An International Monetary Fund (IMF) team, led by Ms. Clara Mira, visited
Kampala from January 20 to 24, 2020 to discuss Uganda’s economic outlook,
the budget for FY2020/21, and the direction of monetary policy.
At the conclusion of the mission, Ms. Mira issued the following statement:
“The Ugandan economy continues to perform well, with growth expected to
reach 6 percent in FY 2019/20, a minor slowdown from the earlier projection
of 6.3 percent. The rebasing of the GDP points to an increase in the size
of the economy by 11.6 percent. Annual headline and core inflation were 3.4
and 3 percent, respectively and are projected to stay below 5 percent over
the next 12–18 months. The Bank of Uganda (BoU) monetary policy remains
accommodative. The current account deficit widened to 9.7 percent of GDP in
FY2018/19, largely due to private sector-related imports financed by
foreign direct investments (FDI). The Ugandan shilling has remained broadly
stable. Overall, the banking sector remains healthy. Downside risks have
increased linked to uncertainty related to oil production, the electoral
period, and the complex external context.
“The execution of the current budget continues to be challenging among
revenue and financing shortfalls and large expenditure pressures, which
have resulted in a supplementary budget and increased borrowing needs. The
authorities have negotiated two commercial loans to address such needs. The
implementation of the externally financed capital investment projects has
lagged behind, underlying the need to continue efforts to strengthen public
investment management. The team discussed with the authority’s potential
revenue measures and the need to carefully prioritize and contain
expenditure pressures, while protecting social spending.
“Regarding the preparation of the 2020/21 budget, the team encouraged the
authorities to prioritize the implementation of the new Domestic Revenue
Mobilization strategy, targeting an increase in the tax-to-GDP ratio by ½
percent per year. Similarly, the large expenditure pressures should be
carefully prioritized. Overall, the team encouraged the authorities to
ensure that the budget is realistic, remains consistent with debt
sustainability while avoiding exacerbating debt vulnerabilities, and is
consistent with available domestic financing. It is also essential that the
capital position of the central bank is strengthened to ensure that the BoU
can continue pursuing its operations efficiently.
“The mission team thanks the authorities for the productive and cooperative
discussions.”
The IMF mission met with Governor Tumusiime-Mutebile, Permanents
Secretary/Secretary to the Treasury Muhakanizi, senior government
officials, and private sector representatives.
