Uganda has navigated post-Covid-19 recovery well, says IMF

The International Monetary Fund has said Uganda has navigated post-Covid-19 recovery well due to sound macroeconomic policies.

The country’s economic recovery, the IMF noted in a statement is strengthening, characterized by low inflation, favorable agricultural production, and strong industrial and services activity.

The IMF says that Uganda should continue to push for an increase in domestic revenue mobilisation and implement better expenditure discipline to address growth impediments and improve social development while advancing governance reform and financial inclusion, supported by vigilant monetary policy, and exchange rate flexibility, using future oil revenue

However, on the other hand, the IMF indicated it was wary of the elevated current account deficit and limited capital inflows, which had weighed on Uganda’s international reserves, despite strong coffee and gold exports.

“Tight global financial conditions and reduced external project and budget support have driven down gross international reserves, covering only 2.9 months of imports at the end of 2024 (excluding oil-project-related imports),” the IMF noted in a statement. 

Speaking at the eighth high-level economic growth forum in Kampala recently Secretary to the Treasury Ramathan Ggoobi, said agricultural and related products exports had significantly increased in recent years, with earnings from coffee, which government has invested in over time, rising from $845.4m in the 2022/23 financial year to $1.14b in the 2023/24 financial year.

This, he said, coupled with a recovery in the tourism receipts had boosted the country’s foreign exchange earnings, but continues to face several risks, such as climate change, regional and global geopolitical tensions, high interest rates limiting access to affordable credit, and fluctuations in global commodity prices.

In its statement, IMF said pressure on international reserves amid tight global financial conditions, as well as the elevated debt servicing costs accompanied by a shortfall in the country’s development spending, remained a threat to economic stability, adding that the continued fallout resulting from the Anti‑Homosexuality Act, could exacerbate an already fragile external financing position.

Therefore, it noted government must continue to implement reforms, including those envisaged under the expired Extended Credit Facility arrangement to rebuild fiscal and external buffers and boost inclusive and sustainable growth, supported by technical assistance from the Fund and other partners as needed.