Macroeconomic updateUganda

22 September 2022

Nuggets From The Pearl

In brief

  • Local folklore goes like this, ‘If you throw anything on the ground, it grows the next day’. That is what makes Uganda, the pearl of Africa


  • We spent the week of 12th – 16th September in Kampala meeting policymakers; financial services’ regulators and professionals; multilateral creditors; and the media. This note highlights our 5 take-aways from our Uganda trip


  • An IMF mission is underway in Uganda for combined second and part-third reviews, with operational challenges delaying the second review (initially scheduled for June 2022).


  • A monkey wrench has been thrown on Uganda’s oil project with last week’s resolution by the European Union seeking East African Crude Oil Pipeline (EACOP) to delay construction works by a year citing environmental concerns.


  • Uganda has a credible (relative to its peers) liberalized FX regime, which although painful against the current global macroeconomic environment, is comforting to offshore investors


  • We expect the BoU to maintain its tightening stance in the upcoming October MPC, to wade off the inflationary pressures whose second-round effects has catapulted core inflation from 2.9% (December 2021) to 7.2% (August 2022).


  •  The back-end of the curve (10 years and above) offers an attractive entry point with the reversal of the upward rates shift as environment normalizes. We see the 10-year (2032 maturities) offering the best risk-reward exposure, with c. 300bps downward rate adjustment to March 2022 levels.