## _cr15321 - 6.3 percent in October and is expected to rise somewhat before converging to the medium- ## Source details **Canonical URL:** [_cr15321 - 6.3 percent in October and is expected to rise somewhat before converging to the medium-](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15321.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15321.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15321.pdf.json) --- ### Context and recent developments - Political context - February 2016 presidential and parliamentary elections created uncertainty; President Museveni running for another 5-year term. - Active political campaign generated market nervousness and speculative behavior. - Exchange rate and real sector - Shilling declined by 27 percent vis-à-vis the US dollar over FY2014/15 (through June). - In real terms, the shilling lost about 10 percent against the currencies of its main partners. - Real GDP growth reached 5 percent in FY2014/15 (slightly below projections of 5¼ percent), driven by public investment; manufacturing, services, and agriculture contributed. - Inflation and pass-through - Annual headline and core inflation at end-June were 4.9 percent. - Depreciation pass-through to inflation estimated at 40-50 percent. - Developments in early FY2015/16: additional 12 percent depreciation; annual headline and core inflation rose to 7.2 and 6.7 percent, respectively, in September. - Inflation began disseminating across several CPI sub-groups. - Observed: "6.3 percent in October and is expected to rise somewhat before converging to the medium-target of 5 percent due to monetary tightening." - External sector - External current account deficit was 9¼ percent of GDP in FY2014/15. - Reserve coverage remained high at 4.3 months of imports. - Capital and financial inflows shrunk; declining oil-related FDI and net portfolio outflows observed. ### Monetary policy, financial conditions, and Bank of Uganda (BoU) actions - Policy tightening and interest rates - BoU increased the central bank rate by 600 basis points since April, bringing it to 17 percent. - CBR increases: 100 bps in June, 150 bps in July, 150 bps in August, and 100 bps in October. - BoU widened the interest rate corridor to +/- 3 percent. - Lending rates for shilling loans and shilling deposit rates rose sharply. - T-bill rates upsurged about 450 bps between June and September. - Foreign exchange operations - Fixed-quantity dollar purchase program exacerbated depreciation pressures; BoU stepped-up sales subsequently. - In September, BoU replaced predetermined purchases with an auction-based mechanism allowing all banks to sell foreign exchange to the central bank; exchange rate pressures dissipated thereafter. - Auction experience resulted in price deviations of less than 0.2 percent between successful offers; guidelines ensure spread below 1 percent. - Monitoring and system soundness - Financial system "remains sound despite increased vulnerabilities." - BoU updated stress tests; a shock raising NPL ratio to the industry’s highest level in past 10 years would not lead to bank capital shortfalls (BoU analysis). - Stress tests: a 100 percent depreciation from June level would keep banks' net open positions within regulatory limits and reduce core capital ratio from 18.8 percent to 17.7 percent (stress-test example). - BoU beefed up on-site inspections and completed a crisis management plan. ### Fiscal developments, public investment, and PSI performance - FY2014/15 fiscal outcomes and composition - FY2014/15 fiscal deficit was 4½ percent of GDP. - Higher revenue (including windfall from a tax settlement) and higher grants allowed accelerated spending—mainly development spending, but also wages and current outlays. - Karuma and Isimba HPPs commenced; BoU recapitalization program resumed, pushing up net lending and investment by 1¾ percent of GDP. - Financing modalities in FY2014/15 included domestic security issuance of 2 percent of GDP; use of government savings reaching 1½ percent of GDP; external borrowing—mostly concessional—about 1 percent of GDP. - Early FY2015/16 shifts - Revenue fell short in June-September; some HPP-related fees shifted from prior year to first quarter. - Tight liquidity, preference for dollars, and market uneasiness lowered appetite for government securities and raised demanded yields; authorities postponed issuances and used a temporary advance from the BoU. - Higher-than-anticipated HPP spending increased use of oil and energy funds held at the BoU; net domestic financing from the central bank rose in the first quarter. - Fiscal adjustment and medium-term stance - Authorities reduced the budgeted fiscal expansion by 0.55 percent (through spending cuts); revised overall deficit projected at 6.5 percent of GDP compared to 7 percent in the budget. - Authorities re-profiled medium-term infrastructure projects by postponing investments to ensure debt remains at low risk of distress. - Strong fiscal-monetary coordination and effective communication emphasized as essential. - PSI performance and structural issues - All end-June quantitative assessment criteria were observed; most continuous assessment criteria were observed. - Average core inflation remained within the bands of the PSI consultation clause. - Indicative targets on the overall fiscal deficit and withdrawals from the energy and petroleum funds were missed by a small margin. - Significant progress needed on consistently determining the stock of domestic arrears; an audit is ongoing. - Structural reform agenda needs reinvigoration: public financial management (PFM) reform, central bank independence, and financial sector enhancements. - Staff recommendations regarding the PSI - Staff recommends completing the fifth review under the PSI. - Staff supports authorities’ request to eliminate the QACs on limits to short-term external debt and non-concessional external debt in line with the new debt limits policy, and to upgrade the overall deficit IT to a QAC. - Staff supports a waiver for nonobservance of the continuous assessment criterion on introducing a multiple currency practice (MCP), modification of two end-December QACs to reflect updates, and introduction of a new IT to cap cumulative changes in advances from the BoU to the government. ### Outlook, risks, and policy priorities - Short- and medium-term outlook - Real GDP growth expected to remain at 5 percent in FY2015/16, supported by public investment, but below initial projections due to tight credit conditions and smaller-than-expected fiscal stimulus. - Medium-term growth set to accelerate albeit by less than previously projected reflecting global concerns and a planned slowdown of public investment. - Average inflation projected at 7.7 percent in FY2015/16; average core inflation projected at 7.9 percent in FY2015/16 and 6.6 percent in FY2016/17; convergence to 5 percent medium-term target expected thereafter. - External current account deficit projected to widen to 9.6 percent of GDP as infrastructure-related imports increase. - International reserves expected to decline to 3.6 months of imports and thereafter gradually recover to an average of 4 months of imports. - Key risks - Market nervousness around elections could fuel further exchange rate depreciation, inflation, and financial market volatility. - Weak tax collections, stagnant exports, weak tourism receipts, and high infrastructure-related imports could widen the current account deficit. - Tight global financial conditions, changes in China’s growth model, regional geopolitical developments, declining export prices, and election-related instability noted as significant risks. - Policy priorities and recommendations - Keep inflation in check via timely monetary tightening and anchoring inflation expectations through credible fiscal restraint. - Maintain strong fiscal-monetary coordination and transparent communication to dissipate market anxieties over excessive spending prior to elections. - Enhance tax collections (still low by international standards) to support inclusive growth; authorities plan to raise tax revenues by a minimum of ½ percent of GDP per year over the medium term. - Diversify exports through gains in productivity and competitiveness. - Pursue financial deepening to improve access to credit and lengthen average maturities of domestic debt. - Improve governance and strengthen social protection. - Reinvigorate structural reforms, including PFM reform, central bank independence, and financial sector enhancements. ### Exchange rate developments, reserves, and recommended reserve policy - Exchange rate movements - Depreciation pressures picked up in April and significantly increased since June 2015. - Between June and September, the shilling declined by about 20, 17, and 14 percent against the US dollar, euro, and Kenyan shilling, respectively. - In real effective terms, the shilling depreciated by about 10 percent in FY2014/15 and is estimated to be undervalued by 10-15 percent. - Exchange rate depreciation reached over 40 percent year-on-year in September 2015. - Drivers of depreciation - External: weaker demand for Ugandan exports; less favorable terms of trade; tightening global financial conditions. - Domestic since June 2015: election-related uncertainties that fueled speculation; elevated demand for foreign currency by offshore investors and key domestic sectors. - Reserve adequacy and policy recommendations - Historical reserve coverage: on average 4½ months of imports, 85 percent of M2, and 500 percent of short-term debt over the last four years. - Staff assessment: a level that covers 3½–4 months of prospective imports is adequate for Uganda in current conditions. - Recommended approach: temporarily aim for about 3½ months of imports as an optimal reserve level; communicate rationale clearly; achieve target through lower purchases (not large market sales); ensure effective fiscal-monetary coordination; resume prior pace of reserve accumulation when conditions normalize. ### Debt sustainability, DSA findings, and public debt indicators - Risk assessment - DSA update: Uganda remains at low risk of external debt distress, but CPIA downgrade (from strong to medium performer) lowered thresholds for external debt indicators. - A real exchange rate depreciation of about 10 percent (y/y) increased the PPG external debt-to-GDP ratio to 19 percent at end-FY2014/15. - Baseline projections and key debt metrics - PV of PPG external debt expected to peak at 27 percent in FY2020/21. - Nominal external public debt projected to stay below 36 percent of GDP throughout the projection period. - Total public debt (external and domestic) projected PV peak at about 41 percent in FY2020/21—below benchmark level of 56 percent associated with heightened vulnerabilities for medium performers. - Concerns include short average maturity of domestic debt and a relatively low revenue base; debt service-to-revenue ratio about 41 percent in FY2019/20 in projections. - Stress tests - Extreme stress tests (e.g., a one-time 30 percent depreciation) show debt burden indicators may peak close to thresholds. - Recommendation: strengthen governance, transparency, and PFM to increase borrowing space while maintaining sustainability. - Policy recommendations on debt - Adhere to revised plan of reduced pace of public investment; carefully assess projects’ financial and economic viability; select best possible borrowing terms. - Avoid reliance on uncertain oil flows; keep a prudent fiscal plan that does not depend on oil proceeds. - Strengthen revenue mobilization and extend average maturities of domestic debt to mitigate rollover and interest rate risks. ### Reporting, technical definitions, and program monitoring - TMU and monitoring - NIR for program-monitoring: reserve assets of BoU net of short-term external liabilities; stocks converted at program exchange rates. - Ceiling on accumulation of new external payments arrears for public sector: zero, to be observed on a continuous basis. - Cumulative change in temporary advances from BoU to central government defined as cumulative change in adjusted net claims on central government by BoU; legal ceiling under 2000 BoU Act is 18 percent of recurrent revenues. - Inflation consultation mechanism: core inflation target 5.0 percent with inner band and outer band limits (Dec. 2015 / Mar. 2016: outer band upper limit 8.0 / 8.0; inner band upper limit 7.0 / 7.0; inner band lower limit 3.0 / 3.0; outer band lower limit 2.0 / 2.0). - Data reporting and submission requirements - GoU to submit information to IMF staff with frequencies and submission lags as indicated (contact afruga@imf.org). - Selected reporting examples: - BoU: weekly issuance of government securities, FX operations, and reserve levels (submission lag 5 working days); monthly balance sheets (submission lag 4 weeks); quarterly off-site bank supervision indicators (submission lag 4 weeks). - MoFPED: monthly summary of central government accounts (submission lag 4 weeks); quarterly summary of unpaid bills (submission lag 6 weeks); quarterly contingent liabilities (submission lag 6 weeks); quarterly detailed donor-financed flows (submission lag 4–6 weeks). - Structural benchmarks and timelines (selection) - Amendments to BoU Act to be submitted to Parliament: April 2016 — draft under review. - Regulations for implementation of the PFM Act: revised date March 2016 — not met as of original July 2015 date. - Ministry of Finance to include 30 local governments in TSA: March 2016 — proposed/adjusted benchmark. - Ministry of Finance to publish quarterly reports on the stock of unpaid bills: November 15, 2015; February 15, 2016; May 15, 2016. *Source: UGANDA — FIFTH REVIEW UNDER THE POLICY SUPPORT INSTRUMENT; IMF staff report excerpt (chapter/section), November 3, 2015.