IMF Completes 2026 Article IV Review for Uganda

Washington DC: On July 27, the Executive Board of the International Monetary Fund (IMF) concluded the 2026 Article IV Consultation ^[1] with Uganda. The authorities have consented to the publication of the Staff Report prepared for this consultation. ^[2]

The Ugandan economy has performed well since the expiration of the 2021-24 Extended Credit Facility arrangement, with a weak fiscal position as a notable exception. Strong growth momentum continues, supported by robust domestic demand, low inflation, and a pickup in private sector credit. Growth reached 6.3 percent in FY2025/26 (Q1-Q3), maintaining the same strong momentum recorded in FY2024/25. Headline and core inflation stood at 3.7 percent and 3.4 percent, respectively, in June, remaining well below the Bank of Uganda's medium-term core inflation target of 5 percent.

Strong capital inflows have supported Uganda's international reserves. Despite strong coffee and gold exports, the current deficit remains high due to private sector imports of capital goods associated with investment activity, increased gold imports, and a wider services account deficit. Sizable portfolio inflows have boosted gross international reserves, reaching $6.1 billion at end May 2026 (or about 2.7 months imports of goods and services).

The overall fiscal deficit widened to 6.0 percent of GDP in FY2024/25, from 4.7 percent in FY2023/24, reflecting higher recurrent spending and rising interest payments. Spending pressures persisted in the first eight months of FY2025/26, with the overall deficit projected to widen further to 7.1 percent of GDP for the fiscal year.

Looking ahead, growth momentum will continue, further boosted by the start of oil production, which will make lasting improvement in the fiscal and external balances. exchange rate movements, elevated energy prices, and higher transportation costs are expected to push headline inflation above 5 percent in FY2026/27, while core inflation is projected to reach the BoU's 5‑percent medium-term target before end‑2026. A prolonged or intensified conflict in the Middle East and Ebola outbreak pose significant downside risks to the outlook in the near term. Other risks include tighter global financial conditions, potential delays in oil production, and climate‑related shocks.

Executive Board Assessment ^[3]

Executive Directors agreed with the thrust of the staff appraisal. They welcomed Uganda's continued robust growth momentum, low and stable inflation, as well as the favorable outlook bolstered by the anticipated start of oil production. At the same time, they expressed concern about the weakening fiscal position, noting the high debt service burden and the crowding out of private sector credit. Directors also noted the significant downside risks, including spillovers from a prolonged conflict in the Middle East, tighter global financial conditions, further delays in oil production, and climate-related shocks.

Directors agreed that stronger fiscal consolidation, anchored in enhanced domestic revenue mobilization and improved expenditure discipline, is needed to reduce debt vulnerabilities, ease crowding-out pressures, and rebuild policy space. They recommended the swift adoption and implementation of the Domestic Revenue Mobilization Strategy to broaden the tax base, improve administration, and rationalize tax expenditures. They stressed the critical need for stronger budgetary discipline, including tightening controls on supplementary spending, improving spending efficiency, and enhancing public financial management. Directors underscored the urgency of establishing a robust and transparent framework for managing oil revenues, to safeguard sustainability and support intergenerational equity.

Directors supported the Bank of Uganda's tight monetary policy stance to anchor inflation expectations amid successive shocks and heightened global uncertainty. They emphasized that monetary policy should remain data-driven and forward-looking, alongside continued efforts to enhance policy transmission. They highlighted the importance of exchange rate flexibility for absorbing external shocks, and the need to continue building foreign exchange reserves. Directors supported continued efforts to strengthen central bank independence, including through full implementation of the 2021 Safeguards Assessment recommendations.

Directors commended the financial system's strong capital and liquidity buffers, while calling for vigilant monitoring of the sovereign bank nexus. They also encouraged continued efforts to translate gains in financial inclusion into broader financial deepening and to address structural constraints to lending.

Directors underscored that accelerating structural reforms, particularly to improve the business environment and strengthen governance, is essential to support private sector-led inclusive growth and enhance resilience. They highlighted the need to strengthen the anti-corruption framework and the judiciary, reduce non-tariff barriers, and deepen regional trade integration. Continued efforts to strengthen climate resilience remain important.

The next Article IV consultation with Uganda will be held on the standard 12 month cycle.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the https://www.imf.org/en/countries/uga page.

[3] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .