Uganda’s economy has shown solid resilience in the post-pandemic period, supported by broad-based growth, contained inflation and a strong external position, the International Monetary Fund said after concluding its 2025 Post-Financing Assessment (PFA).
The IMF Executive Board endorsed the assessment on Jan. 12 on a lapse-of-time basis, meaning the decision was taken without a formal meeting. Ugandan authorities have agreed to the publication of the staff report.
Uganda’s real gross domestic product grew by 6.3 percent in the 2024/25 fiscal year, up from the previous year, driven by strong domestic demand and favourable external conditions. Inflation remained below 4 percent, while the current account deficit narrowed to an estimated 6.1 percent of GDP, supported largely by robust coffee exports.
Foreign exchange reserves rose to more than three months of import cover by October 2025, reflecting strong portfolio inflows and an improved external environment, the IMF said.
Despite the strong macroeconomic performance, progress in rebuilding fiscal buffers has been limited. The overall budget deficit widened to 6% of GDP in fiscal year 2024/25 from 4.7% a year earlier, while public debt increased to 52.4 percent of GDP. Debt servicing costs remain elevated, adding pressure to public finances.
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The IMF assessed Uganda’s capacity to repay the Fund as adequate under both baseline and downside scenarios, though it warned of rising risks. Potential large portfolio outflows, adverse commodity price shocks and further delays to the country’s oil project could weaken repayment indicators, though they would remain within manageable levels.
Uganda is preparing to begin oil production, which is expected to start in late 2026 and provide an additional boost to growth and export earnings. However, delays to the project remain a key risk to the medium-term outlook.
Looking ahead, the IMF said macroeconomic conditions are expected to remain broadly favourable, provided that authorities implement fiscal adjustment measures and maintain prudent macroeconomic policies.
Executive Directors highlighted the need for faster fiscal consolidation to address rising deficits and debt servicing pressures. The Fund recommended durable revenue mobilisation, including improvements in tax administration and the rationalisation of tax exemptions, as well as measures to broaden the tax base.
It also urged the government to strengthen public financial management reforms to improve budget discipline and reduce frequent in-year spending adjustments. Effective implementation of Uganda’s oil revenue management framework will be critical to safeguarding future oil revenues and maintaining fiscal discipline, the IMF said.
On monetary policy, the Fund welcomed the central bank’s data-driven and forward-looking approach, noting that a gradual easing could support private sector credit growth as inflation risks recede. Strengthening monetary policy transmission and promoting financial deepening particularly through financial technology-enabled lending and improvements in credit infrastructure will be important to support inclusive growth.
The IMF also stressed the importance of limiting central bank financing of the budget. Recent securitisation and repayments of advances from the Bank of Uganda were seen as positive steps, but adherence to statutory limits under the Public Finance Management Act remains essential to preserve monetary policy credibility.
The Fund reaffirmed that exchange rate flexibility should remain a key pillar of policy to absorb external shocks and preserve competitiveness. It encouraged continued rebuilding of foreign exchange reserves in a sustainable manner, while cautioning that Uganda’s pilot gold purchase programme should be carefully managed to mitigate financial and operational risks.
Uganda’s financial sector remains resilient, with improved asset quality and capital buffers, the IMF said. However, it warned that rising sovereign-bank linkages warrant close monitoring, particularly as government borrowing increases. Strengthening financial supervision and regulatory frameworks will be essential, especially amid the rapid expansion of fintech lending.
