized in text
- Need for fiscal consolidation through revenue mobilization and curtailment of recurrent spending to reduce vulnerabilities and achieve the nominal debt objective (below 50 percent of GDP).
- Continue engagement with IDA/IMF on debt management and efforts to strengthen policy credibility and deepen markets to mitigate debt vulnerabilities.
- Authorities' ongoing use of regular debt sustainability analyses to guide policy and maintain low debt distress risk.

*Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1ugaea2026001-source-pdf.pdf*

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_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1ugaea2026001-source-pdf.pdf_