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© 2003 International Monetary Fund

March 2003

IMF Country Report No. 03/83

Uganda: 2002 Article IV Consultation—Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Uganda

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2002 Article IV consultation with Uganda, the following documents have been released and are included in this package:

  • the staff report for the Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on November 22, 2002, with the officials of Uganda on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 29, 2003. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its February 12, 2003 discussion of the staff report that concluded the Article IV consultation.

  • a statement by the Executive Director for Uganda.

The document(s) listed below have been or will be separately released.

  • Report on Observance of Standards and Codes—Fiscal Transparency Module—Update Statistical Appendix

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to

Copies of this report are available to the public from

International Monetary Fund • Publication Services

700 19th Street, N.W. • Washington, D.C. 20431

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Price: $15.00 a copy

International Monetary Fund

Washington, D.C.

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Staff Report for the 2002 Article IV Consultation

Prepared by the Staff Representatives for the 2002 Consultation with Uganda

Approved by Michael Nowak and Michael T. Hadjimichael

January 29, 2003

  • The 2002 Article IV consultation discussions took place in Kampala during November 6–22, 2002, The mission consisted of Mr. Caramazza (head), Mr. Dunn, Ms. Sayek, Mr. Chembe (all AFR), Mr. Palomba (FAD), Mr. Mitchell (PDR), Mr. Mahler (Senior Resident Representative), and Ms. Cheng (AFR-Administrative Assistant). Meetings were held with President Museveni; the Minister of Finance, Planning and Economic Development, Mr. Ssendaula; the Governor of the Bank of Uganda, Mr. Tumusiime-Mutebile; and other senior officials. The mission also met with members of parliamentary committees and representatives of the donor community, the financial and business community, trade unions, and nongovernmental organizations. The mission collaborated closely with a parallel MAE mission that held concluding discussions under the Financial Sector Assessment Program.

  • At the conclusion of the last Article IV consultation on March 26, 2001, Directors commended the authorities for the continued implementation of prudent financial policies, which had helped to sustain strong economic growth, low inflation, and a comfortable level of foreign reserves, in spite of a sharp deterioration in Uganda's terms of trade. They noted that this strong economic performance had contributed to a substantial reduction in poverty; however, they were concerned that income inequality had increased. Directors also expressed concern regarding low government revenues, poor governance, and weaknesses in expenditure management and banking supervision and financial regulations, but welcomed the authorities’ intentions to address these issues.

  • Uganda has generally been receptive to Fund policy advice and has performed well under ESAF/PRGF-supported programs. A new three-year PRGF arrangement in support of Uganda’s economic reform program was approved on September 13, 2002.

  • Uganda has accepted the obligations under Article VIII, Sections 2(a), 3, and 4 of the Fund’s Articles of Agreement and maintains an exchange system free of restrictions on payments for current international transactions.

Table of Contents

  • Executive Summary

  • I. Background

    • A. Economic Outlook for 2002/03

  • II. Policy Issues and Medium-Term Outlook

    • A. Fiscal Policy

    • B. Monetary and Financial Sector Issues

    • C. External Sector Policies and Competitiveness

    • D. Governance

    • E. Privatization

    • F. Medium-Term Outlook and Alternative Scenarios

    • G. Poverty Reduction

    • H. Other Issues

  • III. Staff Appraisal

  • Boxes

  • 1. Key Structural Reforms over the Past Decade

  • 2. Lessons from Past Performance Under Fund-Supported Programs

  • 3. Main Findings of the Financial Sector Assessment Program (FSAP)

  • 4. Poverty and Social Impact Analysis of the Strategic Exports Program

  • 5. Efforts to Reduce Corruption

  • 6. HIV/AIDS Epidemic in Uganda

  • 8. Foreign Direct Investment in Uganda

  • 7. Uganda’s Debt Sustainability

  • 9. Implementation Status of Actions to Strengthen Tracking of Poverty-Reducing Public Spending

