New IMF-Supported Program Will Strengthen Uganda’s Policy Design and Implementation Capacities in the Transition to OilPress Release No. 10/97
March 19, 2010
A mission from the African Department of the International Monetary Fund (IMF) visited Uganda during March 4-17, 2010, to conduct the seventh and final review under Uganda’s Policy Support Instrument (PSI) and reach understandings on a policy framework for a new three-year PSI to cover the period 2010 to 2013.1 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 at an important juncture. Cautious macroeconomic management has spared Uganda from the worst effects of the global financial crisis, but persistent structural rigidities–including pervasive weaknesses in public financial administration—have constrained efforts to raise investment and growth. Looking forward, the prospect of substantial petroleum revenue offers a unique opportunity to raise growth and eliminate poverty, but it also poses important challenges for Ugandan policymakers.
“The authorities are taking steps to rekindle growth and build up infrastructure, particularly roads. Higher public expenditure will help boost activity and improve competitiveness. But it is important to make sure that these resources are well spent. The authorities have committed to strengthen budget controls and enhance capacity so as to ensure efficiency in spending. We forecast growth will stay below 6 percent this fiscal year but will gradually rebound to around 7 percent in the coming years.
“Uganda needs to boost non-oil revenue and bolster its institutional and financial capacities to avoid the “oil curse”. Oil will bring substantial revenue, but only for a limited number of years. Channeling these resources in a careful and transparent manner is key to maintain macroeconomic stability and raise living standards in a durable way.
“In an oil-exporting economy, fiscal policy plays an even more central role in maintaining macroeconomic stability. It is thus all the more important to start putting in place processes that prevent the inappropriate use of public resources and raise Uganda’s ability to invest in itself. A deeper, broader financial sector is also essential to intermediate efficiently a much larger volume of funds and increase the effectiveness of monetary policy. The IMF-supported program includes actions both to strengthen public financial management and to deepen financial markets, with a view to preparing the ground for a smooth and successful transition to Uganda’s petroleum era.
“It is expected that the review of Uganda’s performance under the current PSI and the proposed policy program for a new PSI will be considered by the IMF’s Executive Board in early May.”
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.