IMF warns Uganda on debt, budget discipline

What the report says

The International Monetary Fund has warned Uganda that its public debt is likely to rise further this financial year as the government borrows to cover a widening budget gap. In The Observer’s report, the Fund’s latest Article IV consultation says debt could reach 55.5% of GDP, up from 52.3% in FY 2024/25, while the fiscal deficit is projected at 7.1%.

The consultation, concluded on July 27 and published the next day, comes against a backdrop of solid economic performance. The report says growth has remained strong, supported by domestic demand, low inflation and higher private sector credit. It also notes that Uganda’s economy expanded in FY 2024/25 and that per capita income is expected to keep rising. Even so, the IMF said the main weakness is the government’s fiscal position, with tax collection under pressure and domestic borrowing becoming more expensive for the private sector.

According to the report, the IMF Executive Board urged tighter budget discipline, better control over supplementary spending, improved public financial management and stronger efforts to boost revenue without undermining business activity. It also called for reforms in governance, anti-corruption institutions, the judiciary and trade barriers so that growth can translate into broader job creation and prosperity.

The article also highlights Uganda’s limited foreign-exchange reserves, which it says amount to $6.1 billion, or about 2.7 months of import cover. The IMF said stronger reserves will be important, especially as future oil revenue is expected to support the economy, but should be managed carefully to protect stability and long-term development.