* ### 6.3 percent in October and is expected to rise somewhat before converging to the medium- ### _cr15321 - 6.3 percent in October and is expected to rise somewhat before converging to the medium- ### Context and recent developments - Political context - Proximity of the February 2016 presidential and parliamentary elections has created uncertainty; President Museveni is running for another 5-year term. - An active political campaign generated market nervousness and speculative behavior. - Exchange rate and real sector - The shilling declined by 27 percent vis-à-vis the US dollar over FY2014/15 (through June). - In real terms, the shilling lost about 10 percent against the currencies of its main partners. - Real GDP growth reached 5 percent in FY2014/15 (slightly below projections of 5¼ percent), driven by public investment; manufacturing, services, and agriculture contributed. - Inflation and pass-through - Annual headline and core inflation at end-June were 4.9 percent. - Depreciation pass-through to inflation estimated at 40-50 percent. - Developments in the first quarter of FY2015/16: additional 12 percent depreciation; annual headline and core inflation rose to 7.2 and 6.7 percent, respectively, in September; inflation began disseminating across several CPI sub-groups. - "6.3 percent in October and is expected to rise somewhat before converging to the medium-target of 5 percent due to monetary tightening." - External sector - External current account deficit was 9¼ percent of GDP in FY2014/15. - Reserve coverage remained high at 4.3 months of imports. - Capital and financial inflows shrunk; declining oil-related FDI and net portfolio outflows observed. ### Monetary policy, financial conditions, and BoU actions - Policy tightening and interest rates - Since April the Bank of Uganda increased the central bank rate by 600 basis points, bringing it to 17 percent. - CBR increases: 100 bps in June, 150 bps in July, 150 bps in August, and 100 bps in October (text notes driving it to 17 percent). - The BoU widened the interest rate corridor to +/- 3 percent. - Lending rates for shilling loans rose significantly; shilling deposit rates rose sharply. - The upsurge in T-bill rates was significant (about 450 bps between June and September). - Foreign exchange operations - Fixed-quantity dollar purchase program exacerbated depreciation pressures; stepped-up BoU sales followed. - In September, BoU replaced the pre-determined purchase system by an auction-based mechanism allowing all banks to sell foreign exchange to the central bank; subsequently exchange rate pressures dissipated. - Monitoring and system soundness - The central bank continues to monitor the financial system, which "remains sound despite increased vulnerabilities." ### Fiscal developments and public investment - FY2014/15 fiscal outcomes and composition - FY2014/15 fiscal deficit was 4½ percent of GDP, in line with projections. - Higher revenue (including windfall proceeds from a tax settlement) and higher grants allowed accelerated spending, mainly development spending, but also wages and current outlays. - Karuma and Isimba HPPs commenced; BoU recapitalization program resumed, pushing up net lending and investment by 1¾ percent of GDP. - Financing modalities in FY2014/15 included: security issuance in the domestic market amounting to 2 percent of GDP; use of government savings reaching 1½ percent of GDP; external borrowing—mostly concessional—accounting for about 1 percent of GDP. - Early FY2015/16 shifts - Revenue fell short in June-September; some HPP-related fees shifted from prior year to first quarter. - Tight liquidity, preference for dollars, and market uneasiness lowered appetite for government securities and raised demanded yields, especially on longer-term paper; authorities postponed issuances and used a temporary advance from the BoU. - Higher-than-anticipated HPP spending increased use of oil and energy funds held at the central bank; net domestic financing from the central bank rose in the first quarter. - Fiscal adjustment and medium-term stance - Authorities reduced the budgeted fiscal expansion by 0.55 percent (through spending cuts); revised overall deficit projected at 6.5 percent of GDP compared to 7 percent in the budget. - Authorities re-profiled medium-term infrastructure projects by postponing investments to ensure debt remains at low risk of distress. - Strong fiscal-monetary coordination and effective communication emphasized as essential. ### Performance under the Policy Support Instrument (PSI) and structural issues - PSI performance - Performance under the PSI has been positive: all end-June quantitative assessment criteria were observed, and most continuous assessment criteria were observed. - Average core inflation remained within the bands of the PSI consultation clause. - Indicative targets on the overall fiscal deficit and withdrawals from the energy and petroleum funds were missed by a small margin. - Structural and data issues - Significant progress needed on consistently determining the stock of domestic arrears; an audit is ongoing. - Structural reform agenda needs reinvigoration: public financial management (PFM) reform, central bank independence, and financial sector enhancements. - Staff recommendations regarding the PSI - Staff recommends completing the fifth review under the PSI. - Staff supports authorities’ request to eliminate the QACs on limits to short-term external debt and non-concessional external debt in line with the new debt limits policy, and to upgrade the overall deficit IT to a quantitative assessment criterion. - Staff supports a waiver for nonobservance of the continuous assessment criterion on introducing a multiple currency practice (MCP), modification of two end-December QACs to reflect updates, and introduction of a new IT to cap cumulative changes in advances from the Bank of Uganda to the government. ### Outlook, risks, and policy priorities - Short- and medium-term outlook - Real GDP growth expected to remain at 5 percent in FY2015/16, supported by public investment, but below initial projections due to tight credit conditions and smaller-than-expected fiscal stimulus. - While short-term downside risks are significant (global uncertainty, active political campaign), longer-term prospects are favorable: approaching oil production, growing regional integration, and improving infrastructure. - Key risks - Market nervousness around elections could fuel further exchange rate depreciation, inflation, and financial market volatility. - Weak tax collections, stagnant exports, weak tourism receipts, and high infrastructure-related imports could widen the current account deficit. - Policy recommendations and priorities - Keep inflation in check via timely monetary tightening and anchoring inflation expectations through credible fiscal restraint. - Maintain strong fiscal-monetary coordination and transparent communication to dissipate market anxieties over excessive spending prior to elections. - Enhance tax collections (still low by international standards) to support inclusive growth. - Diversify exports through gains in productivity and competitiveness. - Pursue financial deepening to improve access to credit. - Improve governance and strengthen social protection. - Reinvigorate structural reforms, including PFM reform, central bank independence, and financial sector enhancements. *Source: UGANDA — FIFTH REVIEW UNDER THE POLICY SUPPORT INSTRUMENT; November 3, 2015.* ### 10. The supervisory authorities are monitoring the impact of the declining shilling and ### _cr15321 - 10. The supervisory authorities are monitoring the impact of the declining shilling and ### Banking sector developments and immediate vulnerabilities - Banks tightened lending standards, driving a slowdown in credit growth to 9 percent year on year, excluding currency valuation effects. - Some banks were affected by the increase in interbank and deposit rates; most expect non-performing loans (NPLs), which declined until June, to increase. - BoU actions and preparedness: - Updated its stress test analysis. - Engaged with other EAC countries to assess effects of global liquidity tightening, declines in commodity prices, and weakening confidence on banks’ balance sheets. - Completed a crisis management plan outlining procedures for problem detection and bank resolution. - Acted swiftly by taking over the management of a bank whose Kenyan parent had been placed on receivership. ### Financial sector risks and supervisory responses - Key vulnerabilities noted: - Increased credit risk from exposure to sectors hurt by the shilling decline (e.g., retail, construction, imports) and borrowers with adjustable lending rates. - Liquidity pressures from potential capital outflows, particularly cross-border related. - Deposit growth has decelerated and growth in private sector credit has slowed (figures shown in source charts). - Supervisory measures: - BoU beefing up on-site inspections to enforce regulations. - Crisis management plan to remain active and monitored. - Stress test findings: - A shock that would raise the NPL ratio to the industry’s highest level in the past 10 years would not lead to bank capital shortfalls (BoU analysis). - On foreign exchange risk, stress tests confirmed that all banks would keep their net open position in foreign currency within required levels even if a depreciation of 100 percent (from the June level) were to occur. - A sudden withdrawal of funds held by offshore clients would keep the system’s liquidity well above the threshold of 20 percent (BoU analysis). ### Structural reforms, governance, and institutional constraints - Progress reported: - Work on regulations to implement the PFM Act and to prepare a charter of fiscal responsibility is underway. - A new social protection policy under cabinet consideration aims to set the basis for sustainable pensions, expanded social security services to the informal sector, affordable health insurance schemes, and direct income support to vulnerable groups. - Challenges and risks: - Implementation of the PFM Act delayed by slow regulation on oil revenue management and by parliament’s upfront allocation of the new contingency reserve to non-essential spending. - Draft amendments to the PFM Act (now under parliamentary consideration) could eventually compromise key principles of the law. - Weak institutions and governance affecting public sector efficiency and the business climate; consequences include long-time gray-listing by FATF and a recent downgrade in the World Bank’s CPIA rating. - The regulations for implementing the PFM Act have not become effective yet and the current draft needs significant improvement. - Draft amendments to the BoU Act, to be submitted to parliament in April 2016, need refinements. ### Performance under the PSI and structural benchmarks - Program performance at end-June 2015: - Average core inflation reached 3¼ percent in June 2015—below the central target of the PSI inflation consultation clause. - All other end-June and most continuous QACs were observed, with the exception of an unintentional introduction of an MCP when a new auction-based system for foreign exchange purchases was implemented. - ITs on the overall fiscal deficit and on withdrawals from the energy and petroleum funds were missed by a small margin. - Preliminary data suggests domestic arrears reduction may have exceeded the target, but the stock was larger than previously thought. - Structural benchmarks: - Issuance of national ID cards SB was met. - FY2015/16 budget appropriated necessary funds for BoU recapitalization, though actual recapitalization is slightly delayed (SB for October 2015 now set for November 2015). - Progress to finalize the charter of fiscal responsibility continued; some SBs and drafts need further work. ### Macroeconomic outlook and risks - Outlook summary (as described in source): - Growth is expected to be lower (5 vs. 5¾ percent projected earlier) in FY2015/16, supported by significant public investment but less dynamic private demand. - Medium-term growth is set to accelerate albeit by less than previously projected reflecting global concerns and a planned slowdown of public investment. - Average inflation projected at 7.7 percent in FY2015/16. - Average core inflation projected to increase to 7.9 percent (within the outer band of the inflation consultation clause) in FY2015/16 and then converge steadily back to the 5 percent medium-term target. - External current account deficit projected to widen to 9.6 percent of GDP as infrastructure-related imports increase. - International reserves expected to decline to 3.6 months of imports and thereafter gradually recover to an average of 4 months of imports. - Risks highlighted: - Significant risks from tight global financial conditions, changes in China’s growth model and spillovers, regional geopolitical situation, declining export prices, and election-related instability affecting market sentiment and disbursement of infrastructure loans. - Uganda has buffers—adequate international reserves, a sound financial system, and relatively low government debt—but remains vulnerable to adverse external shocks. ### Monetary policy, reserve use, and communications - BoU actions and analysis: - Timely sharp monetary tightening started well before rise in inflation; forecasting capacities under inflation targeting proved sound. - Lending and deposit rates promptly reacted to the increase in the CBR; banks adapted business plans swiftly. - Authorities acknowledged that the fixed-quantity modality for foreign exchange purchases may have exacerbated depreciation pressures. - Staff’s reserve adequacy analysis shows that 3½–4 months of import coverage is sufficient for Uganda. - Authorities introduced a mechanism to ensure that purchase prices of foreign exchange will not differ by more than 1 percent among each other and with respect to the interbank rate. - Authorities reaffirmed commitment to limiting foreign exchange sales to smooth excessive volatility. - Communication and coordination: - Authorities were less successful in anchoring expectations and dissipating market anxieties over excessive spending prior to the elections. - Authorities intend to boost fiscal-monetary coordination and communication efforts. - To improve monetary transmission, authorities are encouraged to narrow the interest rate corridor as soon as feasible. ### Fiscal policy adaptation, financing, and debt management - FY2014/15 performance and policy stance: - Fiscal policy continued to support growth; tax revenues significantly picked up, surpassing original expectations (an increase of ½ percent of GDP expected originally and revised projections of 1 percent of GDP). - Authorities resisted election-related spending to the maximum extent possible and adhered to the investment program to avoid undue pressures on inflation or the exchange rate. - Planned fiscal adjustments and financing strategy: - Authorities intend to cut spending with respect to the approved budget and identified sector-specific budget savings amounting to about ½ percent of GDP; wages, health, education, already-begun development projects, and national security sectors excluded from cuts. - The overall fiscal deficit is expected to widen by 2 percent of GDP to about 6½ percent (7 percent in the budget). - External non-concessional financing of infrastructure projected at 4 percent of GDP; concessional financing expected at 1¼ percent of GDP. - Domestically financed deficit would be limited to 1¼ percent of GDP, with security issuances cut to almost one-third of the amount anticipated in the approved budget. - Staff recommended improving tax compliance via better VAT collection on government projects, enhanced audits of high-risk medium and large taxpayers, and upgrades in the automated valuation control system. - Use and repayment of BoU advance: - Staff concerned about higher-than-usual use of the BoU advance during the first quarter; approved advance aligned to legal ceiling of 18 percent of revenues. - About 30 percent of this approved advance amount was used in the first quarter. - Authorities proposed an IT to limit the quarterly size of the advance and a SB to set rules and controls on use of the advance in the charter of fiscal responsibility. - Staff recommended avoiding shortening the average maturity of domestic debt to prevent rollover and interest rate risks. *Source: IMF staff report excerpt (chapter/section provided).