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International Monetary Fund. African Dept.
This Selected Issues Paper analyzes potential macro-financial risks from cross-sectoral exposures in Uganda by leveraging on the Balance Sheet Approach framework. It presents evidence on the macro-financial linkages in Uganda using the Network Map and Financial Input-Output approaches. On the one hand, the Network Map analysis shows the cross-sectoral exposures in which potential build-up of macro-financial vulnerabilities may arise. On the other hand, the Financial Input-Output tool simulates relevant scenarios in the context of Ugandan economy such as currency depreciation and increases in government interest payments on debt held by banks. The purpose of the scenario exercises is to strengthen the monitoring of the developments in key economic sectors in Uganda. While the banking sector, which dominates the Ugandan financial system, remains fundamentally sound, there are pockets of vulnerabilities resulting from the growing sovereign-bank nexus and cross-border exposures of the Near Field Communication technology sector which require close vigilance.
International Monetary Fund. African Dept.
The 2024 Article IV Consultation highlights that Uganda has navigated the post pandemic recovery well due to sound macroeconomic policies. The economic recovery is strengthening with low inflation, favorable agricultural production, and strong industrial and services activity. While public debt is sustainable, low tax revenues constrain Uganda’s fiscal policy space. Strengthening domestic revenue mobilization and budgetary and cash management practices are key to securing a durable fiscal space. The Bank of Uganda’s tight monetary policy stance has helped anchor inflation expectations and counter external sector pressures. Going forward, monetary policy should remain data driven to ensure price stability and further financial deepening. Continued flexibility of the exchange rate is important to build up adequate foreign exchange reserves. Uganda should continue its efforts to create fiscal space through revenue mobilization and better expenditure discipline, vigilant monetary policy, and exchange rate flexibility, using future oil revenue to address growth impediments and improve social development while advancing governance reform and financial inclusion. Addressing governance deficiencies and regulatory burdens and enhancing regional trade integration are critical to unlocking Uganda’s growth potential.
International Monetary Fund. African Dept.

This paper leverages the 2015 International Labor Organization (ILO) School to Work Transition Survey (SWTS) for Uganda to examine the determinants facilitating the transition of youth workers from informal to formal employment. SWTS enables analysis using micro data pertaining to youth’s prevailing conditions. The analysis indicates that fostering private sector led growth, investing in education and skills development, implementing targeted programs and, advancing gender parity are essential strategies to mitigate informality.

International Monetary Fund. African Dept.

Across several social and economic dimensions Uganda scores relatively well in sub-Saharan Africa in terms of gender gaps. Yet, despite a progressive institutional framework, women continue facing higher poverty and vulnerability, lower education opportunities, and obstacles to acquiring productive assets. While existing social protection and economic (i.e. poverty-reducing) programs do not show gender exclusion given the need to close the remaining gaps in opportunities and outcomes consideration could be given to strengthening direct gender targeting and increasing programmatic support.

International Monetary Fund. African Dept.

1. Our Ugandan authorities appreciate the constructive engagement with staff and share the thrust of staff's assessment of economic developments and key policy priorities.

International Monetary Fund. African Dept.

1. Uganda has navigated the post pandemic recovery well. The impacts of the pandemic and Russia’s war in Ukraine have by now largely tapered off: real GDP growth is back to its prepandemic levels, inflation is among the lowest in the region, and fiscal and external balances have seen notable improvements (Text Figure 1). However, Uganda’s gap in real per capita income with other emerging and developing economies continues to widen. Over the last year, external buffers have also declined, denting Uganda’s ability to weather future shocks.

International Monetary Fund. African Dept.

This paper revisits monetary policy transmission in Uganda, focusing on the credit and exchange rate channels. Despite inflation being below the target, the Bank of Uganda has maintained a tight monetary policy stance. The findings support the importance of exchange rate developments in shaping monetary policy actions in Uganda, offering several policy recommendations to further strengthen monetary policy transmission and enhance the inflation targeting framework.

International Monetary Fund. African Dept.

We analyze macro-financial linkages in Uganda using the “from-whom-to-whom” balance sheet approach (BSA) framework.2 While the banking sector, which dominates the Ugandan financial system, remains fundamentally sound, there are pockets of vulnerabilities resulting from the growing sovereign-bank nexus and cross-border exposures of the NFC sector which require close vigilance.