Country Risk Rating

A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high. - Source: Coface

Business Climate Rating

The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.


  • Natural resources: fertile soils, oil deposits, hydroelectric potential
  • Diversification efforts, particularly in the agri-food sector
  • International support for infrastructure projects
  • Debt mainly on concessional terms
  • Main coffee exporter on the continent, alongside Ethiopia


  • Endemic poverty, persistent inequalities
  • Inadequate infrastructure
  • Lack of security in border areas (Democratic Republic of Congo and South Sudan) and recurring tensions with neighboring Rwanda
  • Poor progress in governance (particularly in terms of combating corruption)

Current Trends

Growth was driven by domestic demand and hydrocarbons

Following a year of recession due to the pandemic, growth rebounded in 2021. It is expected to be more dynamic in 2022, thanks to household consumption. Household consumption is expected to improve as remittances recover and health restrictions are eased. Increased domestic demand will boost the services sector (50% of GDP). However, low rainfall forecasts and locust outbreaks could threaten the incomes of households dependent on agriculture (25% of GDP and 70% of the labor force). This will also affect inflation, which will nevertheless remain moderate. Furthermore, investments in hydrocarbons to exploit Lake Albert’s resources and build a pipeline will also be an essential growth driver. Construction of the Tilenga and Kingfisher development projects, operated by TotalEnergies and China National Offshore Oil Corporation, respectively, is expected to start in 2022, with exports expected to begin in 2025. In addition, the Karuma hydropower plant, scheduled to come online in 2022, will improve the country’s energy supply, contributing to an improved operating environment. While donor funding will support public investment in infrastructure, reforms aimed at rebalancing the public accounts could dampen the authorities’ ambitions. The acquisition will result in higher imports of capital goods, which will weigh on the contribution of net exports. This will be even more the case with a likely decline in gold revenues (44% of exports in 2020) following the suspension of its export by mining operators in response to the imposition of a 5% levy on refined gold and 10% on unrefined gold (July 2021). Exports will also continue to be constrained by the trade dispute with Kenya, which has, for instance, imposed a 7% surcharge on imports of Ugandan milk. However, coffee exports (12% of exports), supported by high prices, could buck this trend.


Twin deficits supported by international aid 

The budget deficit is expected to narrow in 2021/22 as growth accelerates. Reforms in tax administration, the introduction of new taxes on internet packages, and an increase in customs duties will help mobilize revenue. On the expenditure side, capital investment in infrastructure and security will be a priority. However, interest on debt, representing more than 20% of fiscal revenues in 2020/21 (mainly due to interest on domestic debt), will continue to weigh on public finances. The country will benefit from IMF support under a three-year ECF program for USD 1 billion to support fiscal consolidation efforts. Moreover, public deficit financing will rely mainly on concessional sources, notably multilateral creditors, who already hold more than 60% of external debt (64%). Less concessional debt to China (20% of public external debt) is also expected to continue.


The current account deficit is expected to widen in 2022. The increase in export revenues linked to the recovery in activity will be offset by imports of capital goods, particularly those needed for hydrocarbon projects. The services deficit will also deteriorate, as the slow recovery in tourism receipts will not offset payments for transport and construction services in the Lake Albert development. Accelerated repatriation of profits by foreign firms and interest payments on the debt will widen the primary income balance. In contrast, increased remittances and foreign aid will fuel the secondary income surplus. Financing the current account deficit is expected to rely on international donor support and FDI in oil projects. A widening current account deficit will increase domestic demand for USD, encouraging a modest shilling depreciation. Still, the allocation of Special Drawing Rights in 2021 (worth USD 492 million) strengthened foreign reserves (covering four months’ worth of imports).


Social frustration and security crisis

President Yoweri Museveni, in power since 1986, and his party, the National Resistance Movement (NRM), won the general election in January 2021. With more than 58% of the vote, the president won a sixth term, beating Robert Kyagulanyi (also known as Bobi Wine), a singer and member of parliament. However, given that the results have been subject to accusations of fraud, political tensions are expected to remain high. Surveillance of opponents, starting with Robert Kiagulanyi, again under house arrest in December 2021, is expected to amplify dissatisfaction with the regime’s grip on power. His arrest in November 2020 sparked protests that were repressed by law enforcement, resulting in 54 deaths, according to Human Rights Watch. Poor socio-economic conditions and perceived corruption also fuel tensions. Concomitantly, the security situation has deteriorated with the activity of Allied Democratic Forces (ADF) insurgents affiliated with the Islamic State. In late 2021, they claimed responsibility for several attacks, including the double suicide bombing in Kampala (November 2021). In response, Uganda and the Democratic Republic of Congo launched a joint military operation in North Kivu and Ituri (DRC). 


Coface (02/2022)