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Africa > Uganda

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Cover Technical Assistance Reports
Uganda: Technical Assistance Report-The Cost of Meeting the Sustainable Development Goals in Human Capital and Infrastructure Development
International Monetary Fund. Fiscal Affairs Dept.
The mission estimates that making substantial progress in critical SDG sectors in Uganda would require additional annual spending of about 18.4 percent of gross domestic product (GDP) by 2030. Relative to low-income developing countries (LIDCs), additional spending in Uganda is higher in the social sectors and lower in the infrastructure sectors (Figure). Overall, Uganda’s additional spending is above the median LIDC and similar to the median Sub-Saharan African (SSA) country. (This analysis is an assessment of the spending to achieve a high performance in selected SDGs in Uganda and does not include an examination of options to finance the spending needs.) • Health—expanding the supply of medical staff. Total health care spending is low (4.2 percent of GDP) relative to peers, and there is substantial room to increase the efficiency of spending: health outcomes are below those of several other countries with similar spending. Overall, we estimate that total health care spending would have to gradually increase by an additional 7.4 percent of GDP in 2030 relative to today’s spending, to deliver superior health care outcomes. A major contributor to the additional cost is the need to substantially increase the supply of doctors—more than 16-fold—and to nearly triple the number of other health personnel. • Education—strengthening both quality and quantity of services. Uganda’s young population—60 percent are school-aged, a higher share than in the East African Community (EAC) and LIDC peers—combined with a relatively low enrollment rate, means that the country needs to invest in getting its children into schools. However, just as important is improving the currently low level of educational quality. Toward this goal, class sizes need to fall by hiring more teachers, thus bringing the student-teacher ratio down from 28 to 19. Public spending, currently well below LIDC and EAC averages, would need to triple as a share of GDP to help deliver on these goals. We estimate that Uganda’s total expenditures on education would need to increase by an additional 6.7 percent of GDP from its current level of 7.1 percent of GDP. • Water and sanitation—aiming at safely managed water and sanitation for all. Uganda is below regional and income-group peers in water and sanitation standards. In particular, while there has been progress in water provision, sanitation services have hardly improved in the past two decades, and its provision is lower than most countries in the subregion. Closing the water and sanitation gaps will require an additional annual spending of 1.1 percent of GDP, including maintenance costs to counteract depreciation. The bulk of the cost burden comes from safely managed water in rural areas, given the relatively high unit cost of such facilities and the large rural population unserved by this type of facility. • Electricity—investing in transmission and distribution networks to increase access. The vast majority of Uganda’s electricity is generated by renewable energy (hydropower). Overall electricity consumption per capita, at 83kilowatt-hour (kWh), strongly lags LIDCs and is below what would be expected given its level of GDP per capita. Transmission and distribution networks need to catch up with installed capacity, which, at 1,347 megawatts (MW), is far ahead of peak demand at 793 MW. We estimate that expanding current access, serving the future population through 2030, and increasing consumption in line with economic growth, will require annual investments reaching 0.4 percent of GDP in 2030. • Roads—gradually increasing rural access. Raising access to roads from its current level of 53 percent of the rural population to 75 percent by 2030 will require about 20.4 thousand additional kilometers of all-weather roads. While rural road access is higher than LIDCs, road quality lags subregional peers, thus the expansion of access will also need to include upgrading of roads in that are in poor condition. We estimate that this will require annual investments of 2.8 percent of GDP in 2030.
Keywords:
Uganda; Sustainable Development Goals; Social Spending; Infrastructure Spending.; EU-International Monetary Fund; IMF resident Representative; IMF team; FAD department; SDG index; Sustainable Development Goals (SDG); Global; Sub-Saharan Africa
Cover IMF Working Papers
Aggregate Shocks and the Formation of Preferences and Beliefs
Paola Giuliano
and
Antonio Spilimbergo
A growing body of work has shown that aggregate shocks affect the formation of preferences and beliefs. This article reviews evidence from sociology, social psychology, and economics to assess the relevance of aggregate shocks, whether the period in which they are experienced matters, and whether they alter preferences and beliefs permanently. We review the literature on recessions, inflation experiences, trade shocks, and aggregate non-economic shocks including migrations, wars, terrorist attacks, pandemics, and natural disasters. For each aggregate shock, we discuss the main empirical methodologies, their limitations, and their comparability across studies, outlining possible mechanisms whenever available. A few conclusions emerge consistently across the reviewed papers. First, aggregate shocks impact many preferences and beliefs, including political preferences, risk attitudes, and trust in institutions. Second, the effect of shocks experienced during young adulthood is stronger and longer lasting. Third, negative aggregate economic shocks generally move preferences and beliefs to the right of the political spectrum, while the effects of non-economic adverse shocks are more heterogeneous and depend on the context.
