KAMPALA, July 29, 2026 — The International Monetary Fund [IMF] has raised concerns over Uganda’s weakening fiscal position, warning that rising government spending and debt-servicing costs could increase vulnerabilities despite continued strong economic growth.
The warning follows the conclusion of the IMF Executive Board’s 2026 Article IV Consultation with Uganda on July 27, with the Fund commending the economy’s robust growth momentum, low inflation and improving private sector credit.
Uganda’s economy grew by 6.3 percent in the first three quarters of the 2025/26 financial year, maintaining the strong momentum recorded in 2024/25.
Inflation also remained below the Bank of Uganda’s medium-term target of five percent, with headline inflation at 3.7 percent and core inflation at 3.4 percent in June 2026.
However, the IMF said the country’s fiscal position remained a major concern.
Uganda’s overall fiscal deficit widened to 6.0 percent of gross domestic product [GDP] in the 2024/25 financial year, up from 4.7 percent in 2023/24, driven largely by increased recurrent expenditure and rising interest payments.
The spending pressures have continued into the current financial year, with the IMF projecting the fiscal deficit to widen further to 7.1 percent of GDP in 2025/26.
“Stronger fiscal consolidation, anchored in enhanced domestic revenue mobilisation and improved expenditure discipline, is needed to reduce debt vulnerabilities, ease crowding-out pressures, and rebuild policy space,” the IMF Executive Directors said.
The Fund urged the Ugandan Government to accelerate implementation of its Domestic Revenue Mobilisation Strategy to broaden the tax base, improve tax administration and rationalise tax expenditures.
It also called for stronger budgetary discipline, including tighter controls on supplementary spending, improved efficiency in public expenditure and stronger public financial management.
Oil production offers economic boost
The IMF said Uganda’s economic growth is expected to remain strong, with the anticipated start of oil production providing an additional boost to growth and potentially leading to a lasting improvement in the country’s fiscal and external balances.
However, the Fund cautioned that exchange rate movements, elevated energy prices and higher transport costs are likely to push headline inflation above five per cent in the 2026/27 financial year.
Core inflation is also projected to reach the Bank of Uganda’s five per cent medium-term target before the end of 2026.
The IMF identified a prolonged or intensified conflict in the Middle East and a possible Ebola outbreak among the key near-term downside risks to Uganda’s economic outlook.
Other risks include tighter global financial conditions, possible delays in oil production and climate-related shocks.
Reserves strengthened by capital inflows
Uganda’s international reserves have been supported by strong capital inflows, with gross reserves reaching US$ 6.1 billion at the end of May 2026, equivalent to about 2.7 months of imports of goods and services.
The IMF noted that Uganda has benefited from strong coffee and gold exports. However, the country’s current account deficit remains high, partly because of increased imports of capital goods by the private sector to support investment, higher gold imports and a widening services account deficit.
Sizable portfolio inflows have helped boost foreign exchange reserves despite these pressures.
The IMF Executive Directors supported the Bank of Uganda’s tight monetary policy stance, saying it was necessary to anchor inflation expectations amid successive shocks and heightened global uncertainty.
They recommended that monetary policy remain data-driven and forward-looking, while calling for continued efforts to strengthen monetary policy transmission.
The Directors also stressed the importance of exchange rate flexibility in absorbing external shocks and urged Uganda to continue building its foreign exchange reserves.
They further backed efforts to strengthen the independence of the Bank of Uganda, including full implementation of recommendations contained in the 2021 Safeguards Assessment.
IMF calls for stronger oil revenue framework
With Uganda expected to begin oil production, the IMF stressed the need for a robust and transparent framework for managing oil revenues.
The Fund said effective management of oil revenues would be critical to safeguarding fiscal sustainability and ensuring that the benefits of the country’s oil resources are shared across generations.
The IMF also commended Uganda’s financial system for maintaining strong capital and liquidity buffers, while calling for vigilant monitoring of the relationship between sovereign finances and banks.
It encouraged continued efforts to turn gains in financial inclusion into broader financial deepening and address structural constraints that limit lending.
The Fund further called for accelerated structural reforms to improve Uganda’s business environment, strengthen governance and support private sector-led inclusive growth.
Among the priorities highlighted were strengthening the anti-corruption framework and judiciary, reducing non-tariff barriers and deepening regional trade integration.
The IMF also stressed the importance of continued efforts to strengthen Uganda’s resilience to climate-related shocks.
The next IMF Article IV consultation with Uganda will be held on the standard 12-month cycle.
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