IMF Backs Uganda’s Price Stabilization Efforts

Maria kiwanuka geneva;”>Ms. Ana Lucía Coronel, IMF senior resident representative and mission chief for Uganda, said this program will support maintenance of price stability and achievement of strong and sustainable growth.

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She noted that the program also contains a broad range of reforms to improve economic management in Uganda.

“These reforms include institutional arrangements to maintain low inflation, actions to enhance the financial system’s contribution to development; strengthening of tax revenue and management of public funds, improvements in the business environment and preparing the economy for oil production,” she said.

This was agreed upon during a visit by the IMF mission in Kampala from April 29-May 14, 2013.

The team was in the country for discussions in the context of the 2013 Article IV consultation, sixth and final review of the current PSI arrangement and negotiations on the program’s new three-year arrangement.

During this visit, the IMF mission analyzed recent economic developments and outlook in this country. It commended the authorities for their successful efforts in bringing inflation down to close to the 5 percent target level as a result of careful monetary management.

Meanwhile, Uganda’s growth rate is projected at 5¼ percent because of a low rate of economic expansion last year, driven by investment and trade. This is due to the fast implementation of road projects providing fiscal drive to domestic demand, the operation of Bujagali hydropower plant which curtailed manufacturing costs, leading to a good harvest and in turn boosted the private sector activity.

Ms Coronel also said: “With low inflation and signs of economic recovery, market confidence and expectations are improving. External performance was stronger than anticipated, with the current account deficit projected to narrow significantly this fiscal year owing to strong non-coffee exports and a temporary deceleration of imports.”

She noted that aided by foreign exchange inflows, the country’s international reserves were significantly higher than anticipated and stand at a comfortable level equivalent to four months of imports, creating a significant buffer to the economy in the context of uncertainty in the international environment.


Although the all end-December 2012 quantitative assessment criteria under the current PSI were met, and some progress on the structural front was achieved, Ms Coronel said there were delays in actions to improve transparency by publishing the beneficiaries of tax expenditures and the status of arrears.

However, she noted that the government has taken steps to improve controls in payment systems, close inactive accounts, and prepare a public financial management bill that will set the legal framework to strengthen credibility of the budget process and improve cash and debt management.

“Looking ahead, the macroeconomic outlook is favorable, with growth projected at 6-7 percent in the medium term in the context of mid single digit inflation,” she affirmed.

A moderate expansion in the underlying fiscal deficit, a neutral monetary policy stance, and the maintenance of a flexible exchange rate will support these efforts.

Therefore the implementation of the reforms agreed upon within the new PSI is expected to underpin the framework.

These include the strengthening of the capital position of the Bank of Uganda and upgrade of its instruments to refine the inflation targeting framework; actions to increase access of the population to financial services; measures to raise revenue generation; further efforts to safeguard and improve the quality of public expenditure; and progress in improving governance.

Meanwhile the 2013 Article IV consultation with Uganda, the sixth program review under the PSI arrangement, and the request for a successor arrangement are scheduled for consideration by the IMF Executive Board in end-June, 2013.

During the visit, the IMF team met with President Museveni, Minister of Finance, Planning and Economic Development, Hon. Maria Kiwanuka, the Governor of the Bank of Uganda, Prof. Emmanuel Tumusiime-Mutebile, and other senior government officials, development partners, and representatives of the business and financial communities and civil society.

At the end of the mission, it expressed its appreciation for the kind hospitality provided during the visit and thanked the authorities for the constructive discussions.


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