  • Figures

  • 1. Real GDP Growth, Inflation, and Terms of Trade, 1990/91–2001/02

  • 2. Savings and Investment, 1990/91–2001/02

  • 3. Fiscal Indicators, 1990/91–2001/02

  • 4. Monetary Aggregates, 1990/91–2001/02

  • 5. Nominal and Real Effective Exchange Rates, January 1992–June 2002

  • 6. Interest Rates, December 1994–June 2002

  • 7. Selected Financial Market Indicators, March 1999–June 2002

  • 8. External Sector Indicators, 1990/91–2001/02

  • Tables

  • 1. Selected Economic and Financial Indicators, 1997/98–2006/2007

  • 2. Fiscal Operations of the Central Government, 1997/98–2006/2007

  • 3. Monetary Survey, 1997/98–2006/2007

  • 4. Balance of Payments, 1997/98–2006/2007

  • 5. Status of HIPC Initiative Agreements by Creditors

  • 6. Selected Financial and External Sustainability Indicators, 2001/02–2006/07

  • 7. Comparison of Sustainability Indicators Under Alternative Scenarios, 2001/02–2006/07

  • Appendices

  • I. Relations with the Fund

  • II. Relations with the World Bank Group

  • III. Statistical Issues

  • IV. Social Output and Outcome indicators, 2000–04

  • V. Tentative Work Program

Executive Summary

  • Since achieving stable political and security conditions in the late 1980s, Uganda has implemented an ambitious program of economic reforms in the context of Fund-supported programs. Moreover, under the Poverty Eradication Action Plan (PEAP), launched in 1997 and revised in 2000, the authorities have pursued a comprehensive strategy to reduce poverty, supported by substantial donor assistance. As a result, the economy achieved high real GDP growth rates over the past decade, annual inflation was reduced to low single-digit rates, and the incidence of poverty fell considerably.

  • The main challenge facing Uganda is to sustain the poverty reduction effort by maintaining robust economic growth, which would require higher rates of private investment and more effective use of donor support. Government policies to support growth focus on increasing farmers’ productivity and building investors’ confidence. Maintaining the integrity of the budget process, improving monitoring and accountability of national and local government operations, and sustaining efforts to strengthen governance are critical to raising the effectiveness of programs.

  • Uganda’s fiscal and external sustainability indicators have worsened in recent years. A gradual fiscal consolidation to improve sustainability, without jeopardizing programs to reduce poverty, is the centerpiece of the governments’ medium-term macroeconomic policy framework. This will require increasing revenue collection and streamlining public administration expenditure.

  • Monetary policy will need to remain directed at keeping inflation low. The further development of monetary and exchange rate policy instruments will augment the Bank of Uganda’s capacity to carry out large sterilization operations without giving rise to unnecessary interest or exchange rate volatility.

  • The health of the banking system is good, owing largely to strengthen banking supervision, corrective actions taken with regard to weak banks, and privatization of intervened banks. The policy agenda aims to further strengthen financial sector regulations and supervision, deepen intermediation, and develop the nonbank financial sector.

  • Despite a sharp deterioration in its terms of trade in recent years, Uganda’s external position displays some signs of strengthening, including solid growth in export volumes and rising international reserves. Efforts to expand and diversify the export base need to be sustained. It is important also to ensure that international competitiveness is maintained by continuing to implement a flexible exchange rate policy.

  • The medium-term economic outlook envisages continued robust economic growth. The risks to the outlook include major delays to the expansion of the power supply and a weak implementation of the policy agenda.

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Public Information Notice (PIN) No. 03/35


March 20, 2003

International Monetary Fund

700 19th Street, NW

Washington, D. C. 20431 USA

Telephone 202-623-7100

Fax 202-623-6772

On February 12, 2003, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Uganda.1

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February 12, 2003

Uganda: 2002 Article IV Consultation-Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Uganda
Author: International Monetary Fund