UGANDA

UGANDA
Appendix I. Letter of Intent
Kampala, Uganda
November 22, 2016
Ms. Christine Lagarde
Managing Director
International Monetary Fund
700 19 th Street, N.W.
Washington, DC 20431,
USA
Dear Madame Lagarde:
On behalf of the Government of Uganda, we would like to provide you with an update on the
progress we have achieved under our economic program supported by the IMF’s Policy Support
Instrument (PSI). Economic growth declined slightly in the context of a difficult global and
regional situation, and uncertainties around the February 2016 general elections. Our decisive
monetary policy actions under the inflation targeting regime successfully kept inflation under
control. International reserves remain at adequate levels. However, the softer-than-anticipated
growth together with election-related pressures affected our fiscal accounts.
We observed all June 2016 quantitative assessment criteria, except one. Bank of Uganda
successfully kept inflation within the bands of the inflation consultation clause, and increased its
international reserve buffers. At the same time, the fiscal deficit was affected by revenue
shortfalls—reflecting softer growth—and slightly more expansionary expenditure linked to
elections. The indicative target on poverty reducing expenditure was respected. However, with the
slightly higher fiscal deficit and concerns over government leaning too much on domestic
financing from the banking sector, we were not able to repay the advance from Bank of Uganda
by the end of the fiscal year. Instead, the outstanding advances will be repaid this fiscal year.
Looking ahead, we remain committed to our objectives described in the context of the 6 th PSI
review. In particular, we are implementing measures to increase the tax-to-GDP ratio by
½ percent, and will ensure that the quality and composition of expenditure is protected in the
context of a tight envelope. Bank of Uganda continues to target core inflation of 5 percent. Given
a slightly tighter balance of payments, the scope for accumulating international reserves has
narrowed, but the reserve coverage remains at adequate levels.
We made good progress on structural reforms. Government adopted the PFM Act regulations and
is preparing implementation instructions, thereby enhancing the efficiency of the budget process.
We have also submitted the charter of fiscal responsibility to Parliament. The charter will set clear
fiscal objectives and enhance fiscal transparency. The exercise to reconcile domestic arrears data
has been practically completed, and we are resuming semi-annual arrears reporting and
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