* ### 23. The BoU continues to make progress in promoting financial inclusion and financial ### _cr15321 - 23. The BoU continues to make progress in promoting financial inclusion and financial ### Financial inclusion and consumer protection - Financial literacy efforts: - Pilot tool targeting the youth. - Continuing media campaigns in various languages. - Rolling out an e-learning facility in partnership with banks. - Consumer protection: - BoU continues to enforce compliance with the guidelines. - In coordination with the Uganda Communications Commission, progress on ensuring adequate surveillance of growing mobile banking activities. ### Revising the medium-term fiscal framework - Objective: ensure debt sustainability through re-profiling medium-term investment projects. - Context: - Exchange rate depreciation increases external debt denominated in shillings. - CPIA downgrade from strong to medium performer raises more stringent debt sustainability thresholds. - Fiscal response: - Programmed medium-term deficits reduced by an average of 0.4 percent of GDP per year over FY2016/17 to FY2019/20 by postponing start of infrastructure and PPP projects and choosing concessional over non-concessional debt where possible. - Staff restated need for sound investment decisions based on technical grounds and careful assessment of contingent risks on PPP arrangements. ### External debt and debt sustainability - External debt remains at low risk of distress. - Authorities’ stance: - Maintain debt sustainability as a key buffer and for creditor/investor assessment. - Framework target: - Revised fiscal framework keeps nominal external debt below 36 percent of GDP at all times, with its peak (in present value terms) at 27 percent. ### Tax revenue priorities - Authorities plan to raise tax revenues by a minimum of ½ percent of GDP per year over the medium term through policy and administration measures. - Staff recommendations: - Resume tax policy improvements, including removal of taxpayer-specific exemptions soon after the election. - Improve use of compliance data and enforcement methods. - Deepen efforts to instill voluntary tax compliance linked to visible improvements in quality of public services. - Stakeholder feedback: taxpayers largely favor a system free of corruption accompanied by visible spending improvements. ### Protecting the poor and social protection - Government committed to preserving poverty-reducing spending despite budget cuts. - Staff welcomed protection of safeguards given temporary rise in inflation disproportionately affecting the poor. - New social protection policy expected to be approved by cabinet before the end of the fiscal year to allocate budgetary funds to supplement development partner support and ensure predictable medium-term financing. ### Overhauling structural reforms — key fronts and actions - Preserve principles of the PFM Act and complete regulations to facilitate implementation: - Staff recommended revising amendments to clarify BoU advances should not extend beyond the fiscal year, avoid excessive executive discretion on budget decisions, and keep rationale for the contingency reserve. - Regulations should address gaps, especially in resource revenue management. - Authorities indicated principles of the PFM Act will be retained. - Audit domestic arrears: - Concern that FY2013/14 stock of arrears may have been higher than previously reported. - Ongoing special audit based on strict instructions to accounting officers; authorities committed to promptly publish results. - Approve and implement public investment guidelines: - Need detailed guidelines on project appraisal, selection and impact; World Bank support and revamped Ministry of Finance structure are preparing these guidelines. - Progress on Treasury Single Account (TSA): - Donor hesitation and limited tracking capacity delayed donor account integration pilot. - Focus shifted to incorporating local governments into TSA: Fourteen local governments have been added, with plans to increase this amount to 30 by March 2016. - Amendments to BoU to enhance independence: - Proposed provisions to set BoU’s capital as a share of its monetary liabilities (instead of current fixed amount) and improve governance structure to address fiscal dominance threats. - Financial Institutions Act amendments: - Bill with parliament revises capital requirements in line with Basel III (capital conservation, countercyclical buffers, and higher capital requirements for systemically important banks); introduces agent and Islamic banking; reforms the deposit protection fund. - Streamline BoU operational and administrative costs: - Tighter control to build credibility of inflation-targeting central bank and reinforce support for ongoing recapitalization; an MoU between BoU and Ministry of Finance is yet to be agreed. - AML/CFT commitments: - Uganda remains gray-listed by the FATF due to strategic AML/CFT deficiencies. - Key outstanding actions: criminalization of individual terrorists, expansion of scope of records required, greater exchange of information with foreign counterparts. - Authorities encouraged to establish a legal framework for freezing terrorist assets and ensure adequate AML/CFT supervision of the financial sector. ### Staff appraisal — macroeconomic performance and policy stance - Program performance: generally favorable; end-June fiscal, external, and inflation targets achieved; structural progress made. - Policy stance in response to shilling depreciation and inflation: - Authorities rightly tightening policies. - Recommended actions: continue adapting monetary policy to inflation forecast from price, exchange rate, and output developments; reduce fiscal expansion and borrowing needs; finance part of the shock through use of reserves to preserve program objectives and calm markets. - Urged to strengthen fiscal-monetary coordination; clearly communicate policy rationale; strengthen buffers when possible; be ready to adjust policies if downward risks materialize. ### Monetary policy and financial sector soundness - BoU’s proactive monetary tightening assessed as successful: - Timely monetary action demonstrated forward-looking policy and determination to control inflation. - Transmission of policy rate to market rates is working well. - New market-determined auction-based foreign exchange purchase system expected to improve market signaling, mitigate excessive exchange rate volatility, and build reserves gradually. - BoU encouraged to deepen actions to ensure financial sector soundness: - Closely assess banks’ risks, frequently monitor lending portfolio quality, and strictly enforce provisioning. ### Fiscal recommendations and debt financing - Build on revenue gains and resist election-related spending pressures: - Encourage further enhancement of tax compliance and enforcement following impressive tax revenue performance in FY2014/15. - Advised to avoid supplementary budgets, refrain from reallocations from development to current spending, and protect social outlays. - Staff urges: - Strict adherence to reduced fiscal expansion and prompt resumption of security issuances at market rates to facilitate timely repayment of BoU’s advance to the government, avoid hampering inflation-targeting regime functioning, and deter crowding out credit to private sector. ### Medium-term outlook and investment strategy - Outlook supported by revenue gains, oil production, regional integration, and infrastructure investment. - Need to: - Raise tax-to-GDP ratio toward international standards. - Close tax loopholes by eliminating remaining tax-specific exemptions. - Enforce tax payments seriously. - Ensure future oil revenues complement a broad tax base and do not become indispensable. - Align regional integration progress with program objectives. - Select, assess, and sequence infrastructure projects appropriately, mobilize best possible financing terms, and ensure investment plan consistency with fiscal and debt sustainability. - Properly assess contingent liabilities and avoid government guarantees. ### Reiteration of structural reform urgencies - Avoid setbacks in PFM reform by revising amendments that would weaken original provisions and strengthen regulations. - Use contingency reserve solely for unforeseen events; limit recourse to central bank financing to temporary cash flow gaps. - Conduct exhaustive audit of domestic arrears for proper fiscal assessment and governance strengthening. - Complete charter of fiscal responsibility and improve TSA use to enhance public sector efficiency. - Promptly implement BoU Act amendments to strengthen independence, tighten BoU administrative costs, and further comply with AML/CFT requirements. *Source: IMF staff report excerpt provided in the supplied content.* ### 34. Staff recommends completing the fifth review of the PSI-supported program ### _cr15321 - 34. Staff recommends completing the fifth review of the PSI-supported program ### Staff recommendation and program adjustments - Staff recommends completing the fifth review of the PSI-supported program. - The attached MEFP outlines the macroeconomic objectives and policies for the period ahead and proposes rescheduling some structural benchmarks to take account of ongoing progress. - Staff supports the authorities’ requested changes to the program and the waiver of the nonobservance of the continuous assessment criterion on the introduction of an MCP. - In line with the new debt limits policy: - The QACs on limits to short-term external debt and on non-concessional external debt with maturities greater than one year are proposed to be eliminated. - The treatment of the overall deficit is proposed to be modified from an IT to a QAC. - The QAC on net domestic financing is proposed to be eliminated, and replaced by an IT on the ceiling on cumulative changes in temporary advances from the BoU to the central government. - End-December 2015 and end-March 2016 overall deficit targets are proposed to be revised downwards to reflect the projected less expansionary fiscal stance. - End-December 2015 and end-March 2016 targets on reserve accumulation are proposed to be lowered as reserves are expected to be partly used to finance the shocks. ### Key macroeconomic projections and indicators (selected) - Real GDP: 4.4, 3.3, 4.6, 5.3, 5.0, 5.8, 5.0, 5.8, 6.1, 6.3, 6.5 - GDP deflator: 20.9, 4.1, 2.3, 4.4, 4.2, 5.1, 8.2, 4.0, 3.2, 3.8, 4.0 - CPI (period average): 23.5, 5.8, 6.7, 2.7, 2.7, 5.5, 7.7, 6.3, 5.0, 5.0, 5.0 - CPI (end of period): 18.0, 3.6, 5.0, 5.6, 4.9, 6.4, 8.0, 5.6, 5.0, 5.0, 5.0 - Core inflation (end of period): 19.6, 5.7, 2.9, 6.1, 4.9, 6.7, 7.7, 5.7, 5.0, 5.0, 5.0 - Terms of trade (deterioration, -): 3.5, -8.2, 2.5, 3.3, 5.9, 0.9, 1.2, -2.7, -1.7, -1.3, -0.9 - Exchange Rate (Ugandan Shilling/US$): 10.1, 1.3, -2.0, ..., 11.4, .................. - Real effective exchange rate (depreciation, -): -19.9, 2.2, -2.4, ..., -9.4, .................. ### Money, credit, and monetary policy (selected) - Broad money (M3): 7.2, 6.6, 17.4, 14.2, 15.9, 16.3, 14.0, 15.0, 15.7, 16.0, 14.6 - Credit to non-government sector: 11.5, 6.4, 13.9, 15.7, 20.4, 15.0, 19.4, 15.4, 15.6, 15.2, 15.2 - Bank of Uganda policy rate (end of year CBR): 20.0, 11.0, 11.0, ..., 13.0, .................. - M3/GDP (percent): 19.0, 18.9, 20.7, 21.5, 21.9, 22.5, 22.0, 23.0, 24.3, 25.5, 26.4 - NPLs (percent of total loans): 3.9, 4.0, 5.8, ..., 4.0, .................. ### Fiscal outcomes and projections (selected) - Revenue and grants (percent of GDP): 13.1, 12.9, 13.0, 14.1, 14.8, 15.1, 15.7, 15.8, 15.8, 16.0, 16.5 - Of which: grants (percent of GDP): 1.9, 1.5, 1.0, 1.1, 1.2, 1.6, 1.9, 1.6, 1.0, 0.7, 0.6 - Expenditure (percent of GDP): 15.6, 16.5, 17.1, 18.6, 19.4, 22.1, 22.3, 22.4, 22.0, 21.9, 21.1 - Current (percent of GDP): 9.4, 9.1, 9.8, 10.0, 10.3, 10.4, 10.3, 10.2, 10.2, 10.5, 10.6 - Capital (percent of GDP): 5.8, 6.6, 7.3, 7.9, 8.5, 11.3, 11.7, 11.5, 11.2, 10.8, 10.0 - Primary balance (percent of GDP): -1.5, -2.2, -2.7, -2.9, -3.0, -5.0, -4.5, -4.4, -3.8, -3.3, -2.0 - Overall balance (percent of GDP): -2.5, -3.6, -4.1, -4.5, -4.6, -7.0, -6.6, -6.6, -6.2, -5.9, -4.7 - Excluding grants (percent of GDP): -4.5, -5.0, -5.1, -5.6, -5.9, -8.6, -8.6, -8.1, -7.2, -6.6, -5.3 - Net domestic borrowing (billion shillings): 0.0, 1.0, 2.3, 3.4, 3.3, 2.0, 1.3, 1.4, 0.6, 0.7, 0.6 - Public gross nominal debt (percent of GDP): 22.0, 26.2, 28.9, 31.9, 33.1, 36.0, 38.8, 38.7, 42.0, 44.5, 45.6 - of which: external public debt (percent of GDP): 13.2, 15.2, 16.1, 18.2, 19.3, 21.8, 25.8, 25.5, 29.3, 32.4, 34.0 ### Fiscal operations (central government, selected nominal series) - Total revenue and grants (billion shillings): 7,771; 8,245; 8,868; 10,618; 11,045; 12,631; 13,306; 14,811; 16,170; 18,132; 20,602 - Expenditures and net lending (billion shillings): 9,281; 10,523; 11,684; 13,988; 14,494; 18,503; 18,943; 20,942; 22,514; 24,780; 26,439 - Overall balance (billion shillings): -1,510; -2,277; -2,816; -3,371; -3,449; -5,872; -5,637; -6,130; -6,343; -6,647; -5,837 - Financing: external financing (net, billion shillings): 1,171; 1,418; 887; 845; 919; 4,203; 4,555; 4,789; 5,769; 5,852; 5,126 ### External sector (selected) - Exports (goods and services, percent of GDP): 20.2, 20.5, 18.8, 19.7, 18.8, 20.5, 23.1, 21.8, 20.8, 21.5, 21.7 - Imports (goods and services, percent of GDP): 33.1, 30.7, 28.8, 29.8, 30.1, 32.1, 35.4, 34.2, 32.4, 34.4, 35.7 - Current account balance (including grants, percent of GDP): -9.5, -7.5, -8.8, -8.9, -9.2, -11.0, -9.6, -10.6, -10.4, -12.1, -13.3 - Gross international reserves (US$ billions): 2.6, 2.9, 3.4, 2.9, 2.9, 3.2, 2.6, 3.0, 3.6, 4.2, 4.6 - Reserves in months of next year imports: 4.2, 4.5, 5.1, 4.0, 4.3, 3.9, 3.6, 3.8, 4.0, 4.1, 4.4 ### Monetary and banking sector (selected tables) - Money and quasi-money (M3, billion shillings): 11,296; 12,047; 14,142; 16,144; 16,389; 18,783; 18,683; 21,494; 24,863; 28,835; 33,036 - Base money (billion shillings): 3,013; 3,545; 4,092; 4,684; 5,053; 5,372; 5,814; 6,607; 7,572; 8,677; 9,911 - Credit to the private sector (annual percentage change): 11.5, 6.4, 13.9, 15.7, 20.4, 15.0, 19.4, 15.4, 15.6, 15.2, 15.2 ### Banking sector indicators (March 2012–June 2015, selected) - Regulatory capital to risk-weighted assets (percent): 21.8, 20.7, 20.9, 21.9, 24.5, 24.3, 23.1, 22.1, 23.6, 22.8, 22.5, 22.2, 23.2, 21.2 - NPLs to total gross loans (percent): 3.4, 3.9, 4.7, 4.2, 4.7, 4.0, 4.4, 6.0, 6.2, 5.8, 5.3, 4.1, 4.2, 4.0 - Return on assets (percent): 4.4, 4.4, 4.3, 3.9, 3.6, 3.3, 3.2, 2.0, 2.4, 2.1, 2.2, 2.6, 2.5, 2.8 - Net interest margin (percent): 12.5, 12.8, 12.9, 12.8, 12.5, 12.2, 11.8, 11.6, 11.4, 11.5, 11.3, 11.0, 11.0, 10.9 - Liquid assets to total deposits (percent): 37.5, 38.9, 42.5, 42.0, 42.7, 41.1, 40.6, 42.5, 45.4, 46.5, 41.8, 44.0, 44.2, 46.4 *Sources: Ugandan authorities and IMF staff estimates and projections.