Abstract
This paper focuses on Uganda’s 2013 Article IV Consultation and Sixth Review Under the Policy Support Instrument, Request for a Three-Year Policy Support Instrument and cancellation of Current Policy Support Instrument. Driven mainly by investment and trade, growth has recovered to about 5 percent, a stronger than expected rebound from the low 3½ percent expansion registered last year. Fast implementation of road construction, the start of operations of the Bujagali hydropower plant, and a good harvest boosted aggregate demand. Envisaged public finance management reforms are set to address the problems of persistent under budgeting, arrears accumulation, and failure to sanction financial irregularities.
Press Release No. 13/239
FOR IMMEDIATE RELEASE
June 28, 2013
International Monetary Fund
Washington, D.C. 20431
USA
The Executive Board of the International Monetary Fund (IMF) today completed the sixth review under the Policy Support Instrument (PSI) for Uganda and approved a new three-year PSI. To this end, the Executive Board took note of Uganda’s cancellation of the current PSI, which was scheduled to expire on August 10, 2013 (see Press Release No. 10/195).
The PSI for Uganda aims at maintaining macroeconomic stability and alleviating constraints to growth. The IMF’s framework for PSIs is designed for low-income countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring and endorsement of their policies. PSIs are voluntary and demand driven (see Public Information Notice No. 05/145).
Following the Executive Board’s discussion on Uganda, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:
“The Ugandan authorities are to be commended for the broadly satisfactory implementation of their economic program under the Policy Support Instrument. Prudent policies were successful in bringing inflation under control, raising economic growth, and strengthening the external position.
“Monetary and fiscal policies have been consistent with the growth and inflation objectives, and the authorities have managed large foreign exchange inflows successfully. In the short term, fiscal policy will need to focus on increasing tax revenue collection—currently low compared to the regional East African Community peers—and allocating significant resources to development spending. The central bank is encouraged to remain vigilant to potential demand pressures and stand ready to adjust the monetary policy stance if needed. Continued exchange rate flexibility will help support these efforts.
“Important progress has been achieved in institutional modernization. Public financial management has been significantly strengthened, and efforts to introduce a Treasury Single Account and pass a public finance management bill are expected to improve budget execution, transparency, and cash management. Moreover, progress toward improving the inflation targeting framework is ongoing, with the recent decision to recapitalize the Bank of Uganda representing a major milestone to enhance its independence and credibility.“To ensure inclusive growth and deal effectively with the challenges posed by natural resource production, further structural reforms to improve the business environment, enhance competitiveness and productivity, promote diversification, and strengthen the social safety net remain essential. This will require additional efforts to strengthen governance and accountability.”