Public spending is expected to continue to rise in 2017, especially spending on investment given the large infrastructure programs. But the increase in current spending, notably on salaries, is likely to be more moderate than during the previous tax year (July 2015 - June 2016), undertaken during an election period. Meanwhile, government revenues are expected to increase as economic growth strengthens, some taxes go up (fuel, cigarettes, alcohol) and as measures to broaden the tax base and improve tax collection are introduced as agreed with the IMF. The deficit will continue to be financed by loans, most of them on concessional terms.
The current account balance, structurally in deficit, could improve slightly in 2017. Exports are likely to remain constrained overall by the ongoing political instability in South Sudan, a key trading partner of Uganda. However, exports of coffee (Uganda is Africa's biggest exporter of robusta), having been hit by the drought in 2016, could be boosted by higher production in 2017. Imports, notably of foodstuffs and energy (Uganda is still dependent on external supplies of oil as the exploitation of its reserves has not begun) are expected to remain high. Meanwhile, the need for capital equipment and consumer goods, buoyed by more robust growth, cannot be met by local industry.
The shilling, which stabilised in 2016 after losing around 20% in value against the dollar in 2015, is not expected to depreciate sharply in 2017.
Although healthy overall, the banking sector is weakened by the rise in non-performing loans (8.2% at end June 2016 compared with 5.1% at end 2015), as evidenced by the central bank's intervention to take over control of a struggling bank (Crane Bank) in October 2016.