* ### Annex I. Exchange Rate Developments ### Annex I. Exchange Rate Developments ### Exchange rate movements and valuation - The exchange rate depreciated significantly over the last several months, with depreciation pressures picking up in April and significantly increasing since June, 2015. - Between June and September, the Ugandan shilling declined by about 20, 17, and 14 percent against the US dollar, euro, and Kenyan shilling, respectively. - In real effective terms, the shilling depreciated by about 10 percent in FY2014/15 and is now estimated to be undervalued by 10-15 percent. - The most recent External Balance Assessment (EBA-lite) analysis in May 2015 indicated a slight overvaluation of 1.1 percent. - The exchange rate depreciation reached over 40 percent year-on-year in September 2015. ### Drivers of depreciation - External factors explaining a large part of the shilling depreciation (particularly January–June 2015) include: - Weaker demand for Ugandan exports. - Less favorable terms of trade. - Tightening of global financial conditions. - Domestic factors contributing since June 2015: - Election-related uncertainties (expectations of higher spending and weakening confidence) that fueled speculation. - Additional contributors noted in FY2014/15 analysis: - Appreciation of the US dollar against major currencies. - Declining global commodity prices. - Elevated demand for foreign currency by offshore investors and key domestic sectors (energy, manufacturing). - Lower FDI inflows owing to tightening global liquidity conditions. - Delays in issuing production licenses to the extractive sector. ### Central bank actions and market response - The Bank of Uganda (BoU), consistent with its inflation targeting regime, did not counter market exchange rate dynamics but intervened sporadically to smooth depreciation. - Dollar sales by the BoU in early-March and early-July were large and drove an appreciation on impact of 65 and 215 shillings per dollar, respectively. - Relative shilling stability lasted only two months after the March intervention and two weeks after the July intervention. ### Macroeconomic context and effects - Growth and inflation: - Real GDP growth reached 5 percent in FY2014/15, driven by services and manufacturing. - Headline inflation averaged 2.7 percent in FY2014/15. - Annual core and headline inflation rose to 7.2 and 6.7 percent, respectively, in September 2015. - Food crop inflation picked up since May due to adverse weather and pest/disease problems. - External position and reserves: - The current account deficit was 9.6 percent of GDP (excluding official grants) in FY2014/15, reflecting one-off government payments for Karuma and Isimba hydropower projects, lower tourism receipts, and higher profit repatriations. - Reserve coverage remained adequate at above 4 months of imports of goods and services at the end of the fiscal year. - Financial sector: - Non-performing loans fell from 5.8 percent as of June 2014 to 4 percent of total gross loans in June 2015. - A stress test shows an additional 100 percent shilling depreciation from June levels would reduce the core capital ratio from 18.8 percent to 17.7 percent. - All banks would keep their open position within the regulatory limit of +/-25 percent of tier 1 capital. - Fiscal outcomes: - The FY2014/15 revenue-to-GDP ratio was 1½ percent higher than in FY2013/14. - Tax revenues in the first three months of FY2015/16 slightly underperformed, driven by shortfalls in corporate, withholding, and excise taxes. - Current spending was ½ percent of GDP higher than the previous year; spending on Karuma and Isimba increased by 1½ percent of GDP. - The overall deficit was 4.6 percent of GDP, financed by concessional project loans, domestic securities issuance, and withdrawals from the petroleum and energy funds. - The government used a temporary advance from the BoU in the first quarter of FY2015/16 to address cash flow difficulties. ### Impact of depreciation on growth and inflation - Potential benefits: - Real exchange rate depreciation may have boosted external competitiveness and growth, especially since import price elasticity is higher than export price elasticity. - Fiscal accounts have slightly benefited from the shilling decline. - Adverse effects: - Large pass-through to domestic prices likely offsets positive trade effects by reducing consumers’ real incomes. - Higher real interest rates required to contain inflation may hurt aggregate demand and domestic production. - More costly imports of intermediate goods can hurt domestic production. - Loss of market confidence contributed to domestic price increases and currency substitution in favor of dollar savings. ### Reserve adequacy and policy recommendations (Annex II) - Historical reserve coverage and objectives: - Over the last four years, reserves on average covered 4½ months of imports, 85 percent of M2, and 500 percent of short term debt. - Maintaining comfortable international reserves is a key policy objective to meet government foreign exchange needs, address volatile capital flows, and mitigate crises. - The BoU has conducted sterilized foreign exchange purchases, intensifying them during large portfolio inflows and strong projected government imports. - Optimal reserve level in current conditions: - Based on precautionary and non-precautionary motives and holding costs, a level that covers 3½–4 months of prospective imports is assessed as adequate for Uganda. - Some analysts suggest strengthening buffers given the large depreciation; others favor using buffers—there is broad support for flexibly adjusting targeted reserves to changing international transaction conditions. - Benefits of adapting reserve policy to lower foreign exchange inflows: - Contribute to market stabilization by lowering BoU dollar demand amid limited market supply, attenuating shilling depreciation and helping attain the inflation target with less tightening. - Provide clearer market signals: continuing reserve accumulation in a rapidly depreciating environment may signal reserve inadequacy and exacerbate nervousness. - Reduce central bank costs: lower opportunity costs on reserve assets, sterilization costs, and foregone physical investment returns. - Recommended approach: - Temporarily aim for about 3½ months of imports as an optimal reserve level. - Communicate the rationale clearly to the public. - Achieve the target through lower purchases (not large foreign exchange market sales or high public sector dollar demand). - Ensure effective fiscal-monetary coordination. - Once balance of payments flows and market conditions normalize, resume prior pace of reserve accumulation to rebuild buffers. *Source: IMF staff report annexes and accompanying text in the provided content unit.* ### 10. Monetary policy was tightened at the appropriate time to ensure that annual core ### _cr15321 - 10. Monetary policy was tightened at the appropriate time to ensure that annual core ### Monetary policy and inflation - Monetary policy was tightened to ensure that annual core inflation remains around the medium-term target of 5 percent. - The central bank rate was increased by 600 basis points from 11 percent in March to 17 percent in October. - Tightening aimed to forestall a rise in core inflation resulting from the high pass-through of the depreciation of the shilling and second-round effects from a pick-up in food crop prices. - Since Uganda has a flexible exchange rate regime, the BoU does not target the exchange rate. - The BoU continued to purchase foreign exchange in the market to build up reserves but occasionally sold foreign exchange to stem excessive volatility. ### Performance under the PSI - All end-June 2015 quantitative assessment criteria (QAC) were met. - International reserves declined but remain at adequate levels. - Ceilings on the increase in net domestic financing and the contracting or guaranteeing of new non-concessional external debt were met. - Inflation remained within the consultation target bands. - Indicative targets (IT) on tax revenues and expenditures on poverty alleviating sectors surpassed program targets. - IT on the overall deficit was missed due to higher project performance financed by stronger-than expected external financing. - IT on withdrawals from the energy and petroleum fund was missed, though just by a small margin. - Progress made in reduction of the stock of arrears; Government is working with the Auditor General to ascertain why the stock was larger than initially thought. - Commitment to conduct a thorough audit of the arrears situation and publish the report on the stock of end-June arrears by end-December (proposed updated date for structural benchmark). - Plan to apply sanctions on the incurrence of arrears to ensure no new arrears are accumulated. ### Structural reform progress - Draft PFM Act regulations under review of the First Parliamentary Council before submission to Cabinet; regulations will become effective by March 2016 (proposed updated date for structural benchmark). - Consultative meetings and workshops with Permanent Secretaries and Accounting Officers have taken place to sensitize them about the new law and draft regulations. - Draft amendments to the Bank of Uganda Act being reviewed by MoFPED before submission to Cabinet; will be submitted to Parliament by April 2016 (structural benchmark). - Charter of fiscal responsibility to be finalized for submission to Parliament after the general election, by April 2016 (structural benchmark). - Government continues to recapitalize the BoU (structural benchmark). - TSA head and TSA sub-account structure completed; donor-supported projects not yet included in the TSA. - Commitment to continue publishing quarterly reports on the stock of unpaid bills (structural benchmark). ### Macroeconomic outlook and risks - Real GDP growth projected at 5 percent for FY2015/16 and 5.8 percent for FY2016/17. - Growth drivers: scale up in public infrastructure spending (particularly HPPs) and a rebound in private sector activity as market sentiment improves in a stable post-election environment. - Private sector investment expected to be boosted by recovery in FDI inflows linked to expected issuance of oil production licenses and normalization of monetary policy. - Consumer prices expected to increase somewhat due to lagged pass-through of exchange rate depreciation and higher food crop prices. - Average core inflation projected at 7.9 percent for FY2015/16 and 6.6 percent for FY2016/17. - Current account deficit projected to widen due to increased imports to finance Government’s planned infrastructure projects and expansion in private sector activity, coupled with slow growth in exports. - Government’s infrastructure related imports will be fully externally financed and therefore not exert pressure on the balance of payments. - International reserves projected to decline to 3.6 months of imports in FY2015/16, recover to 3.8 months of imports in FY2016/17, and gradually return to over 4 months of imports thereafter. - Medium-term outlook favorable for oil sector as Government issues production licenses and negotiations on oil-related infrastructure progress. - Risks increased owing to difficulties in neighboring countries, continued strengthening of the US dollar, lower international commodity prices, seasonal factors regarding food crops, and deteriorating market sentiment in the run-up to the February 2016 general election. ### National Development Plan (NDP II) and priorities - NDP II came into force in June 2015; main policy framework for medium-term macroeconomic and development policy. - Plan prioritizes 3 of the 9 opportunities identified in Vision 2040: agriculture; tourism; and mining, oil and gas. - Identifies infrastructure and human capital as fundamental development areas. - Introduces projects including the standard-gauge railway, the oil refinery, oil-related infrastructure serving the Albertine region, and new roads and electricity transmission projects. ### Fiscal policy, revenue, and domestic debt strategy - Government reduced fiscal expansion approved in FY2015/16 budget. - Deficit expected to increase from 4.6 percent in FY2014/15 to 6.6 percent of GDP (as opposed to 7.0 percent presented in the budget). - Domestic borrowing needs in the market will fall from Shs. 1.4 trillion