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© 2013 International Monetary Fund
January 2013
IMF Country Report No. 13/25
Uganda: Fifth Review Under The Policy Support Instrument And Request For Program Extension—Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Uganda.
In the context of the Fifth Review Under The Policy Support Instrument And Request For Program Extension, the following documents have been released and are included in this package:
The staff report for the fifth review under the Policy Support Instrument and request for program extension, prepared by a staff team of the IMF, following discussions that ended on November 6, 2012 with the officials of Uganda on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on December 21, 2012. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A Press Release summarizing the views of the Executive Board as expressed during its January 14, 2013 discussion of the staff report that completed the request and/or review.
A statement by the Executive Director for Uganda.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Uganda*
Memorandum of Economic and Financial Policies by the authorities of Uganda*
Technical Memorandum of Understanding*
*Also included in Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
UGANDA
FIFTH REVIEW UNDER THE POLICY SUPPORT INSTRUMENT AND REQUEST FOR PROGRAM EXTENSION
December 21, 2012
Key Issues
The anti-inflationary strategy was successful but costly in terms of growth. Tight monetary policy and under execution of budget spending brought inflation under control—an important policy achievement. The tightened stance, however, sharply slowed growth. A substantial foreign reserve accumulation created a useful buffer.
Program performance was satisfactory. All end-June 2012 quantitative assessment criteria were met, as were most quantitative indicative targets, except on poverty spending and on the stock of domestic arrears. Achievement of structural benchmarks was mixed, with progress on developing forecasting techniques and publishing data, but delays on other commitments, notably the issuance of national identification cards.
A suspension of aid due to a theft of donor funds led to development spending cuts, and signaled the need for a more radical fight against corruption. The authorities have provided assurances that they will recover the stolen funds, take action against involved officials, and strengthen the public financial management (PFM) system.
Limiting the impact of aid suspension on growth and keeping inflation low are the main priorities. The macroeconomic framework adjusts for the aid suspension by a combination of spending cuts and increased domestic financing. A limited fiscal stimulus and some recovery in private sector activity would allow growth of about 4¼ percent this year. Inflation is expected to remain at around 5 percent, and, supported by exchange rate flexibility, the international reserve coverage would fall to 3¾ months of imports.
Risks to the program stem from external shocks and governance weaknesses. Global financial difficulties and regional political uncertainties could worsen the outlook. An equally serious threat comes from delays in implementing credible measures to fight corruption, strengthening PFM, and rebuilding confidence of the population and the development partners.
Staff supports the authorities’ request to complete the fifth PSI review and extend the PSI-supported program to August 10, 2013. The extension will provide time to complete the sixth review and discuss a successor PSI-supported program which the authorities plan to request.
Approved by Roger Nord and Elliott Harris
IMF team: A. L. Coronel (head, senior resident representative), C. Dieterich, G. Oestreicher (all AFR), P. Wingender (FAD), and Y. Bal Gündüz (SPR).
Discussions: Held in Kampala during October 24-November 6, 2012. The mission met with senior government officials and economic authorities, as well as representatives of parliament, the private sector, NGOs, civil society, development partners, and the media.
Contents
BACKGROUND AND RECENT DEVELOPMENTS
A. Recent Developments
B. Program Performance
ECONOMIC OUTLOOK AND RISKS
POLICY DISCUSSIONS
A. Ensuring High Quality Fiscal Spending in the Context of Lower External Financing
B. Preserving Low Inflation and Safeguarding the Health of the Banking System
C. Taking Forceful Measures to Strengthen Governance
PROGRAM ISSUES
STAFF APPRAISAL
BOXES
1 Short-term PFM Reform Commitments
FIGURES
1. Monetary Developments
2. Fiscal Developments
3. External Developments
TABLES
1. Selected Economic and Financial Indicators, FY2009/10–2016/17
2a. Fiscal Operations of the Central Government, FY2009/10–2016/17
2b. Fiscal Operations of the Central Government, FY2009/10–2016/17
2c. Quarterly Fiscal Operations of the Central Government, FY2011/12–2012/2013
3. Monetary Accounts, FY2009/10-2016/17
4. Balance of Payments, FY2009/10-2016/17
5. Banking Sector Indicators, March 2010-September 2012
6. Quantitative Assessment Criteria and Indicative Targets Outturn for June 30, 2012 to September 30, 2012
7. Structural Benchmarks Under the PSI
APPENDIXES
I. Letter of Intent
Attachment I: Memorandum of Economic and Financial Policies
Annex: High Level Government Financial Management Reform Action Plan Matrix
Attachment II. Technical Memorandum of Understanding
II. Fund Relations
III. Joint Bank-Fund Work Program, July 2012 – June 2013
IV. Statistical Issues
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Press Release No. 13/11
FOR IMMEDIATE RELEASE
January 14, 2013
International Monetary Fund
Washington, D.C. 20431 USA
Telephone 202-623-7100
Fax 202-623-6772