Keywords:
trade shock; inflation experience; effect of shock; economic shock; beliefs to the right; Economic recession; Natural disasters; Migration; Inflation; Global; Europe
Cover IMF Staff Country Reports
Uganda: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Uganda
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.
Keywords:
IMF staff calculation; NDP IV; inflation expectation; fiscal consolidation effort; core inflation; data dependent; headline inflation; Anti-money laundering and combating the financing of terrorism (AML/CFT); Debt sustainability; Global; Africa; Middle East
Cover Policy Papers
Macroeconomic Developments and Prospects For Low-Income Countries—2024
International Monetary Fund
and
World Bank
The outlook for Low-Income Countries (LICs) is gradually improving, but they face persistent macroeconomic vulnerabilities, including liquidity challenges due to high debt service. There is significant heterogeneity among LICs: the poorest and most fragile countries have faced deep scarring from the pandemic, while those with diversified economies and Frontier Markets are faring better. Achieving inclusive growth and building resilience are essential for LICs to converge with more advanced economies and meet the Sustainable Development Goals (SDGs). Building resilience will also be critical in the context of a more shock-prone world. This requires both decisive domestic actions, including expanding and better targeting Social Safety Nets (SSNs), and substantial external support, including adequate financing, policy advice, capacity development and, where needed, debt relief. The Fund is further stepping up its support through targeted policy advice, capacity building, and financing.
Keywords:
Low-Income Countries; Heterogeneity; Debt vulnerability; Resilience building; Inclusive growth towards SDGs; Financing needs and external support; Social Safety Nets; poverty rate; means testing; poverty gap; aggregate poverty gap; SSNS spending; prospects in low-income countries; poverty threshold exit poverty; reform scenario; transparency policy; FAD financing tool; financial support; Poverty reduction; Household consumption; Inflation; Global; Sub-Saharan Africa
Cover IMF Staff Country Reports
Uganda: Fifth Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Uganda
International Monetary Fund. African Dept.
This paper presents Uganda’s Fifth Review under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria. Economic recovery continues to gain strength following a rapid decline in inflation, favorable agriculture and robust industrial and services activity. Fiscal financing and foreign portfolio flows are facing headwinds amid tight global financial conditions and the passage of the Anti-Homosexuality Act in May 2023. The authorities are implementing fiscal consolidation to contain vulnerabilities, maintaining a moderately tight monetary stance in the face of upside risks to inflation and undertaking reforms to improve governance and reduce corruption. All September 2023 quantitative performance criteria were met, as well as most June 2023 indicative targets (ITs). Preliminary data suggest that the December 2023 IT for net credit to government and inflation were met but the IT for net international reserves was missed. Four out of seven structural benchmarks for the current review were met on or before test dates, and one was completed with a delay.
Keywords:
government debt service; inflation risk; excise duty regime; inflation outlook; authorities' effort; ECF program; financing risk; Inflation; Anti-money laundering and combating the financing of terrorism (AML/CFT); Credit; Imports; Global
Cover IMF Staff Country Reports
Kenya: Selected Issues
International Monetary Fund. African Dept.
This Selected Issues paper examines tax policy and administrative changes in Eastern African Community (EAC) countries with a view to benchmark Kenya’s experience and draw lessons for future tax reforms. Using granular data from a new IMF database on tax measures announced during 1988–2022, it concludes that EAC policymakers frequently changed their tax system and administrations by announcing tax packages that typically consisted of measures to narrow the tax base and strengthen tax administrative practices. Kenya appeared to be one of the EAC countries that most frequently announced and introduced such changes, which might have played a significant role in explaining the reduction in the tax-to-gross domestic product ratio experienced by the country since 2014. The conclusions of this note are subject to caveats, as the frequency of tax measures is not an indicator of the actual revenue impact of such measures. Looking at the frequency of changes, however, can help identify reform episodes providing a sense of their duration and comprehensiveness.
Keywords:
public sector balance sheet methodology; exchange rate shock; public sector balance sheet vulnerability; public sector balance sheet approach; HM Treasury; EAC policymaker; Tax-to-GDP ratio; Financial statements; Exchange rates; Public sector; Fiscal risks; Global; Australia and New Zealand
Cover IMF Staff Country Reports
Rwanda: Selected Issues
International Monetary Fund. African Dept.