to Shs. 530 billion. - Government will issue securities for Shs. 750 billion in the three last quarters of the fiscal year. - Planned actions in the domestic debt market: - Reduce amounts offered at bond auctions and increase amounts at T-bills auctions to reduce risk of locking-in high interest rates. - Offer the 2-year, 5-year and 10-year bonds at the same auction (currently only two bonds are offered at each bond auction). - Change the modality for treasury securities auctions to enhance performance and minimize equilibrium yields. - Commitment to execute the budget in line with the agreed terms under the PSI and to execute the budget well below the ceilings approved by Parliament to reflect the reduced fiscal expansion. ### Tax policy and administration measures - Plan to increase tax revenue by 0.3 percent of GDP in the current fiscal year, surpassing the nominal budget target. - Identified tax administration actions to mitigate potential revenue shortfalls in FY2015/16 and compensate for shortfalls in the first three months of the year. - Domestic tax actions: - Conduct critical analysis of returns on a monthly basis. - Closely monitor large taxpayers (VIPs and high net worth investors/individuals). - Ensure data matching between domestic taxes and customs. - Enforce the new simplified presumptive regime to bring more informal sector players into the tax net. - Provide information to taxpayers on the impact/interpretation of new policy measures. - Customs actions: - Enhance valuation by adding more items to the database. - Improve bonded warehousing management. - Centralize customs document processing. - Strengthen risk management through establishment of a national targeting center. - Medium-term tax strategy: - Simplify the tax regime, remove ambiguities, reassess rationale and value added of remaining tax exemptions, undertake comprehensive taxpayer education, and further automate and simplify tax management and compliance systems. ### Expenditure prioritization and public investment - Expenditure cuts to be realistic and focus on lower-than-programmed capital investment on slow moving projects and lower non-essential recurrent expenditures. - Cuts designed to avoid significant adverse effects on growth and to prevent arrears accumulation; poverty-reducing spending will be preserved. - Commitment to properly sequence infrastructure projects after feasibility and commercial viability confirmed; all projects to be approved by the Development Committee. - Finalizing the Public Investment Management Guidelines and Procedures (structural benchmark). ### Major infrastructure projects and medium-term adjustments - Main FY2015/16 projects: 1. Continuation of Karuma and Isimba dams construction, with spending amounting to $680 million. External disbursements delayed but expected by end-2015. Government provided 15 percent of total costs’ contribution in FY2014/15. 2. Road construction using machinery acquired through a loan amounting to $132 million for purchase of construction equipment. 3. Upgrade of Entebbe airport financed by a loan of a total value of $202 million―of which $80 million is to be spent in FY2015/16. - Medium-term investment plan adjustments: - Pace of spending on Karuma slowed. - Spending on the SGR reduced in FY2016/17 and spread over a larger number of years. - Investment in the refinery reduced in FY2017/18 and spread over a larger number of years. - Various road projects delayed by one year and will commence in FY2017/18. - Road construction and the planned oil refinery to be undertaken by PPP arrangements. - Public Private Partnership Act effective since October 2015; Government initiating institutions for PPP oversight including preparing regulations, setting up PPP unit, and establishing PPP committee within MoFPED. ### Monetary and financial sector policies - BoU to remain focused on keeping inflation low and stable; will monitor domestic and external developments and adapt monetary policy stance as needed. - BoU changed modality of foreign exchange purchases to an auction-based methodology where all banks are eligible to participate; banks place offers daily and BoU accepts lowest price bids first and works upwards. - Auction experience resulted in price deviations of less than 0.2 percent between successful offers during the same auction. - BoU issued new guidelines to ensure spread between auction prices remains well below 1 percent at all times. - Sales of foreign exchange in the market will be limited to smoothing excessive volatility. - Amendments to the BoU Act to be finalized by April 2016 (structural benchmark); new Act to include: - Limit temporary advances to Government to 10 percent of tax revenue of the previous year. - Establish the capital of the BoU as an adequate percent of monetary liabilities. - Regulate management of the Petroleum Revenue Investment Reserve established by the new PFM Act. - BoU implementing policies to control non-monetary policy related costs in line with reforms in its latest business plan. - BoU strengthening prudential oversight, monitoring banking system health through onsite inspections, off-site analysis, and stress-testing for further currency depreciations, interest rate increases, liquidity pressures, and credit sector concentration risks. ### Policy coordination and fiscal controls - MoFPED and BoU to strengthen coordination through regular meetings and agree guiding principles in updated Memorandum of Understanding to be signed shortly. - Joint strategy to communicate policies to the public to manage expectations during the election period. - MoFPED committed to containing temporary advances at manageable levels so they can be repaid within the year. - Proposal to include in the PSI a new IT to measure changes in the advance from the BoU to Government. - MoFPED to introduce specific rules and controls around flows, use, and balances of the Uganda Consolidated Fund (UCF) and UCF/TSA and institutionalize these in a framework agreement with the BoU and in the charter of fiscal responsibility (new proposed structural benchmark). - Government will ensure all future oil revenues are deposited in the new Petroleum Fund and earmarked to infrastructure financing through regular budget appropriations. - Current stocks of Shs. 1,066 and Shs. 190 billion from the oil and energy funds will be fully transferred to the new petroleum fund, in addition to the $36 million in capital gains received following the commencement of the Act. ### Social protection - Government committed to strengthening the social protection system to ensure benefits of growth are broadly shared; focus on reducing poverty and inequality and providing support for lower income segments. - Draft social protection policy developed and submitted to Cabinet for approval; outlines instruments: social insurance, direct income support, social care, and support services. - National Social Protection Policy to provide framework for increasing coverage and delivering coordinated interventions across formal and informal sectors. - GoU entered into a Memorandum of Understanding with DFID and the Government of Ireland to implement Phase 2 of the Social Assistance Grants for Empowerment Program over a 5-year period (FY 2015/16–FY 2020/21), adding 40 new districts to the existing 15 districts covered in Phase 1. - MoU deliverables include strengthening institutional framework for coordinated and gender sensitive social protection service delivery and enhancing an enabling environment for inclusive social protection policy. *Source: _cr15321 (IMF staff report excerpt)* ### 38. Progress on PFM reforms is ongoing. The implementation of the new PFM Act, in force ### Progress on PFM reforms is ongoing. The implementation of the new PFM Act, in force since March 2015, has increased transparency and scrutiny of the budget process and fiscal frameworks, and improved standards for reporting, budgeting, procurement, audit, and oversight. ### Public Financial Management (PFM) reforms and Treasury Single Account (TSA) - Implementation status and intent: - The new PFM Act has been in force since March 2015 and has increased transparency and scrutiny of the budget process and fiscal frameworks, and improved standards for reporting, budgeting, procurement, audit, and oversight. - Government will ensure that the proposed amendments to the Act, needed to facilitate budget implementation, keep its main principles intact. - TSA pilot and rollout: - Pilot experience including 14 local governments in the TSA has been positive, and government plans to expand it to all local governments within 2 to 3 years. - Proposed modified structural benchmark: By March 2016, 30 local governments will be using the TSA. - Government will continue to engage development partners on streamlining disbursement and reporting modalities for proper operation under the TSA. - Government will upgrade the data center to facilitate inclusion of more entities in the TSA. - Structural benchmark proposals (selected): - Ministry of Finance to conduct a pilot exercise aimed at including donor-supported projects in the TSA: March 2016 — Off track; donors require more time as they consider existing systems do not provide sufficient safeguards. Structural benchmark reformulated. - Proposed new structural benchmark: Ministry of Finance to include 30 local governments in the TSA structure: March 2016. ### Identity cards, revenue mobilization, and financial integrity measures - National ID program: - 10 million identity cards have been issued, surpassing the PSI benchmark of 3 million. - Expected impacts: support efforts to strengthen revenue mobilization, promote financial inclusion through unique identification of financial sector clients, and combat money laundering and the financing of terrorism. - AML/CFT and anti-terrorism measures: - Implementation accelerated for the action plan to comply with AML/CFT standards. - Amendments to the AML Act are under consideration by Parliament. - Draft regulations for the AML Act (under review by the MoFPED) expand the scope of records required to be kept and ensure unconditional exchange of information with foreign counterparts, among other actions. - Amendments to the Anti-Terrorism Act, including definitions to properly criminalize terrorist financing, were adopted in June, and its regulations were issued in August, 2015. - These amendments, together with the full constitution of the Board of the Financial Intelligence Authority, prevented Uganda from being blacklisted by the Financial Action Task Force (FATF). - Government commitment: promptly addressing any remaining strategic AML/CFT deficiencies. ### Financial access, inclusion, and regulatory developments - Regulatory amendments and oversight: - Draft amendments of the Financial Institutions Act (FIA) prepared to include provisions regulating agency banking, expected to further spur financial deepening and access. - Progress made to oversee operations of mobile money transactions. - Financial inclusion progress: - Efforts ongoing to enhance financial access and inclusion through regulatory reforms and oversight. ### Statistics, arrears data, and e-GDDS engagement - Statistics upgrade and e-GDDS: - Further upgrading of the statistics compilation and dissemination system remains a critical objective. - Authorities are willing to work with the Fund to implement the recommendations under the e-GDDS, as suggested in Ms. Lagarde’s letter of May, 2015, to improve data transparency standards by using standardized formats. - Arrears data: - Progress made to overcome considerable coordination difficulties that prevent straightforward collection and dissemination of arrears data, although further steps are required and are under consideration. - Reporting commitments (structural benchmarks and publication): - Ministry of Finance to publish quarterly reports signed by the PS/ST on the stock of unpaid bills of all government entities contained in the central government votes: - Dates: November 15, 2015 for quarter ending September 30, 2015; February 15, 2016 for quarter ending December 31, 2015; May 15, 2016 for quarter ending March 31, 2016. - Ministry of Finance to publish a report signed by the PS/ST on the stock of domestic arrears of all government entities contained in the central government votes: - Target: September 30, 2015 for the quarter ending June 30, 2015 — Not met; government needs to audit and reconcile figures before publication. ### East African Community (EAC) regional integration - Ongoing actions: - Progress towards EAC regional integration will continue, including work to establish regional institutions at the EAC level and to create a fiscal surveillance process, including preparation of a medium-term convergence program. - Enactment of the Elimination of Non-Tariffs Bill in March 2015. - Launch of a new scorecard to assess progress towards the Common Market Protocol and highlight key implementation gaps. - EAC Capital Markets Authorities plan to integrate regional financial sectors and link up the stock markets. ### Program monitoring, quantitative assessment criteria (QACs), indicative targets (ITs), and structural benchmarks - Monitoring framework: - Progress on implementation of program policies will be monitored through QACs, ITs, and SBs detailed in attached Tables 1, 2, and 3 and through semi-annual reviews. - Two QACs (the overall deficit and the international reserves) are proposed to be modified for end–December 2015 to better reflect the updated macroeconomic framework and plans, and to be monitored at the sixth PSI review. - Requests by authorities: - Turn the previous IT on the overall deficit into a QAC and drop the QAC on net domestic financing. - Add a new IT on cumulative changes in temporary advances from the BoU to the central government. - Drop the ceilings on nonconcessional and short-term external borrowing in line with the new debt policy guidelines. - Indicative targets are proposed for March 2016. - The sixth review is expected to be completed by end-June 2016. - Attachment Table highlights (selected numeric outcomes and targets — cumulative change from beginning of fiscal year unless otherwise stated): - Ceiling on the increase in net domestic financing of the central government (Billions of Ugandan shillings): - Program Adjusted Target / Outturn Result examples: 2,461 / 2,081 / 1,632 — Met; 