IMF Executive Board Completes Fifth Review Under Policy Support Instrument for UgandaPress Release No. 13/11
January 14, 2013
The Executive Board of the International Monetary Fund (IMF) today completed the fifth review under the Policy Support Instrument (PSI) for Uganda.
The PSI for Uganda was approved on May 12, 2010 (see Press Release No. 10/195) and 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:
“Uganda’s macroeconomic performance under their Policy Support Instrument has been satisfactory. The anti-inflationary strategy underpinned by tight monetary policy and under-execution of budget spending brought inflation under control—an important policy achievement. The tightened stance, however, sharply slowed economic growth.
“Reviving economic activity is therefore an urgent priority for Uganda’s low-income economy. To this end, the authorities’ short-term policies are appropriately geared at maintaining essential public investment and encouraging a gradual resumption of bank lending, while continuing to allow the shilling to reflect market conditions.
“The recent theft of donor funds, resulting in a suspension of aid, signals governance problems and the need for a more radical fight against corruption. The government’s action plan to strengthen public financial management in order to reinforce controls and increase transparency of public sector operations is key to rebuilding confidence of the population and development partners. Forceful implementation of this plan is essential to prevent reoccurrence of misappropriation of public funds, restore budget financing and facilitate growth enhancing development spending.
“While medium-term growth is set to converge to its potential level of 6-7 percent, this objective needs to be underpinned by a higher contribution of private investment, which in turn requires improvements in the business environment. In parallel, institutional reforms to refine the inflation targeting framework and efficient management of revenues, including the prospective oil proceeds, will be essential to ensure sustainable and inclusive growth.”