Owing to the alleged misappropriation of some donor grants in Uganda, traditionally strong relations with donors have been under strain and may undermine the country's grant and concessional financing. Previously high inflation rates have come down, but tightened monetary policy has contributed to a slowdown in per capita real GDP growth, which we now expect to be just under 1% in 2012. We have revised the outlook to negative, reflecting our view that we could lower the ratings in the next 12 months if relations with donors are not repaired and if this leads to a continued reduction in support to Uganda's fiscal and external balance sheets. We are affirming our 'B+/B' long- and short-term sovereign credit ratings on Uganda.
