Washington, DC:
A staff team from the International Monetary Fund (IMF) led by Mr. Amine
Mati conducted a virtual mission to Uganda from September 27 to October 14,
2021 to discuss the economic outlook, the budget strategy for FY2021/22,
and progress with the implementation of reforms under the
Extended Credit Facility
(ECF) - supported program.
At the conclusion of the mission, Mr. Mati issued the following statement:
“Uganda’s recovery remains slow, with the recent COVID-19 lockdown further
impacting recovery efforts, particularly in the manufacturing and services
industries. Inflation is subdued, despite increases in global energy and
food prices. The current account deficit is at an elevated level amid
foreign inflows-triggered exchange rate appreciation that helped keep
reserves above 4 months import cover. Private sector credit is weak despite
ample liquidity in the well-capitalized banking system as both banks and
borrowers remain cautious about prospects.
“The FY 20/21 fiscal deficit was lower than planned thanks to
higher-than-expected tax revenues and low spending execution. Helped by
exchange rate appreciation and delays in repaying advances to Bank of
Uganda (BoU), central government debt remained sustainable and comfortably
below the authorities’ 50 percent of GDP target.
“Going forward, higher vaccination rates, gradual reopening of the economy
and a recovery in external demand are expected to aid activity.
Notwithstanding increases in global commodity prices, an accommodative
monetary policy will help core inflation converge gradually towards the
BoU’s central target, while the elevated current account deficit is
expected to decline progressively over the medium term helped by greater
exchange rate flexibility. Maintaining the hard-earned credibility of BoU’s
inflation targeting framework is critical, including by clarifying limits
on advances to government.
“Risks are tilted to the downside, including from further COVID-19 waves, a
less benign external environment, and slow reform implementation.
“In view of existing financing constraints, fiscal policy in the near term
should remain focused on accommodating additional priority social spending
needs—including for vaccine facilitation to support reopening of the
economy—while staying within the programmed fiscal target. Mobilizing
domestic revenues, limiting arrears accumulation, improving budget
composition (including through cuts-in non-priority spending while
supporting social spending) and strengthening public investment management
would help support the fiscal consolidation strategy in both the near and
medium term.
“Generating more inclusive growth that can create jobs would require
further progress on the authorities’ structural reform agenda supported by
the ECF-supported program. This requires implementing the governance
pillars—accounting for the use of COVID-19 funds, strengthening of
Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) legal
framework and improving accountability of high-level
officials—strengthening financial inclusion and fostering greater trade
integration.
“The mission team is thankful to the authorities and all stakeholders it
met for the candid and productive discussions.
“The team met with the Minister of State for Finance, Planning and Economic
Development (in charge of Planning), Mr. Lugoloobi, Governor of the BoU,
Mr. Mutebile; Permanent Secretary and Secretary to the Treasury, Mr.
Ggoobi; Deputy Governor of the BoU, Mr. Atingi-Ego; and other senior
officials. The team also had constructive discussions with representatives
of the private sector, civil society organizations, and development
partners.”
