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HomeWorld NewsAnti-Homosexuality Act: Uganda Faces Hardship Getting External Funds - Fitch

Anti-Homosexuality Act: Uganda Faces Hardship Getting External Funds – Fitch

 

Uganda Faces challenges as they finds it difficult to access external funding opportunities following the enactment of the Anti-Homosexuality Act in 2023, according to insights from Fitch Ratings. Despite being endowed with favorable medium-term growth prospects and a track record of relative macroeconomic stability, Uganda’s recent legislative move has triggered concerns among global financiers, resulting in a negative outlook for the nation’s credit rating.

Fitch’s analysis underscores Uganda’s economic strengths, including promising GDP growth projections and a commitment to fiscal consolidation. However, the country’s low GDP per capita, governance challenges, and elevated deficits pose significant hurdles to its economic resilience.

Of particular concern are the mounting pressures on external financing and liquidity, exacerbated by the reluctance of donor agencies to extend concessional funds. Donor apprehensions surrounding democracy, human rights, and corruption have further restricted Uganda’s access to vital financial support, casting a shadow over its economic trajectory.

The World Bank’s decision to withhold new funding until Uganda addresses concerns of discrimination highlights the severity of the situation, given the institution’s significant role in the country’s external debt portfolio. Negotiations between Ugandan authorities and the World Bank are underway, but the path to restoring funding remains uncertain.

In the absence of concessional financing, Uganda has turned to costlier external commercial creditors and domestic markets to meet its financial obligations. However, this shift comes with its own set of challenges, including heightened interest costs and shorter maturities, which could strain the country’s fiscal sustainability.

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Looking ahead, Uganda faces an uphill battle to narrow its fiscal deficit and strengthen revenue generation amidst persistent underperformance and weak budget planning. While efforts to reduce general government debt are underway, the country’s narrow revenue base limits its ability to respond effectively to economic shocks.

Despite these challenges, Fitch remains cautiously optimistic about Uganda’s growth prospects, buoyed by anticipated developments in the oil sector and increased agricultural production. However, near-term risks loom large, including a contractionary fiscal stance and adverse weather conditions, which could impede economic recovery.

 

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