UGANDA
Despite sluggish growth in credit to the private sector, GDP growth has been supported by the implementation of large public investments. Inflation has started to decelerate towards the medium-term target, allowing for monetary policy easing. Improved market sentiment on domestic policies helped stabilize the shilling. International reserves remain adequate.
The economy has fared well in a difficult environment. A large exchange rate depreciation fueled inflation prospects and prompted sharp monetary tightening. Credit deceleration and weakened confidence linked to the proximity of the election slowed private activity, but growth was supported by dynamic public investment. International reserves remained comfortable. Program performance under the PSI was generally positive. All end-June and continuous quantitative assessment criteria (QAC) were observed, with one exception, and so were most indicative targets (ITs). Inflation remained within the bands of the consultation clause. An unprecedented increase in tax revenue was a key achievement. However, further progress on structural reforms is needed
KEY ISSUES Backed by sound policies, economic performance since the 2013 Article IV Consultation has been positive. In response to fiscal stimuli and credit recovery, growth is picking up from the low levels that followed the credit-boom-and-bust-cycle. Careful central bank policies kept inflation low and the financial sector stable, despite shilling volatility. Lower export demand and high infrastructure-related imports widened the current account deficit, but reserves and debt remain at comfortable levels. Performance under the PSI is on track. All end-December 2014 quantitative assessment criteria and most indicative targets and structural benchmarks were met. Key highlights include an exceptionally strong revenue performance and progress in public financial management. The inflation targeting mechanism triggered consultations with staff as average core inflation fell below the inner limit of the band. Risks to the program stem from the upcoming election, regional unrest, and capacity constraints. The envisaged policy mix should achieve further economic gains in the fiscal year starting in July. Despite the election, the authorities are committed to keeping fiscal policy within a budget that favors large infrastructure investment and sustains tax revenue collections in the context of low inflation. They also intend to closely oversee the spillovers and feedback loops between the real economy and the financial sector.1 The planned oil production, infrastructure upgrades, and regional integration bring encouraging medium-term prospects for growth and employment. The strategy will be supported by foreign direct investment; enhanced domestic revenue mobilization through additional tax collection and efforts to improve access to bank services; and increased borrowing at non-concessional but favorable terms. Staff recommends conclusion of the 2015 Article IV Consultation and supports the authorities’ request to complete the fourth PSI review. It also supports the authorities’ decision to modify two end-June 2015 ACs and to increase the continuous ceiling on the contracting or guaranteeing of new nonconcessional debt.
This paper focuses on Uganda’s Second Review Under the Policy Support Instrument (PSI) and Request for Modification of Assessment Criteria. Economic performance of Uganda has been broadly favorable. Progress has been made on structural reforms, but further steps are needed. Starting the construction of the two hydropower projects without further delay, approving and regulating the Public Financial Management Bill, and strengthening accounting controls are crucial steps in the reform effort. The expected amendments to the Bank of Uganda Act should support the inflation targeting regime. Based on the proposed policies, the IMF staff supports completion of the second PSI review.
This Report on the Observance of Standards And Codes (ROSC) on data module for Uganda provides an assessment of Uganda’s macroeconomic statistics against the recommendations of the General Data Dissemination System (GDDS) complemented by an assessment of data quality based on the IMF’s Data Quality Assessment Framework. This ROSC data module contains the main observations covering four macroeconomic data sets, namely national accounts, the consumer price index (CPI), government finance statistics (GFS), and balance of payments (BOP). It also provides an overview of the dissemination practices compared with the GDDS.