KAMPALA, January 24, 2026 — The International Monetary Fund [ IMF ] has painted a cautiously optimistic picture of Uganda’s economic outlook while warning that growing fiscal pressures and debt vulnerabilities could undermine recent gains if left unaddressed.
In a Post-Financing Assessment concluded on January 12, 2026, the IMF Executive Board endorsed staff findings that Uganda has weathered the post-pandemic period relatively well, supported by strong domestic demand, stable inflation, and favorable external conditions.
The organisation’s press release sent to media houses and journalists yesterday noted that real gross domestic product [GDP] growth for the country accelerated to 6.3 percent in financial year [FY] 2024/25, inflation remained below 4 percent, and foreign exchange reserves rose to more than three months of import cover by October 2025, buoyed partly by strong portfolio inflows.
However, behind the positive macroeconomic indicators, the Fund flagged mounting fiscal weaknesses. Uganda’s overall budget deficit widened to 6 percent of GDP in FY2024/25 from 4.7 percent the previous year, while public debt climbed to 52.4 percent of GDP.
The IMF also noted that debt servicing costs for the country are increasing and that weaknesses in budgetary processes have contributed to elevated spending pressures.
While the IMF assessed Uganda’s capacity to repay the Fund as “adequate” under both baseline and downside scenarios, it emphasised that this assessment is contingent on continued policy discipline. Risks to repayment capacity include potential portfolio outflows, adverse commodity price movements, governance weaknesses, and further delays to the long-awaited oil project.
Oil production, expected to begin in late 2026, is projected to provide an additional boost to growth and revenues. Yet IMF staff cautioned that delays or mismanagement could quickly strain fiscal buffers. They stressed the importance of implementing the adopted oil revenue frameworks to prevent slippages and ensure that oil proceeds do not weaken fiscal discipline.
The Fund called for faster fiscal consolidation, urging the government to go beyond administrative improvements in tax collection and move toward politically sensitive tax policy reforms, including the rationalization of tax exemptions and a broader tax base. It also warned that frequent in-year spending adjustments are eroding budget credibility and should be curbed through stronger public financial management reforms.
On monetary policy, the IMF acknowledged the Bank of Uganda’s prudent stance but warned against the risks of fiscal dominance, pointing to the need to strictly limit central bank financing of government spending. While gradual monetary easing could support private sector credit as inflation risks recede, the Fund emphasized that credibility must be preserved.
The financial sector was described as resilient, with improved capital buffers and asset quality, but the IMF expressed concern about rising sovereign-bank linkages and the rapid expansion of FinTech lending, calling for stronger supervision and regulation.
Overall, the IMF’s assessment suggests that Uganda’s economic momentum is real but fragile—heavily dependent on disciplined fiscal management, successful oil sector development, and the authorities’ willingness to tackle long-standing structural and governance challenges.
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