2,896 / 2,518 / 2,002 — Met; 2,526 / 2,417 / 2,400 — Met. - Ceiling on the stock of external payment arrears incurred by the public sector: 0 — Met across reporting dates. - Ceiling on contracting or guaranteeing of new nonconcessional external debt with maturities greater than one year by the public sector (Billions of Ugandan shillings): - Program Adjusted Target / Outturn Result examples: 2,200 / 2,200 / 201 — Met; 2,200 / 2,200 / 2,134 — Met; 3,000 / 2,217 — Met. - Minimum increase in net international reserves of the Bank of Uganda (US$mn): - Examples: Program Adjusted Target / Outturn Result: -275 / -175 / 238 — Met; -175 / -77 / -101 — Not met; -482 / -490 / -308 — Met. - Share of oil revenue placed in the Petroleum Fund: 100 — Met across reporting dates. - Indicative target — Ceiling on the overall deficit of the Central Government: - Example row: n.a. / n.a. / n.a. / n.a.; later: 3,371 / 3,262 / 3,319 — Not met. - Floor on tax revenue (Billions of Ugandan shillings): 4,362 / 4,454 — Met; 6,576 / 6,751 — Met; 9,397 / 9,485 — Met. - Expenditures on poverty alleviating sectors (Billions of Ugandan shillings): 1,277 / 1,420 — Met; 2,141 / 2,233 — Met; 2,994 / 3,032 — Met. - Net change in the stock of domestic arrears: - Example rows: -70 / -58 — Not met; -80 / -96 — Met; -212 / n.a. / n.a. - Ceiling on withdrawals from energy and petroleum funds (Billions of Ugandan shillings): 1,230 / 899 — Met; later 1,096 / 1,100 — Not met. - Inflation consultation clause (annual percentage change, twelve-month period average core inflation): - Outer band (upper limit): 8.7 / 8.3 / 8.0 - Inner band (upper limit): 7.7 / 7.3 / 7.0 - Core inflation target: 5.7 / 3.1 — Not met; 5.3 / 2.9 — Not met; 5.0 / 3.3 — Met - Inner band (lower limit): 3.7 / 3.3 / 3.0 - Outer band (lower limit): 2.7 / 2.3 / 2.0 - Quantitative Assessment Criteria and Indicative Targets for September 2015–March 2016 (selected): - Ceiling on the overall deficit of the Central Government (Billions of Ugandan shillings) — Program / Revised Program examples: - 1,682 / 3,215 / 2,346 / 4,479 / 3,814. - Minimum increase in net international reserves of the Bank of Uganda (US$mn) — Program / Revised Program examples: - 49 / 111 / -225 / 174 / -281. - Floor on tax revenue (Billions of Ugandan shillings) — Program / Revised Program examples: - 2,441 / 5,199 / 5,282 / 7,823 / 7,997. - Ceiling on cumulative changes in temporary advances from Bank of Uganda to the central government — example Revised Program values: 268; 118. - Net change in the stock of domestic arrears — example targets: -20 / -40 / -39 / -60 / -80. - Structural benchmarks (selection, dates and status as provided): - Ministry of Finance to submit to Parliament amendments to the Bank of Uganda Act (To strengthen monetary policy independence and credibility of the central bank): April 2016 — Some progress; draft under review. - Government to continue with annual recapitalizations of the Bank of Uganda with marketable securities to bring capital to the statutory level until amendments to the Bank of Uganda Act come into force (To enhance central bank efficiency and discipline): October 2015 — Not met; BoU recapitalization catered for in FY2015/16 budget; recapitalization process started; BoU making progress on business plan implementation. Revised date: November 2015. - Ministry of Finance to publish quarterly reports signed by the PS/ST on the stock of unpaid bills (To facilitate control and reduction of unpaid bills): November 15, 2015 for quarter ending September 30, 2015; February 15, 2016 for quarter ending December 31, 2015; May 15, 2016 for quarter ending March 31, 2016. - Ministry of Finance to publish a report on the stock of domestic arrears (To facilitate control and reduction of expenditure arrears): September 30, 2015 for quarter ending June 30, 2015 — Not met; government needs to audit and reconcile figures before publication. Revised date: December 2015. - Government to have issued a minimum of 3 million ID cards under the new national identification system (To support revenue collection, identification of financial sector clients, and combat money laundering and terrorism financing): July 2015 — Met. - Regulations for implementation of the PFM Act to become effective (Ensure efficient PFM implementation and oil revenue management): July 2015 — Not met; government needs to wait for approval of PFM Act amendments; current draft of regulations needs substantive changes, mainly on oil revenue management. Revised date: March 2016. - Ministry of Finance to send to Parliament the charter of fiscal responsibility (To improve fiscal and macroeconomic management): April 2016 — On track; current draft under internal discussion. - Ministry of Finance to develop Public Investment Management Guidelines and Procedures (To strengthen capacity of MDAs in feasibility, project preparation, appraisal, financing assessments): December 2015 — On track; World Bank consultants procured; guidelines produced; training facilitated. - Proposed: Ministry of Finance to introduce specific rules and controls on the intra-year use and balances of the Uganda Consolidated Fund (UCF) and UCF/TSA and institutionalize those rules in a framework agreement with the BOU and in the charter of fiscal responsibility (To improve fiscal and macroeconomic management): April 2016. ### Technical Memorandum of Understanding (TMU) — definitions and reporting - Coverage: - The TMU defines the quarterly QACs and ITs for the PSI program over December 31, 2015—March 31, 2016, and sets reporting requirements under the instrument. - Exchange rate conversions (Text Table 1: Program Exchange Rates, end-June 2015): - US Dollar (US$) 1.0 - British Pound/US$ 0.636213 - Japanese Yen/US$ 122.45 - SDR/US$ 0.711039 - Kenyan Shilling/US$ 98.6394 - Tanzania Shillings/US$ 2,020.35 - Euro/US$ 0.893735 - Canadian dollar/US$ 1.2474 - Australian dollar/US$ 1.302083 - Ugandan Shillings/US$ 3,301.80 - Inflation consultation mechanism (Text Table 2: Inflation Targets): - Dec. 2015 / Mar. 2016: - Outer band (upper limit) 8.0 / 8.0 - Inner band (upper limit) 7.0 / 7.0 - Core inflation target 5.0 / 5.0 - Inner band (lower limit) 3.0 / 3.0 - Outer band (lower limit) 2.0 / 2.0 - Consultation rule: If observed average CCPI inflation for a test date linked to a PSI program review falls outside the outer band, authorities will complete a consultation with the Executive Board of the Fund on their proposed policy response before requesting completion of the review. BoU will report to the public reasons for any breach of outer bands and its policy response, and will conduct discussions with Fund staff when observed average CCPI inflation falls outside the inner band for December 2015. - Ceiling on overall deficit (QAC) — definitional points: - The QAC on the ceiling on the overall deficit of the central government is defined as the cumulative sum, from the beginning of the fiscal year, of: - net domestic financing (NDF) as defined in the TMU; - net external financing (NEF), defined as disbursements minus amortization of loans (including budget support and project loans, concessional and non-concessional), internationally-issued bonds, and other liabilities to nonresidents, excluding nonresidents’ holdings of domestically-issued government securities; plus external exceptional financing; - net proceeds from sales of non-financial assets including privatization receipts. - NDF definition (cash basis, below the line): sum of: - change in net claims on the central government by the banking system (difference between outstanding bank credits to central government and central government deposits, excluding deposits in the Energy and Petroleum Funds and project accounts with the banking system and the central bank; credits include bank loans and advances and holdings of government securities and promissory notes). NDF by deposit corporations calculated from monetary authority and deposit corporations balance sheets as per the deposit corporations’ survey (DCS). - change in net claims on the central government of domestic nonbank institutions and households (treasury bills, bonds or other government securities held by nonbank institutions and households, including nonresident individuals and nonresident financial institutions, plus any other liabilities of the central government to domestic nonbank institutions or households). - All changes calculated as difference between end-of-period stocks, net of valuation changes from currency movements. *Source: IMF staff report text provided in the content unit.* ### 6. Changes in NEF will be measured using external financing (net) provided in the monthly ### _cr15321 - 6. Changes in NEF will be measured using external financing (net) provided in the monthly ### Measurement of Changes in NEF - Changes in NEF will be measured using external financing (net) provided in the monthly government financial statistics. - These data will be based on reconciled donor disbursement figures obtained by the central bank and by Ministry of Finance, Planning, and Economic Development (MoFPED) through the Debt Management and Financial Analysis System (DMFAS) and Aid Management System (AMS). ### Floor on the Net International Reserves (NIR) of the Bank of Uganda (QAC) - NIR definition for program-monitoring: reserve assets of the BoU net of short-term external liabilities of the BoU. - Reserve assets: external assets readily available to, and controlled by, the BoU; exclude pledged or otherwise encumbered external assets (including assets used as collateral or guarantees for third-party liabilities). - Short-term external liabilities: liabilities to nonresidents of original maturities less than one year contracted by the BoU; include outstanding IMF purchases and loans. - For program-monitoring, reserve assets and short-term liabilities at the end of each test period will be calculated in U.S. dollars by converting stocks from their original denomination at program exchange rates (as specified in text table 1). - NIR limits are the cumulative changes of the NIR stock from the beginning of the respective fiscal year to the specified dates. ### Share of Oil Revenue Placed in Petroleum Fund (QAC) - Purpose: avoid petroleum revenues bypassing the Ugandan budget framework. - 2015 PFM Act established a petroleum fund; while Act becomes operational, government established a petroleum revenue account in the BoU. - QAC deemed satisfied if 100 percent of any kind of petroleum-related revenues (even before start of oil production) is transferred to this account upon collection by URA. - These resources may then be spent or saved as governed by the 2015 PFM Act. ### Ceiling on Cumulative Changes in Temporary Advances from the BoU to the Central Government (IT) - Legal background: GoU may receive “temporary advances” from the BoU to cover temporary deficiencies of recurrent revenue, up to 18 percent of recurrent revenues over the fiscal year, according to Section 33 of the 2000 BoU Act. - Issues: 2000 BoU Act does not specify repayment timing or measurement of advance amounts; potential risk of extensive use replacing domestic market financing and monetization of fiscal deficits. Envisaged BoU Act amendments expected to be submitted to Parliament in April, 2016. - At the beginning of FY2015/16, GoU requested access up to about Ush 2,000 billion, with commitment to fully repay by end of fiscal year; intended to utilize periodically for cash flow management. - Purpose of indicative target: define and monitor balance of outstanding temporary advances and ensure prompt repayment; reduce likelihood advances bypass domestic treasury securities issuance. - Definition and measurement: - Cumulative change in temporary advances = cumulative change, from beginning of fiscal year, in adjusted net claims on central government by the BoU. - Adjusted net claims = outstanding amount of BoU credit to central government minus central government's deposits, excluding deposits in administered accounts (including the energy and petroleum funds) and project accounts with the central bank. - Credits comprise BoU loans and advances to the government and holdings of government securities and promissory notes. - Calculation basis: data from balance sheets of the monetary authority as per the DCS. ### Floor on Expenditures on Poverty Alleviating Sectors (IT) - Indicative floor covers domestic expenditures inclusive of wages and salaries in Health, Education, Water and Environment and Agriculture sectors, as defined by the GoU functional budget classification, excluding externally financed expenditures. - Compliance verified on basis of releases. ### Ceiling on Issuance of Guarantees by the Government or Bank of Uganda (IT) - Indicative target aims to prevent accumulation of contingent liabilities by the GoU (including entities such as ministries, agencies and authorities). - Included: any direct contingent liabilities of the GoU (including entities that are part of the GoU such as ministries, agencies and authorities). - Excludes guarantee programs with explicit budget appropriations. ### Tax Revenue (IT) - Floor applies on tax revenue of the central government measured cumulatively from the beginning of the fiscal year. - Tax revenue defined as sum of: - direct domestic taxes (PAYE, corporate tax, presumptive tax, other direct taxes, withholding tax, rental income tax, tax on bank interest, casino tax and unallocated receipts); - excise duty and value-added taxes net of refunds; - infrastructure levy; - taxes on international trade minus temporary road licenses and fees to hides and skins, - Definition follows GoU’s revenue classification. ### Net Accumulation of Domestic Arrears of the Government (IT) - Ceiling applies to net accumulation of domestic arrears of the central government as an indicative target; a negative target represents a floor on net repayment. - Ceiling for each test date measured cumulatively from the beginning of the fiscal year. - Unpaid bill definition: any verified outstanding payment owed by any entity that forms part of central government votes for utilities, rent, employee costs, other recurrent, court awards, compensation, contributions to international organizations, development, taxes, and other deductions. - Domestic arrears: total stock of unpaid bills as of June 30 of the fiscal year as reported in the consolidated financial statements