Statement by IMF Staff Mission to UgandaPress Release No. 09/374
October 28, 2009
A mission from the African Department of the International Monetary Fund (IMF) visited Uganda during October 14-27, 2009, to conduct the sixth review under Uganda’s three-year economic program supported by the IMF’s Policy Support Instrument (PSI).1 The mission met with Minister of Finance, Development and Planning, Hon. Syda Bbumba, Governor of the Bank of Uganda (BOU), Prof. Emmanuel Tumusiime-Mutebile, and other senior government officials.
Ms. Martine Guerguil, IMF mission chief for Uganda, issued the following statement in Kampala today:
“The Ugandan economy is weathering the impact of the global financial crisis better than expected. Despite a slowdown in growth, economic activity has remained strong by regional and international standards with real gross domestic product (GDP) growth reaching 7.1 percent in 2008/09. Growth is projected to taper off slightly to 6.3 percent in 2009/10 before rebounding to its potential of 7 percent in the following years. Nevertheless, there are downside risks to the outlook, largely related to the uncertain prospects of the global economy, as well as the regional security situation. The regional drought, while devastating for some of Uganda’s neighbors, has boosted Ugandan exports of food, thus offsetting some weakness in external demand for traditional exports such as coffee.
“The mission shares the authorities’ concern with the recent surge in food prices. It recognizes that the resulting high level of headline inflation is clearly driven by drought-related factors, and welcomes the continued decline in core inflation (which excludes the impact of food and energy prices). The decline in core inflation is evidence that the BOU’s monetary policy framework is appropriate. The main challenge for monetary policy will be to prevent the high levels of food price inflation from spilling over to underlying, core, inflation.
“The mission supports the emphasis in the July 2009-June 2010 fiscal year budget on infrastructure investment to promote future growth, while consolidating and expanding the gains of poverty reduction efforts of recent years. Giving new impetus to the structural reform agenda would help bolster absorptive capacity so that available resources for badly needed infrastructure can be effectively put to use. The mission particularly assigns priority to two areas: (i) strengthening public financial management to increase spending efficiency and ensure value for money, and (ii) deepening legal and institutional reforms to allow the domestic financial market to operate more efficiently.
“In addition to conducting discussions for the sixth review under the PSI, the mission also reached preliminary agreement with the authorities on an extension of the PSI to allow the authorities time to finalize their National Development Plan. The mission intends to return to Kampala in March 2010 to discuss with the authorities a possible new three-year PSI that would be timed to be aligned with Uganda’s annual budget cycle.
“The mission’s assessment of performance under the PSI and the extension of the PSI are expected to be brought to the IMF’s Executive Board before the end of the year.”
1 The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support. The PSI helps countries design effective economic programs that, once approved by the IMF's Executive Board, signal to donors, multilateral development banks, and markets the Fund's endorsement of a member's policies. (See http://www.imf.org/external/np/exr/facts/psi.htm.) Details on Uganda’s current PSI are available at www.imf.org/uganda.