This Selected Issues paper revisits Rwanda’s options to create fiscal space to meet long-term development challenges. It examines strategies and options for a credible and comprehensive domestic revenue mobilization. The paper analyzes the driving factors of past reform successes and use an original dataset to highlight the benefits of implementing comprehensive tax reforms over selective reforms. The paper concludes that selective measures tend to yield protracted loss of revenue while measures implemented comprehensively lead to increases in revenue in the medium term. This stresses the need for an integrated approach to fiscal policy reform coordination to maximize long-term revenue benefits. For Rwanda, a comprehensive strategy for increasing tax revenues by adjusting rates, broadening the domestic tax base, improving tax compliance, and curbing tax evasion is the way forward. The strategy should shift higher tax burden from low-income households to higher income wealth cohorts with the view to advancing distributional fairness against growing inequality.
Keywords:
climate agenda; NDC financing; monetary policy transmission; financing option; implementation framework; Climate finance; Natural disasters; Central bank policy rate; Value-added tax; Global; Africa; Sub-Saharan Africa
Cover IMF Working Papers
Panel Nowcasting for Countries Whose Quarterly GDPs are Unavailable
Omer Faruk Akbal
,
Mr. Seung M Choi
,
Mr. Futoshi Narita
, and
Jiaxiong Yao
Quarterly GDP statistics facilitate timely economic assessment, but the availability of such data are limited for more than 60 developing economies, including about 20 countries in sub-Saharan Africa as well as more than two-thirds of fragile and conflict-affected states. To address this limited data availablity, this paper proposes a panel approach that utilizes a statistical relationship estimated from countries where data are available, to estimate quarterly GDP statistics for countries that do not publish such statistics by leveraging the indicators readily available for many countries. This framework demonstrates potential, especially when applied for similar country groups, and could provide valuable real-time insights into economic conditions supported by empirical evidence.
Keywords:
Developing economies; fragile and conflict-affected states; GDP; low-income countries; nowcasting; sub-Saharan Africa; GDP statistic; panel Nowcasting; data availability; growth data; annex II; data availablity; Commodity prices; Purchasing power parity; Data collection; Export fluctuations; Global
Cover IMF Staff Country Reports
Uganda: Fourth Review under the Extended Credit Facility Arrangement, Requests for a Waiver of Nonobservance of a Performance Criterion and Modification of a Performance Criterion-Press Release; Staff Report; and Statement by the Executive Director for Uganda
International Monetary Fund. African Dept.
This paper presents Uganda’s Fourth Review under the Extended Credit Facility Arrangement, the Requests for a Waiver of Nonobservance of a Performance Criterion and Modification of a Performance Criterion and the Financing Assurance Review. The program aims to support the near-term response to the coronavirus disease 2019 pandemic and boost inclusive private sector-led long-term growth. Reforms focus on creating fiscal space for priority social spending, preserving debt sustainability, strengthening governance and reducing corruption, and enhancing the monetary and financial sector frameworks. The Ugandan economy is projected to grow by 5.5 percent in FY 22/23 and 6 percent in FY 23/24. Inflation has been declining and is expected to reach the Bank of Uganda’s medium-term target of 5% core inflation by end-2023. A stronger tightening of global financial conditions would constrain the availability of syndicated loans and weigh on financial sector stability. Fiscal consolidation and tight monetary policy remain essential to keep debt on a sustainable path. Structural reforms will need to continue focusing on strengthening governance and anticorruption frameworks, enhancing domestic revenue mobilization, and boosting financial inclusion.
Keywords:
FX reserves-financed government import; core inflation; steadfast adherence; excise duty regime; monetary policy implementation; Credit; Debt sustainability; Global
Cover Selected Issues Papers
Nigeria’s Tax Revenue Mobilization: Lessons from Successful Revenue Reform Episodes: Nigeria
Il Jung
This paper has identified four episodes of large and sustained revenue mobilizations in Sub-Saharan Africa (SSA) and found common lessons from the episodes. Although there is no one-size-fits-all strategy, we can find a tax reform path suitable to Nigeria’s circumstances. Based on these cross-country experiences, this paper recommends: (i) implementing a package reform of tax administration and tax policy measures; (ii) focusing mainly on indirect tax (VAT and excise) reforms and tax incentive rationalizations; (iii) undertaking tax administration measures for improving compliance by strengthening taxpayer segmentation and automation; and (iv) launching social dialogue with key stakeholders as well as high-level political commitment.
Keywords:
undertaking tax administration; tax revenue mobilization; package reform; Nigeria's tax reform; tax incentive rationalization; Excises; Value-added tax; Consumption taxes; Tax administration core functions; Sub-Saharan Africa