of the GoU. - For quarters other than quarter ending June 30: net change in stock of unpaid bills used as indicative target. - For quarter ending June 30: change in total stock of arrears as reported in consolidated financial statements used as indicative target. ### Ceiling on Withdrawals from the GoU Deposits from the Petroleum and Energy Funds (IT) - Purpose: channel these resources to key infrastructure projects while ensuring coordination with BoU for liquidity management. - Ceiling applies on withdrawals measured cumulatively from beginning of respective fiscal year. - Withdrawals restricted to meet GoU’s share of spending on externally-financed infrastructure projects listed in Text Table 3: - Karuma and Isimba hydropower projects (HPPs) - Standard Gauge Railway - Entebbe Airport upgrade ### Adjusters - Adjustor related to budget support: - NIR and overall deficit targets based on program assumptions regarding budget support excluding assistance under HIPC Initiative and MDRI. - Uganda shilling equivalent of projected budget support (grants and loans) excluding HIPC Initiative and MDRI assistance on a cumulative basis from beginning of fiscal year presented under Schedule A. - Floor on cumulative increase in NIR of BoU adjusted upward (downward) by amount budget support (grants and loans) excluding HIPC/MDRI exceeds (falls short of) projected amounts. - Ceilings on cumulative increase in overall deficit adjusted downward (upward) by amount budget support grants excluding HIPC/MDRI exceeds (falls short of) projected amounts. - Schedule A (Ush billions; cumulative from beginning of respective fiscal year): - Dec-15 Mar-16 — Budget support grants: 110142 - Dec-15 Mar-16 — Budget support loans: ---- - Adjustors related to financing of infrastructure projects: - GoU deposits in Energy Fund and Petroleum Fund will be exclusively used to co-finance externally-financed infrastructure projects listed in Text Table 3 for current FY. - Foreign currency-denominated deposits of the Petroleum Fund do not constitute part of BoU reserves and are recorded under other foreign assets of the BoU; further foreign currency inflows to the Fund recorded outside reserves under other foreign assets. - Stock of the Energy and Petroleum Funds as of end-June 2015 (Ush billions and USD millions): - Energy Fund: Ush 190 0 (BoU reserves) - Petroleum Fund: Ush 1,186 0 (BoU other assets) - Adjustor on expenditures to co-finance externally-financed infrastructure projects: - Ceilings on cumulative increase in overall deficit and cumulative withdrawals from Petroleum and Energy Funds adjusted downward (upwards) by amount domestic currency equivalent of spending to co-finance externally-financed infrastructure projects financed by withdrawals falls short of (exceeds) projected amounts as set out in Schedule B. - Any upward adjustment capped by 10 percent of amounts in Schedule B. - Spending on these projects financed by external borrowing not included in this adjuster. - Schedule B (Ush billions; cumulative from beginning of respective fiscal year): - Dec-15 Mar-16: 173253 - Adjustor on inflows into the Petroleum Fund: - Ceilings on cumulative increase in overall deficit adjusted upward (downward) by amount inflows into the petroleum fund (excluding valuation changes) falls short of (exceeds) projected amounts as set out in Schedule C. - Schedule C (Ush billions; cumulative from beginning of respective fiscal year): - Dec-15 Mar-16: ---- - Adjustor on foreign-currency spending to co-finance externally-financed infrastructure projects: - Floor on change in NIR adjusted upward (downward) by amount GoU’s spending in foreign currency to co-finance externally-financed infrastructure projects falls short of (exceeds) projected amounts in Schedule D. - GoU will first withdraw foreign-currency portion of its deposits once there are new foreign-currency inflows to the Energy and Petroleum Funds. - Schedule D (US$ millions; cumulative from beginning of respective fiscal year): - Dec-15 Mar-16: ---- - Adjustor on recapitalization of BoU: - Ceilings on overall deficit adjusted upward (downward) by amount recapitalization of BoU exceeds (falls short of) projected amounts in Schedule E. - Schedule E (Ush billions; cumulative from beginning of respective fiscal year): - Dec-15 Mar-16: 200200 - Adjustor related to externally-financed projects: - Ceiling on overall deficit adjusted downward (upward) by amount external financing tied to projects (concessional and non-concessional) falls short of (exceeds) projected amounts in Schedule F. - Any upward adjustment capped by 10 percent of amounts in Schedule F. - Schedule F (Ush billions; cumulative from beginning of respective fiscal year): - Dec-15 Mar-16: 20903266 ### Ceiling on the Accumulation of New External Payments Arrears Incurred by the Public Sector - Debt definition follows point 9 of the Guidelines on Performance Criteria with Respect to External Debt (Executive Board’s Decision No. 6230-(79/140), as amended by Decision No 14416-(09/91), effective December 1, 2009), and applies to debt and to commitments contracted or guaranteed for which value has not been received. - Extract of debt definition: - Debt understood as a current, i.e., not contingent, liability created under a contractual arrangement through provision of value in the form of assets or services requiring future payments to discharge principal and/or interest liabilities. - Primary forms include: (i) loans (including deposits, bonds, debentures, commercial loans, buyers' credits, repurchase agreements, official swap arrangements); (ii) suppliers' credits; (iii) leases (present value at inception of lease payments expected during the agreement excluding operation/repair/maintenance payments). - Arrears, penalties, and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are included. - Public sector composition: general government (central government, local governments, monetary authorities) and public corporations subject to ‘control by the government’ (ability to determine general corporate policy or at least 50 percent government ownership). - Contracting and guaranteeing defined as approval by Parliamentary resolution as required in Section 36(5) and 39(1) of the Public Finance and Management Act, 2015. - Ceiling on accumulation of new external payments arrears is zero; to be observed on a continuous basis. - Applies to change in stock of overdue payments on debt contracted or guaranteed by public sector from their level at end-June 2015. - External debt payment arrears: external debt service obligations reported by Statistics Department of the BoU and Macro Department of the Ministry of Finance that have not been paid when due as specified in contractual agreements; exclude arrears on obligations subject to rescheduling. ### Monitoring and Reporting Requirements - (Section heading present; detailed reporting and monitoring requirements follow in the source text beyond this excerpt.) *Source: _cr15321 - 6. Changes in NEF will be measured using external financing (net) provided in the monthly* ### 32. The GoU will submit information to IMF staff with the frequency and submission time lag ### 32. The GoU will submit information to IMF staff with the frequency and submission time lag as indicated in Table 1 ### Submission logistics and tracking - The quality and timeliness of the data submission will be tracked and reported by IMF staff. - The information should be mailed electronically to afruga@imf.org. ### I. Bank of Uganda — Reporting requirements (selected items from Attachment Table II.1) - Issuance of government securities, repurchase operations and reverse repurchase operations. - Frequency: Weekly - Submission Lag: 5 working days - Operations in the foreign exchange market and the level of the BoU‘s international reserves. - Frequency: Weekly - Submission Lag: 5 working days - Interest rates (7 day interbank, commercial bank prime lending rate, government securities). - Frequency: Weekly - Submission Lag: 5 working days - Private sector credit growth by shilling and forex, and excess reserves of commercial banks. - Frequency: Monthly - Submission Lag: 5 working days - Disaggregated consumer price index. - Frequency: Monthly - Submission Lag: 2 weeks - Balance sheet of the BoU, consolidated accounts of the commercial banks, and depository corporations’ survey. - Frequency: Monthly - Submission Lag: 4 weeks - Monthly balances of net foreign assets, net domestic assets, and base money of the BoU. - Frequency: Monthly - Submission Lag: 4 weeks - Details on the government position at the central bank including deposits broken down by i) net public debt, ii) government project accounts, iii) Petroleum Fund (specifying the currency), iv) Energy Fund, v) government ministries accounts, and the remainder in vi) other deposits. In addition, liabilities broken down by i) appropriation account (UCF), ii) other drawdown accounts, iii) government securities accounts and the remainder in iv) other liabilities. Detailed information about the recording of the recapitalization of the BoU. - Frequency: Monthly - Submission Lag: 4 weeks - Monthly foreign exchange cash flow table of BoU. - Frequency: Quarterly - Submission Lag: 4 weeks - Statement of (i) cash balances held in project accounts at commercial banks; (ii) total value (measured at issue price) of outstanding government securities from the Central Depository System (CDS); and (iii) the stock of government securities (measured at issue price) held by commercial banks from the CDS. - Frequency: Quarterly - Submission Lag: 6 weeks - Summary of (i) monthly commodity and direction of trade statistics; (ii) disbursements, principal and interest, flows of debt rescheduling and debt cancellation, arrears, and committed undisbursed balances—by creditor category; and (iii) composition of nominal HIPC Initiative assistance. - Frequency: Quarterly - Submission Lag: 6 weeks - Summary of stock of external debt, external arrears, and committed undisbursed loan balances by creditor. - Frequency: Quarterly - Submission Lag: 6 weeks - Standard off-site bank supervision indicators for deposit money banks. - Frequency: Quarterly - Submission Lag: 4 weeks - Summary table of preliminary program performance comparing actual outcome with adjusted program targets for (i) net claims on central government by the banking system; (ii) new non-concessional external borrowing; and (iii) net international reserves. - Frequency: Quarterly - Submission Lag: 6 weeks - Currency composition of the BoU’s international reserves in unit of each currency at each end of quarter. - Frequency: Quarterly - Submission Lag: 6 weeks ### II. Ministry of Finance — Reporting requirements (selected items from Attachment Table II.1) - Summary of central government accounts. Revenues shall be recorded on a cash basis, with a breakdown including infrastructure levy. Expenditures shall be recorded when checks are issued, except for domestic and external debt-service payments, cash transfers to districts, and externally funded development expenditures. Expenditures on domestic interest will be recorded on an accrual basis and external debt service will be recorded on a commitment basis (i.e., when payment is due). - Frequency: Monthly - Submission Lag: 4 weeks - Summary of the stock of unpaid bills by government entities contained in the central government votes as reported by the Accountant General and signed by the PS/ST. - Frequency: Quarterly - Submission Lag: 6 weeks - Summary of the stock of arrears by government entities contained in the central government votes as reported by the Accountant General and signed by the PS/ST. - Frequency: Annual - Submission Lag: 3 months - Summary of contingent liabilities of the central government and the BoU. For the purpose of the program, contingent liabilities include all borrowings by statutory bodies, government guarantees, claims against the government in court cases that are pending, or court awards that the government has appealed. - Frequency: Quarterly - Submission Lag: 6 weeks - Detailed monthly central government account of disbursed budget support and project grants and loans (less change in the stock of project accounts held at the BoU and commercial banks), HIPC support, and external debt service due and paid. - Frequency: Quarterly - Submission Lag: 4 weeks - Detailed central government account of disbursed donor project support grants and loans. - Frequency: Monthly - Submission Lag: 6 weeks - Statement on new external loans contracted or guaranteed by the central government and the BoU during the period according to loan agreements. Parliament resolutions on any new loans. - Frequency: Quarterly - Submission Lag: 6 weeks - Updated national accounts statistics (real and nominal) according to UBOS and medium-term projections. - Frequency: Quarterly - Submission Lag: 12 weeks - Releases of domestic expenditures on wages and salaries in the Health, Education, Water and Environment and Agriculture sectors, as defined by the Government of Uganda’s functional budget classification, with a breakdown based on financing (domestically financed or externally financed). - Frequency: Quarterly - Submission Lag: 6 weeks *Source: Attachment Table II.1 and paragraph 32 of the IMF staff report content provided.