## IMF Executive Board Concludes the Combined Second and Third Reviews under the Extended Credit Facility Arrangement for Uganda

_IMF News, January 17, 2023_

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## Bibliographic details
- Published: January 17, 2023

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### Summary of Review and Financing
- The Executive Board completed the combined second and third reviews under the Extended Credit Facility (ECF) Arrangement for Uganda.
- Approval of the combined second and third reviews enables the immediate disbursement of the equivalent of SDR 180.5 million, about US$240 million.
- The completion of the combined 2nd and 3rd reviews brought the aggregate disbursement-to-date to US$625 million.
- The ECF Arrangement for Uganda totals SDR 722 million (200 percent of quota) or about US$1billion and was approved on June 28, 2021.

### Macroeconomic Assessment and Projections
- Economic growth:
  - The economy is projected to grow by 5.3 percent in FY 22/23 (revised down from 6 percent at the time of the 1st review in March 2022).
- Inflation:
  - Headline inflation is expected to rise to 8.3 percent (marked up from 4.6 percent at the 1st review).
  - Core Inflation - average: 6.8 percent (FY2022/23, table).
- Drivers of forecast revisions:
  - Impact of the war in Ukraine, tighter external financial conditions, drought, and rising domestic borrowing costs.
- Risks to the outlook:
  - Higher imported inflation, lower external demand, climate change, and public health outlook.

### Fiscal and External Policy Recommendations
- Fiscal policy:
  - Return to programmed fiscal consolidation to keep debt sustainable and maintain external buffers.
  - Enhance domestic revenue mobilization, including via the elimination of inefficient tax exemptions and adoption of the tax expenditure rationalization plan.
  - Rationalize non-priority spending and shift composition of spending towards priority social areas.
- Monetary and external:
  - Monetary policy should continue to tighten to achieve the core inflation target.
  - Continued exchange rate flexibility is needed to preserve external buffers; foreign exchange interventions should be limited to smoothing excessive exchange rate fluctuations.
  - Tight macro policies and continued exchange rate flexibility to strengthen external buffers, reduce the current account deficit, and contain the decline in reserves.

### Structural Reforms and Governance Actions
- Progress reported:
  - All but one quantitative performance criterion and most indicative targets for March, June and September 2022 were met.
  - Six of the twelve structural benchmarks due between March and December 2022 have been completed.
  - A structural benchmark on the asset declaration regime was converted into a prior action for the review and has been met.
- Governance and anti-corruption measures taken:
  - Amending the regulations to include assets that are beneficially owned in the asset declarations.
  - Publishing information on compliance with the Leadership Code Act and on applications to access the declarations.
  - Amending the law to establish a central registry for beneficial ownership information of legal entities, with forthcoming regulations expected to allow timely access to the beneficial ownership registry.
- Other structural priorities highlighted:
  - Strengthening governance, transparency, and the anti-corruption framework and the AML/CFT regime.
  - Advancing the financial inclusion agenda and climate adaptation measures.
  - Accelerating momentum on structural reforms to help move Uganda towards attaining its goal of middle-income status.
  - The introduction of the Parish Development Model was noted as a welcome development.

### Executive Board Assessment (summary of Bo Li statement)
- Program implementation:
  - The Ugandan authorities remain committed to their economic program amidst a challenging environment.
  - Sound program implementation in the period ahead remains important to ensure economic resilience and support social and developmental objectives.
- Fiscal deviation and reserve cover:
  - The slight relaxation of the fiscal deficit in fiscal year 2022/23 relative to the programmed target was necessary to support vulnerable households and introduce cost-of-living adjustments in the public sector.
  - The temporary deviation of the reserve cover is appropriate given tighter global financial conditions and the authorities’ commitment to continued successful program implementation.
- Financial sector:
  - The banking system is well-capitalized and financial stability risks should continue to be minimized.
  - Continued improvements in Bank of Uganda’s autonomy and governance framework would be important.

### Key Indicators (selected figures from Table 1)
- Output
  - Real GDP Growth (%): FY2020/21 Act. 3.5; FY2021/22 Rev. 4.7; FY2022/23 Prog. 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 (% of GDP)
  - Revenue and Grants: FY2020/21 14.3; FY2021/22 14.1; FY2022/23 15.1; FY2023/24 15.5
  - Expenditure: FY2020/21 23.7; FY2021/22 21.5; FY2022/23 20.2; FY2023/24 19.0
  - Primary Balance: FY2020/21 -6.7; FY2021/22 -4.3; FY2022/23 -1.8; FY2023/24 -0.3
  - Fiscal Balance: 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; FY2021/22 …
- Balance of Payments
  - 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. 23/04 — IMF Communications Department, January 17, 2023*

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## References

- [Bo Li](https://www.imf.org/en/About/senior-officials/Bios/bo-li)
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- [Press Release 21/197](https://www.imf.org/en/News/Articles/2021/06/28/pr21197-uganda-imf-executive-board-approves-ecf-arrangement-for-uganda)
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_Source: https://www.imf.org/en/news/articles/2023/01/17/pr2304-uganda-imf-executive-board-concludes-combined-second-and-third-reviews-under-ecf-arrangement_