Press Release: Statement by the IMF Mission at the Conclusion of a Visit to Uganda

March 22, 2012

Press Release No. 12/102
March 22, 2012

An International Monetary Fund (IMF) mission visited Kampala during March 7–21, 2012 to conduct discussions for the fourth review under the Policy Support Instrument (PSI).1 The mission met with Finance Minister Kiwanuka, Bank of Uganda Governor Tumusiime-Mutebile, and other senior officials, as well as representatives of parliament, the private sector, civil society, and development partners.

At the conclusion of the mission in Kampala, Thomas Richardson, IMF mission chief and senior resident representative in Uganda made the following statement:

“Uganda faces a number of important economic policy challenges, including high inflation, slower economic growth, and a relatively wide current account deficit. The key priority for the Ugandan authorities at the current juncture is to restore low inflation while laying the groundwork for a robust recovery of economic growth.

“Inflation is in double digits, due to both external food price shocks and domestic factors. Indeed, Uganda deserves credit for sticking to its market-oriented approach to economic policy-making, specifically by resisting the temptation to restrict exports of food products to hold down domestic prices. High inflation undermines business confidence and leads to slower growth, while also acting as a tax which is paid disproportionately by the poor. Thus, the mission welcomes the strong measures taken by the authorities to rein it in, noting that they have already brought about a significant reduction in inflationary pressures. As a result of these measures, inflation is projected to fall to the single-digit range by late in calendar 2012, and to come within striking distance of the Bank of Uganda’s target of 5 percent for core inflation by June 2013.

“At the same time, real economic growth is slowing—both because of weakness in the global economy and due to the effects of tighter monetary and fiscal policies. Some key trading partners, like the Eurozone, are in recession, and others, such as the United Kingdom, are expected to have relatively weak growth this year. For Uganda, real gross domestic product (GDP) growth in 2011/12 should be in the neighborhood of 4¼ percent, while for 2012/13 staff projects growth to be just below 5½ percent, before returning gradually to 6-7 percent over the medium term.

“Good progress has been made in implementing the IMF program since the third review. All end-December quantitative assessment criteria under the program were met, and structural reforms are broadly on track.

“Looking forward, bringing down inflation decisively will require continued tight monetary and fiscal policies. The mission welcomes the Bank of Uganda’s intention to pursue a cautious pace of monetary easing in line with disinflation. The mission also welcomes the authorities’ intention to maintain a conservative fiscal policy while also embarking on a number of important infrastructure investment projects. Social spending and public sector wages must be protected, but the envelope for remaining spending items will be constrained over the coming period. Looking to 2012/13 and the medium term, the mission considers that revenue enhancements would be appropriate in light of Uganda’s relatively low tax-GDP ratio and significant spending requirements. In this regard, the mission encouraged the authorities to eliminate a number of tax exemptions and incentives, and to carefully evaluate all remaining tax incentives on “value-for-money” grounds.

“During the mission, broad agreement was reached on a number of important policy matters. Discussions will continue over the coming weeks on several outstanding issues. Once the discussions on these issues have been concluded, the mission would recommend to the IMF Executive Board the completion of the fourth review under the Policy Support Instrument.”

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 Details on Uganda’s current PSI are available at


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