* ### 2000. In February 2005, a STA mission prepared a ### UGANDA — FIFTH REVIEW UNDER THE POLICY SUPPORT INSTRUMENT AND REQUEST FOR WAIVER OF AN ASSESSMENT CRITERION AND MODIFICATION OF ASSESSMENT CRITERIA—DEBT SUSTAINABILITY ANALYSIS ### Reporting to STA - Uganda reports government finance statistics (GFS) data according to the GFSM 2001 framework for the GFS Yearbook, but does not report any high frequency data for inclusion in the International Financial Statistics (IFS). - The BoU reports regularly monetary data for the central bank and ODCs in the SRF format, and it also reports all core FSIs and some FSIs for deposit takers, households, and real estate markets. - The ROSC mission (prepared February 2005; results published July 2006) assessed national accounts, prices, government finance, and balance of payments statistics; the monetary and financial statistics were not assessed. ### Recent developments - Risk of external debt distress: Low. - Augmented by significant risks stemming from domestic public and/or private external debt? No. - The DSA update indicates Uganda remains at low risk of debt distress, but: - A real exchange rate depreciation of about 10 percent (y/y) increased the PPG external debt-to-GDP ratio to 19 percent at end-FY2014/15 (18 percent in the previous DSA). - A downgrade in the CPIA rating (from strong to medium performer in July 2015) lowered thresholds for external debt indicators. - Weak export performance, relatively low tax revenues, and the short-term nature of domestic debt add to debt burden risks. - Authorities committed to adjust medium-term borrowing plan to keep risk of debt distress low, including postponing some externally-financed investments amounting on average to about ½ percent of GDP annually between FY2016/17 and FY2019/20 while protecting high priority and already-started projects (including hydropower plant projects). ### CPIA downgrade and thresholds (Box 1) - CPIA downgrade based on average ratings over 2012-2014 remaining below threshold. - Box Table 1 — PPG External Debt Thresholds (as presented): - PV of debt in percent of Exports: Strong performer 200; Medium performer 150 - PV of debt in percent of GDP: Strong performer 50; Medium performer 40 - PV of debt in percent of Revenue: Strong performer 300; Medium performer 250 - Debt service in percent of Exports: Strong performer 25; Medium performer 20 - Debt service in percent of Revenue: Strong performer 22; Medium performer 20 - The CPIA downgrade highlights need to reinforce efforts on governance, transparency, and financial management. ### Changes in the underlying macroeconomic assumptions - Baseline aligned to authorities’ framework under the PSI; main changes vs previous DSA: 1. Decline in nominal GDP measured in U.S. dollars due to base effect of recent depreciation. 2. Planned adjustment in authorities’ fiscal investment plan. 3. Lower estimates for oil-related revenue following oil price assumption revision from 74 to 63 dollars per barrel in FY2020/21. - Key macro projections and adjustments: - Growth: projected at 6½ percent, on average, over the medium term (½ percentage point lower than in the previous DSA). - Oil production projected to raise real GDP growth by 0.8 percentage points, on average, during FY2022-2026 (compared to 0.9 percent in the previous DSA). - Oil production would account for 7 percent of Uganda’s GDP during the peak extraction period (previously, 10 percent). - GDP deflator: projected at 4 percent over the medium term. - External current account deficit: estimated at 11 percent of GDP, on average, over the medium term (1 percent of GDP lower than in the last DSA). - Oil exports projected to narrow the current account balance by 2 percent of GDP, on average, in the next 20 years (compared to 2½ percent in the last DSA). - Fiscal deficit: estimated to average 5½ percent of GDP a year over the long run—a decline of ¼ percentage point compared to the last DSA. - Re-phasing of public investment projects projected to push the deficit down through FY2019/20 (by ½ percent of GDP) and raise it afterwards. - Over the long term, deficit set to increase by ¼ percent of GDP to account for the oil price decline. - Oil revenue projections revised down by ¾ percentage point to 3 percent of GDP, on average, once oil production reaches full capacity. - Nonconcessional borrowing: projected to remain unchanged at about $8 billion over the medium term (cumulative from June 28, 2013), but disbursements before FY2019/20 anticipated to be lower due to re-phasing. - Debt to be contracted by end-December 2015 ($3 billion) will finance Karuma and Isimba dams, industrial substations, Entebbe Airport rehabilitation, and road construction projects. - Selected macroeconomic indicators (Baseline vs Previous DSA) — (values shown as in Text Table 1): - Real GDP growth (percent), FY2016: Baseline 5.0; Previous DSA 5.8 - FY2017-21 average: Baseline 6.6; Previous DSA 7.0 - FY2022-26 average: Baseline 8.0; Previous DSA 8.1 - Inflation (GDP deflator, national currency, percent), FY2016: Baseline 8.2; Previous DSA 5.1 - Nominal GDP (US$ billion), FY2016: Baseline 22.8; Previous DSA 27.0 - Current account balance (percent of GDP), FY2016: Baseline -9.6; Previous DSA -11.0 - Overall fiscal balance (percent of GDP), FY2016: Baseline -6.6; Previous DSA -7.0 - Oil-related Revenue (percent of GDP), FY2016: Baseline 0.0; Previous DSA 0.0 - (Full table values preserved in source.) - Summary table on external borrowing program (present value of new debt, Year 1: FY2015/16): - Source of debt financing: 2,684 (Millions of U.S. dollars) - Concessional debt, of which: 1,845 - Multilateral debt: 1,414 - Bilateral debt: 432 - Non-concessional debt, of which: 839 - Semi-concessional debt: 839 - Commercial-term debt: - - Use of debt financing — Infrastructure: 2,684 - Memorandum items — Indicative projections: - Year 2: FY2016/17 — 821 - Year 3: FY2017/18 — 2,371 ### External debt sustainability - Assessment: PPG external debt is sustainable over the projection period. - PV of PPG external debt-to-GDP ratio: expected to peak at 27 percent in FY2020/21. - Nominal PPG external debt: would stay below 36 percent of GDP in the projection period. - All debt burden indicators under baseline and standardized stress tests remain below Uganda’s country-specific thresholds. - More stringent thresholds limit capacity for additional external borrowing. - Extreme stress tests—mainly the 30 percent one-time depreciation scenario—show debt burden indicators peak close to the threshold. - Recommendation: strengthen reforms and institution building, particularly governance, transparency, and public financial management, to increase borrowing space while maintaining sustainability. - Customized alternative scenario with no oil revenues/exports shows limited increase in debt burden indicators, reflecting prudent debt accumulation plan. - Recommendation: keep a prudent fiscal plan that does not rely on oil proceeds. ### Public debt sustainability - Total public debt (external and domestic) assessed to be sustainable over the projection period. - PV of public debt-to-GDP ratio: projected to peak at about 41 percent in FY2020/21, below benchmark level of 56 percent associated with heightened vulnerabilities for medium performers. - Concerns: - Relatively short average maturity of domestic debt combined with low revenue base → debt service-to-revenue ratio of about 41 percent in FY2019/20 (among the highest for countries of Uganda’s income level), increasing rollover and interest rate risks. - Need to mitigate risks via stronger revenue mobilization and efforts to extend average maturities over the medium term. - Stress tests: - Illustrative scenario with a fixed primary deficit suggests PV of public debt-to-GDP would breach 56 percent of GDP in FY2024/25. - Highlights importance of fiscal consolidation after scaling up of public investment is completed. - Customized alternative scenario without oil flows indicates higher but limited risks from oil revenue uncertainty. - Authorities’ actions on debt management: - Developed a medium term debt management strategy and a DeMPA with World Bank assistance. - Establishing a Debt and Cash Management Directorate in the Ministry of Finance, Planning and Economic Development, with plan to transfer debt management functions from the Bank of Uganda. - World Bank providing technical assistance on a debt management reform action plan and internal organization of debt management and contingent liabilities framework. - Further technical assistance planned by end of CY2015 to update Uganda’s debt management strategy. ### Conclusion and policy recommendations - Conclusion: Uganda’s risk of external debt distress remains low. - Key conditionalities and recommendations: - Adhere to the revised plan of reduced pace of public investment. - Carefully assess projects’ financial and economic viability. - Select the best possible borrowing terms. - Avoid reliance on uncertain oil flows; keep a prudent fiscal plan that does not depend on oil proceeds. - Make progress in governance, transparency, and public financial management, especially as large public investments come on stream. - Strengthen revenue mobilization and extend average maturities of domestic debt to mitigate rollover and interest rate risks. *Prepared by the staff of the International Monetary Fund (IMF) and the International Development Association (IDA), November 3, 2015. Approved by Roger Nord (IMF, AFR), Masato Miyazaki (IMF, SPR), and John Panzer (IDA).* ### 12. The authorities concurred with staff’s views. They remain committed to ensuring debt ### _cr15321 - 12. The authorities concurred with staff’s views. They remain committed to ensuring debt ### Authorities' views and commitments - The authorities concurred with staff’s views and remain committed to ensuring debt sustainability through long-term prudent debt management as outlined in their Medium Term Debt Management Framework. - Framework objective: minimizing costs and risks associated with public investment project financing. - Authorities acknowledged increased risks from exchange rate depreciation and weak exports, and challenges highlighted by the CPIA downgrading. - Policy stance: intend to stick to the revised investment plan and closely monitor developments to assess if further policy adjustments are needed to ensure maintenance of debt sustainability. - Governance and transparency: agreed to make progress and to continue engagement with IDA/IMF staff on debt management issues. - Short maturity of domestic debt: authorities continue to address this by building policy credibility, deepening the markets, and reforming auction modalities. ### Key public and external debt indicators (selected figures from debt sustainability tables and charts) - External debt (nominal): 26.6; 29.3; 30.8; 36.8; 45.6; 43.9; 47.0; 50.6; 53.1; 51.4; 32.3; 25.0 - Of which: public and publicly guaranteed (PPG) external debt: 13.2; 15.2; 16.1; 19.3; 25.8; 25.5; 29.3; 32.4; 34.0; 35.5; 27.2; 20.8 - Change in external debt: -1.3; 2.8; 1.4; 6.0; 8.9; -1.8; 3.1; 3.6; 2.6; -1.7; -0.9; -0.1 - Identified net debt-creating flows: 2.2; 3.1; 2.5; 6.5; 4.8; 4.3; 4.7; 4.0; 3.4; -1.9; -0.3; 0.2 - Non-interest current account deficit: 8.1; 6.3; 6.7; 6.9; 5.7; 2.5; 7.4; 8.2; 8.0; 9.6; 10.7; 6.0; 4.2; 3.5; 3.7 - Net FDI (negative = inflow): -3.9; -2.9; -3.8; -3.3; -3.7; 1.1; -2.8; -4.0; -3.3; -5.3; -6.9; -6.4; -4.1; -3.2; -4.1 - PV of external debt (selected years): 28.4; 36.4; 35.5; 38.6; 41.9; 44.5; 42.8; 25.8; 19.8 - PV of PPG external debt (selected years): 10.9; 16.5; 17.1; 20.9; 23.7; 25.3; 26.9; 20.6; 15.6 - PV of PPG external debt (in percent of exports, selected years): 58.1; 71.2; 78.1; 100.7; 110.2; 116.5; 106.3; 74.5; 60.7 - PV of PPG external debt (in percent of government revenues, selected years): 80.7; 120.1; 119.5; 141.4; 154.8; 160.1; 154.7; 114.7; 86.8 - Debt service-to-exports ratio (in percent): 9.7; 9.0; 15.1; 15.8; 17.2; 18.5; 16.2; 18.2; 17.3; 14.9; 11.8; 11.8 - PPG debt service-to-exports ratio (in percent): 2.4; 2.3; 2.8; 2.5; 3.2; 4.0; 4.9; 5.6; 6.4; 5.3; 6.7; 6.5 - PPG debt service-to-revenue ratio (in percent): 4.3; 4.1; 4.5; 3.5; 5.4; 6.1; 6.9; 7.8; 8.8; 7.7; 10.4; 9.2 - Total gross financing need (billions of U.S. dollars): 1.7; 1.6; 1.8; 2.1; 2.3; 2.5; 2.7; 2.9; 2.9; 1.5; 2.9; 6.7 ### Public sector debt indicators (selected figures) - Public sector debt (percent of GDP): 23.3; 26.4; 31.1; 37.9; 37.3; 42.0; 44.9; 47.6; 50.0; 36.7; 26.5 - Of which: foreign-currency denominated (percent of GDP): 15.2; 16.1; 19.3; 25.8; 25.5; 29.3; 32.4; 34.0; 35.5; 27.2; 20.8 - Change in public sector debt: 1.1; 3.0; 4.7; 6.8; -0.6; 4.7; 2.9; 2.8; 2.4; -1.5; -0.4 - Identified debt-creating flows: 2.6; 2.6; 6.7; 6.3; 1.2; 4.0; 4.5; 3.3; -0.3; -2.0; -0.6 - Primary deficit (selected values): 2.2; 2.7; 3.0; 1.7; 1.2; 4.6; 4.4; 3.9; 3.6; 2.4; 1.5 - Revenue and grants (percent of GDP): 12.9; 13.0; 14.8; 15.7; 15.8; 15.8; 16.0; 16.5; 17.9; 18.2; 17.9 - PV of public sector debt (selected years): 22.7; 28.6; 28.9; 33.6; 36.3; 39.0; 41.4; 30.1; 21.2 - Gross financing need (percent of GDP): 6.5; 10.3; 11.7; 14.1; 14.4; 13.9; 14.1; 13.2; 12.1; 8.2; 5.7 ### Stress tests and sensitivity analysis (high-level outcomes) - Most extreme stress tests identified in figures correspond to: - One-time depreciation shock (in multiple panels) - Exports shock (in multiple panels) - Table 3 (sensitivity analysis for PPG external debt indicators, 2016-2036) reports baseline and scenario values for PV of debt-to-exports ratio, PV of debt-to-revenue ratio, PV of debt-to-GDP ratio, debt service-to-revenue ratio with scenario entries including: - Baseline and scenarios A1, A2, A3, B1–B6 with numeric outcomes displayed (selected baseline examples): PV of debt-to-exports ratio baseline entries include 71; 78; 10; 11; 10; 11; 7; 10; 6; 75; 61 (table shows many year-by-year percent values). - Table 4 (sensitivity for public debt, 2016-2036) reports indicators including PV of Debt-to-GDP Ratio, PV of Debt-to-Revenue Ratio, Debt Service-to-Revenue Ratio under baseline and alternative scenarios; baseline examples: PV of Debt-to-GDP Ratio entries: 29; 29; 34; 36; 39; 41; 30; 21; Debt Service-to-Revenue Ratio baseline entries: 34; 36; 37; 38; 40; 34; 28; 21. ### Key macroeconomic and financing assumptions (selected) - Real GDP growth (selected series): 4.4; 3.3; 4.6; 5.0; 6.7; 2.6; 5.0; 5.8; 6.1; 6.3; 6.5; 8.5; 6.4; 5.8; 4.8; 6.1 - GDP deflator in US dollar terms (change in percent, selected series): 9.8; 2.8; 4.4; -6.5; 4.5; 9.7; -17.9; 8.2; 6.9; 1.9; 1.9; 1.6; 0.4; 4.3; 3.5; 4.1 - Effective interest rate (percent, selected series): 6.2; 5.0; 7.7; 7.3; 7.1; 2.3; 5.7; 6.1; 6.0; 5.8; 5.5; 5.4; 5.7; 4.3; 4.4; 4.3 - Growth of exports of G&S (US dollar terms, in percent, selected series): 22.7; 7.5; 0.3; -1.9; 14.8; 11.9; 6.1; 8.1; 8.0; 12.1; 9.4; 28.2; 12.0; 12.5; 6.8; 10.6 - Growth of imports of G&S (US dollar terms, in percent, selected series): 12.3; -1.4; 2.2; 2.8; 14.8; 12.8; 1.2; 10.7; 7.4; 15.2; 12.3; 5.0; 8.7; 10.3; 8.4; 9.8 - Grant-equivalent financing (in percent of GDP, selected entries): 2.8; 2.8; 1.7; 1.8; 1.5; 1.3; 0.8; 0.4; 0.7 - Government revenues (excluding grants, in percent of GDP): 11.2; 11.4; 11.9; 13.5; 13.7; 14.3; 14.8; 15.3; 15.8; 17.4; 18.0; 17.9; 18.3 *Sources: Ugandan authorities; and IMF staff estimates and projections.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15321.pdf_