UGANDA

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<strong>UGANDA</strong> 50 40 30 20 10 0 -10 -20 Figure 6. Uganda: Other Financial Sector Developments Shilling loans have stabilized, while foreign currency lending continues to contract. Evolution of Lending (percent, y-o-y growth) Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Foreign currency loans (net of valuation effects) Shilling loans Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 50 40 30 20 10 0 -10 -20 50 40 30 20 10 0 -10 -20 Shilling deposits have recovered, while foreign currency deposits continue to decline. Evolution of Deposits (percent, y-o-y growth) Jan-12 Jul-12 Jan-13 Jul-13 Foreign currency deposits (net of valuation effects) Shilling deposits Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 The decline in credit growth was concentrated in some of the same sectors that saw rising NPLs. Interest rate spreads increased during the tightening cycle, but have remained high despite the onset of easing. Contribution to Private Credit Growth (percent) Agriculture Other 25 Interest Rate Spreads (percent) 25 30 25 20 Construction/ real estate Private consumption Total credit growth Trade Manufacturing 30 25 20 20 15 20 15 15 10 15 10 10 10 5 5 5 5 0 -5 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 0 -5 0 Shilling spread Forex spread Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 0 100 90 80 70 60 50 The FX loans-to-deposit ratio has been stable, and persistently below the regulatory norm. Market Sensitivity (percent) Forex loans to forex deposits Reg. Norm for Forex loans to Forex deposits Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 100 90 80 70 60 50 The declining trend in FX exposure to regulatory tier 1 capital suggests that the system is structurally short. 4 2 0 -2 -4 -6 -8 -10 Market Sensitivity (percent) Forex exposure to regulatory tier 1 capital Linear (Forex exposure to regulatory tier 1 capital) Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 4 2 0 -2 -4 -6 -8 -10 Sources: Bank of Uganda and IMF staff calculations. INTERNATIONAL MONETARY FUND 11
<strong>UGANDA</strong> PERFORMANCE UNDER THE PSI 6. Performance under the PSI through end-June 2016 was mixed (Memorandum of Economic and Financial Policies (MEFP), para. 11-18). The BoU kept core inflation inside its inflation target band. Softer growth and election effects led to the non-observances of fiscal targets, though it is important to note that these were more muted than during the previous presidential elections. Structural reforms progressed, albeit with many delays. 7. The BoU kept inflation within the target band and exceeded its reserve accumulation target at end-June (MEFP Table 1.1). Tight monetary policy through April 2016 helped contain core inflation within the BoU’s target range. Core inflation decelerated to 5.1 percent year-on-year in October from its peak of 7.5 percent in December 2015, remaining well within the inner band of the inflation consultation clause at end-June. In the same period, headline inflation decelerated to 4.1 percent year-on-year from its peak of 8.4 percent. The BoU seized the favorable balance of payments developments and accumulated about US$170 million gross international reserves to US$2.96 billion (about 4½ months of next year’s imports), exceeding the end-June target. 8. Most fiscal targets were missed due to a confluence of temporary factors (MEFP Table 1.1). The authorities met the targets on the zero ceiling of external payment arrears and on the deposit of oil revenues in the Petroleum Fund. They also protected poverty-alleviating spending, meeting their FY15/16 program objective. However, tax revenue fell short of target by 0.3 percent of GDP, reflecting lower nominal growth. In addition, higher than anticipated election-related spending led to an overrun of current expenditure of 0.1 percent of GDP. Thus, the program fiscal deficit target (QAC) was missed by 0.5 percent of GDP, and the government partly relied on BoU advances for its financing needs. 2 Staff supports a waiver on the basis that the non-observance was temporary. Externally-financed development spending (including hydro power projects) was under-executed by 2.4 percent of GDP, and the overall fiscal deficit was 1.2 percent of GDP lower than anticipated, partly because the necessary domestic contribution was not budgeted for. While the authorities have cleared domestic arrears of about 0.1 percent of GDP in FY16/17 so far, they are still reconciling estimates of the stock, which has complicated assessment of the associated indicative target. The preliminary estimates put the stock of domestic arrears as of June 2016 at 3.2 percent of GDP. 9. Structural reforms have progressed, with two out of five completed on time (MEFP Table 1.2). The government has issued regulations for implementing the PFM Act, though some key elements (e.g., the management of oil revenues) have not been incorporated and are partly expected to be covered in the corresponding instructions under preparation. The government also sent the charter of fiscal responsibility to Parliament. The charter includes measurable fiscal objectives to guide Uganda’s fiscal framework and strong commitments to transparency, though it could have usefully included a requirement to explain how deviations from the measurable objectives will be 2 BoU advances are intended only for within-year cash flow management. 12 INTERNATIONAL MONETARY FUND
Page 1 and 2: January 2017 UGANDA IMF Country Rep
Page 3 and 4: 2 The banking sector remains overal
Page 5 and 6: UGANDA Approved By Roger Nord (AFR)
Page 7 and 8: UGANDA BACKGROUND AND RECENT DEVELO
Page 9 and 10: UGANDA Figure 1. Uganda: Real Secto
Page 11 and 12: UGANDA Figure 3. Uganda: Fiscal Sec
Page 13: UGANDA Figure 5. Uganda: Financial
Page 17 and 18: UGANDA measures to increase revenue
Page 19 and 20: UGANDA 20. The authorities are addr
Page 21 and 22: UGANDA E. Program Design 29. The au
Page 23 and 24: UGANDA Table 1. Uganda: Selected Ec
Page 25 and 26: UGANDA Table 2b. Uganda: Fiscal Ope
Page 27 and 28: UGANDA Table 3. Uganda: Monetary Ac
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Page 33 and 34: UGANDA cessation of operations for
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Page 39 and 40: UGANDA Expenditure - focusing on ef
Page 41 and 42: UGANDA PFM Act, and be repaid befor
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UGANDA Programmatic technical assis
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UGANDA STATISTICAL ISSUES (as of No
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UGANDA December 16, 2016 SEVENTH RE
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UGANDA Chart 1. Public Debt (Percen
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UGANDA finances the construction of
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UGANDA longer term bonds to 30:70.
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UGANDA Figure 2. Uganda: Indicators
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Table 2. Uganda: Public Sector Debt
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UGANDA Table 3. Uganda: Sensitivity
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UGANDA

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