Statement by IMF Staff Mission to Uganda

Press Release No. 08/58
March 21, 2008

An International Monetary Fund (IMF) mission visited Uganda during March 10-20, 2008, to conduct the third review under Uganda's three-year economic program supported by the IMF's Policy Support Instrument (PSI). The mission met with Minister of Finance Development and Planning, Dr. Ezra Suruma, Governor of the Bank of Uganda, Prof. Emmanuel Tumusiime-Mutebile, and other senior government officials.

The mission issued the following statement in Kampala today:

"Uganda's economy continues to expand at a brisk pace. Economic growth in 2007/08 is expected to be around 7 percent, as earlier envisaged. Strong revenue performance, rapid credit expansion, and high import demand confirm the buoyancy of economic activity.

The impact of the unrest in Kenya on economic growth appears to have been very limited as the disruption to the all-important route for Uganda's exports and imports was short-lived. Nonetheless, together with higher international oil prices, it has contributed to a core inflation rate of some 7 percent, somewhat above the authorities' 5 percent target.

"Sound macroeconomic policy implementation is continuing. For the government budget, good performance in revenue collections and expenditure adjustments in non-priority areas are being used to offset spending pressures elsewhere, including for emergencies (the floods in the North and East and Ebola outbreak) and for larger-than-projected spending on the Commonwealth Heads of Government Meeting. The Bank of Uganda is addressing the upward pressures on the money supply from large foreign exchange inflows in order to move inflation back in line with the target. The Shilling has appropriately appreciated against the US dollar in recent months, particularly bearing in mind the dollar's weakness against major currencies.

"The robust private sector-led expansion is expected to continue over the medium-term at around 7 percent. However, raising growth a further notch to deliver higher employment creation and faster poverty reduction requires significant investment to alleviate infrastructure constraints. In this respect, reaching financial closure for the Bujagali hydroelectric project was an important step towards augmenting Uganda's electricity supply. The mission agrees with the government that similar investment in roads and rural development are also needed. The 2008/09 budget, currently under preparation, thus needs to balance the need to allocate resources to these areas with competing priorities and within a framework that supports macroeconomic stability. The Bank of Uganda's continued focus on low inflation will provide an enabling environment for private sector development.

"The IMF's Executive Board is tentatively expected to discuss the third review of Uganda's economic program under the PSI by end-June 2008."



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