UGANDA

UGANDA
MACROECONOMIC OUTLOOK AND RISKS
19. Real GDP growth is projected at about 5 percent, on account of the continuation of the
infrastructure investments and a muted recovery in private sector demand. Inflation is projected
to remain close to its medium term target on account of a relatively stable exchange rate and
lower commodity prices especially oil. We anticipate that the current account deficit will widen
resulting from subdued exports partly because of the strife in South Sudan –a key export market,
as well as the low international prices of our export commodities. On the other hand, the level of
imports remains high – in particular intermediate input and government infrastructure related
imports. The level of international reserves will remain adequate at around 4 months of import
cover. Private sector credit is expected to recover to about 8 percent, following monetary policy
easing, while the exchange rate is projected to remain relatively stable.
20. Over the medium-term, the expected start of oil production in FY2020/21, together with
the growth dividend from completion of our infrastructure investment projects, are projected to
improve Uganda’s growth prospects and fiscal and current account dynamics.
21. The risks to the outlook arise from the current global and regional situation. On the
global front, a slow recovery in global growth coupled with low commodity prices could impact
export growth, while the continued unease in the financial markets could impact direct investment
and financing flows. Implementation challenges for public investment projects remain a key
factor that could hinder reaping of the growth dividend, while sustained foreign exchange
demand for infrastructure projects, widening current account position, civil strife in South Sudan
and volatile global financial markets remain key risks to the exchange rate.
POLICIES FOR THE REMAINDER OF FY2016/17 AND BEYOND
22. Macroeconomic policies remain aligned with our objective of ensuring macroeconomic
stability and enhancing sustainable growth. Our medium term strategy continues to be based on
scaling up infrastructure investment to remove key constraints to growth; protecting essential
poverty-alleviating expenditure; increasing production and productivity; and enhancing domestic
revenue mobilization. These policies will go hand in hand with structural reforms to further
improve the business environment to support private sector growth. Fiscal sustainability and
maintaining government debt at a low risk of distress constitute the anchor of our growth
strategy.
23. In the remainder of FY2016/17, government policies will continue to focus on supporting
economic growth, while adhering to our fiscal framework and keeping inflation within the target
band. Fiscal policy will continue the process of scaling up infrastructure investment and prioritize
the quality of spending. In addition, the government targets a revenue increase by ½ percent of
GDP. Settling government domestic arrears and containing the need for domestic financing
34 INTERNATIONAL MONETARY FUND