The International Monetary Fund (IMF) has completed a Post-Financing Assessment (PFA) of Uganda, concluding that the country’s capacity to repay the Fund remains adequate, although subject to notable risks.
In a downside scenario involving large portfolio outflows, adverse terms-of-trade shocks, and further delays in the oil project, the IMF said repayment indicators would weaken but remain within adequate levels. On June 28, 2021, the IMF Executive Board approved a 36-month arrangement for Uganda under the Extended Credit Facility (ECF), amounting to $1b (about Shs3.54 trillion), to support the country’s post-Covid-19 economic recovery.
Staff assessments indicate that Uganda’s capacity to repay the Fund is adequate under both baseline and downside scenarios, with repayment indicators remaining below median thresholds for ECF-supported countries. Even under significant external and domestic shocks, the IMF noted that Uganda’s repayment position would remain manageable, although policy buffers could come under strain. According to the PFA completed on January 23 in Washington, DC, the IMF Executive Board observed that Uganda’s budget deficit widened to six percent of GDP in FY 2024/2025, up from 4.7 percent in FY 2023/2024, while public debt rose to 52.4 percent of GDP.
To safeguard macroeconomic stability and repayment capacity, IMF staff recommended a multi-pronged policy approach. Fiscal consolidation should be accelerated through durable domestic revenue mobilisation and rationalisation of current spending, the IMF Executive Board said. While welcoming Uganda’s updated domestic revenue mobilisation strategy, particularly its focus on improving tax administration, the IMF advised that authorities should also advance tax policy measures, including rationalising tax expenditures and broadening the tax base. The IMF further recommended prioritising Public Finance Management (PFM) reforms to enhance budget discipline and limit frequent in-year spending requests.
Effective implementation of the adopted oil revenue frameworks was described as critical to safeguarding oil revenues and preserving fiscal discipline. On monetary policy, the executive board advised maintaining a data-driven and forward-looking approach. As inflation risks recede, gradual monetary easing could support private sector credit growth. ‘Strengthening monetary policy transmission and promoting financial deepening, particularly through FinTech-enabled lending and improvements in credit infrastructure, will be critical to supporting private sector activity and fostering inclusive growth,’ the board said. The IMF also noted progress in limiting central bank financing, citing recent securitisation and repayments of Bank of Uganda (BoU) advances.
Adhering to the agreed repayment schedule and limiting BoU advances within the thresholds set under the PFM Act remains essential to mitigate fiscal dominance risks and preserve monetary policy credibility. Uganda adopted a flexible foreign exchange regime in 1993 following economic reforms undertaken between 1987 and 1994 with IMF and World Bank support. The IMF said exchange rate flexibility remains essential to absorbing external shocks and maintaining competitiveness. ‘Rebuilding foreign exchange reserves should continue in a sustainable and durable manner,’ the executive board said, adding that the pilot gold purchase programme could support reserve accumulation but must be carefully managed to mitigate financial and operational risks.
In its State of the Economy report published in December 2025, the Bank of Uganda said the financial sector remains sound and resilient, with the banking system adequately capitalised and liquid, and asset quality improving, as reflected in low non-performing loans. The central bank also reported that private sector credit expanded in the three months to October 2025, supported by stable macroeconomic conditions, stronger credit demand, and improved asset quality. The IMF Executive Board echoed this assessment, noting that Uganda’s financial sector remains resilient with strengthened capital buffers.
However, it cautioned that rising sovereign-bank linkages warrant close monitoring. Strengthening supervision, risk management, and the regulatory framework, particularly amid the expansion of FinTech lending, is necessary to safeguard financial stability. In concluding the PFA, IMF executive directors endorsed staff’s appraisal, noting that Uganda’s robust macroeconomic performance continued, supported by strong domestic demand, favourable external conditions, and prudent monetary policy.
Real GDP growth accelerated to 6.3 percent in FY 2024/2025, inflation remained contained, and the current account deficit narrowed significantly. Foreign exchange reserves increased and investor sentiment improved, reflecting high real returns and Uganda’s relative stability in a volatile regional environment. However, the directors cautioned that fiscal vulnerabilities are rising due to elevated deficits and a high debt-servicing burden. While public debt remains sustainable, they warned that it faces risks from domestic financing pressures and weaknesses in the budgetary process.