IMF and Uganda Reach Staff-Level Agreement on the Combined Second and Third Reviews under the Extended Credit Facility Arrangement

IMF News, December 21, 2022

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IMF staff and the Uganda authorities reached a staff-level agreement to conclude the combined second and third reviews of the 36-month ECF-financed program.
Upon completion of the Executive Board review, Uganda would have access to SDR 180.5 million, about US$240 million.
Total IMF financial support under the ECF-financed program would reach SDR 451.25 million (equivalent to about US$ 625 million).
The ECF was approved by the IMF Executive Board on June 28, 2021 for a total amount of SDR 722 million (about US$ 1 billion at the time of program approval).

Growth projections:
- Growth is projected at 5.3 percent in FY22/23, 0.7 percentage point lower than at the time of the first review in March.
- Medium-term prospects are expected to improve with oil production coming on board by FY24/25.
Inflation expectations:
- Headline inflation is expected to rise to 8.3 percent this fiscal year and is anticipated to decline thereafter.
- Core inflation and headline inflation trajectories reflect elevated commodity prices, higher imported input costs, and monetary tightening.
External and other risks:
- Elevated risks include lower global growth, persistently higher inflation in advanced economies and associated tighter global financial conditions; an intensification of the Ebola outbreak; and more frequent disruptions in activity due to climate change.
- The economic recovery is underway despite global demand and supply-chain shocks affecting inflation, growth, revenues, and spending needs.

Monetary policy:
- The Bank of Uganda (BoU) has tightened the policy rate in recent months and signaled readiness to take appropriate action to contain second-round effects of higher global prices.
- Continued tightening is recommended to guide core inflation back to the target.
- Continued exchange rate flexibility is recommended as an important shock absorber to help rebuild external buffers.
Fiscal policy and revenue mobilization:
- Revenue-based fiscal consolidation enshrined in the authorities’ Domestic Revenue Mobilization Strategy is crucial for keeping debt sustainable and funding Sustainable Development Goals.
- Authorities adopted a plan to rationalize inefficient and costly tax expenditures.
- Expenditure prioritization will continue; a small widening of the fiscal deficit this year, relative to the target set in the first review, is necessary to support the vulnerable while remaining focused on fiscal consolidation.
Financial sector and safeguards:
- The BoU is improving its supervisory framework; implementation of the Safeguards Assessment recommendations will help solidify independence.
- A new risk management framework will address governance and contain risks.
- The banking sector is characterized as well-capitalized, but existing vulnerabilities require continued monitoring and strengthening of financial stability.

Priority structural reforms include:
- Strengthening the anti-corruption framework and the AML/CFT regime.
- Improving the social safety net.
- Advancing the financial inclusion agenda.
- Adapting to climate change.
Recent anticorruption and transparency steps:
- The Companies Act was amended to prepare for implementation of a beneficial ownership register.
- Tools for AML/CFT risk-based supervision for the financial sector are being developed and implemented.
- Authorities published information on compliance statistics for asset declarations and on applications to access the declarations on the Inspectorate of Government’s website.

Mission led by Mr. Malhar Nabar conducted a virtual mission to Uganda from October 31 - November 22, 2022; the concluding meeting was held on December 19, 2022.
The staff team met with the Permanent Secretary and Secretary to the Treasury, Mr. Ggoobi; Deputy Governor of the BoU, Mr. Atingi-Ego; other BoU and senior government officials; and representatives of the private sector, civil society organizations, and development partners.

Output
- Real GDP Growth (%): FY2020/21: 3.5; FY2021/22: 4.7; FY2022/23: 5.3; FY2023/24: 6.0
Prices
- Headline Inflation - average (%): FY2020/21: 2.5; FY2021/22: 3.4; FY2022/23: 8.3; FY2023/24: 7.2
- Core Inflation - average (%): FY2020/21: 3.2; FY2021/22: 7.5; FY2022/23: 6.8
Central Government Finances
- Revenue and Grants (% of GDP): FY2020/21: 14.3; FY2021/22: 14.1; FY2022/23: 15.1; FY2023/24: 15.5
- Expenditure (% of GDP): FY2020/21: 23.7; FY2021/22: 21.5; FY2022/23: 20.2; FY2023/24: 19.0
- Primary Balance (% of GDP): FY2020/21: -6.7; FY2021/22: -4.3; FY2022/23: -1.8; FY2023/24: -0.3
- Fiscal Balance (% of GDP): FY2020/21: -9.4; FY2021/22: -7.4; FY2022/23: -5.1; FY2023/24: -3.5
- Public Debt (% of GDP): FY2020/21: 49.0; FY2021/22: 50.6; FY2022/23: 50.9; FY2023/24: 49.6
Money and Credit
- Broad money (% change): FY2020/21: 8.5; FY2021/22: 10.0; FY2022/23: 14.5; FY2023/24: 12.6
- Credit to Private Sector (% change): FY2020/21: 11.0; FY2021/22: 12.8
- Policy Rate, EOP (%): FY2020/21: 6.5
Balance of Payment
- Current Account Balance (% of GDP): FY2020/21: -9.5; FY2021/22: -7.9; FY2022/23: -9.2; FY2023/24: -10.7
Reserves
- (in months of next year's imports): FY2020/21: 4.9; FY2021/22: 3.7; FY2022/23: 3.0; FY2023/24: 3.1
External Public Debt (% of GDP): FY2020/21: 31.6; FY2021/22: 31.3; FY2022/23: 31.9; FY2023/24: 32.4
Exchange Rate
- REER (% change): FY2020/21: 0.6

Press Release No. 22/453, December 21, 2022 — IMF Communications Department.