Uganda’s economy performs well – IMF

Uganda’s economy has performed reasonably well in a complex environment, the International Monetary Fund (IMF) said.  

Growth slowed marginally to 4.8 percent in FY15/16, reflecting muted sentiment in an election year and adverse global and regional developments. The current account deficit improved by 1 percentage point to 5.9 percent of GDP, and the Shilling has stabilized after a sharp depreciation in 2015. Growth is projected to nudge up to 5 percent in FY16/17, the IMF said.

Program performance under the PSI has been mixed. Tight monetary policy in 2015 has helped contain inflation in the target range, and the Bank of Uganda (BoU) has started an easing cycle in April 2016. Reserve cover remains adequate. Fiscal revenue and deficit targets were missed, reflecting lower-than-expected growth and election effects. Investment spending fell short, while current expenditure overshot. Structural reforms have progressed, albeit with some delays.

The banking sector remains overall well capitalized, despite elevated non-performing loans. The BoU appropriately took over an undercapitalized bank and is identifying a strategic investor.

Uganda remains at a low risk of debt distress. The scaling-up of infrastructure investment implies a temporary increase in debt, putting a premium on domestic revenue mobilization and ensuring that public investment yields the intended growth dividend, the IMF said.

According to the Uganda Poverty Assessment, the proportion of the population living in extreme poverty ($1.90 a day) fell from 62.2% in 2002/03 to 33.2% in 2012/13, representing the second fastest reduction in poverty in Sub-Saharan Africa. Using the national poverty line ($1.25 a day), the incidence of poverty declined from 56.4%in 1993 to 19.7% in 2013. Poverty reduction was mainly driven by agriculture, urbanization, and education.

Despite progress, poverty and vulnerability remain in the Northern and Eastern regions, which account for 84% of those living beneath the national poverty line. For every three Ugandans who get out of poverty, two fall back in, demonstrating the fragile gains in the country’s poverty success.

Uganda has one of the world’s youngest populations, half of them under the age of 15 years. The fertility rate is estimated at 5.7 children per woman (2015), and with a 3.3% population growth the dependency ratio is high with significant consequences for national development.