IMF Executive Board Completes the Seventh Review Under the Policy Support Instrument for Uganda

IMF News, January 10, 2017

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On January 5, the Executive Board of the International Monetary Fund (IMF) completed the seventh review of Uganda’s economic program under the Policy Support Instrument (PSI).
The Board’s decision was taken on a lapse of time basis.
The Board granted a waiver of the nonobservance of the end-June 2016 assessment criterion on the overall deficit of the central government.
The PSI for Uganda was approved by the Board on June 28, 2013, and a one-year extension was approved on June 6, 2016.
The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support; it signals the Fund's endorsement of a member's policies.

Growth slowed marginally to 4.8 percent in FY15/16.
Growth is projected to nudge up to 5 percent in FY16/17.
The current account deficit improved by 1 percentage point to 5.9 percent of GDP.
The Shilling has stabilized after a sharp depreciation in 2015.

Program performance under the PSI has been mixed.
Tight monetary policy in 2015 helped contain inflation in the target range.
The Bank of Uganda (BoU) started an easing cycle in April 2016.
Reserve cover remains adequate.
Fiscal revenue and deficit targets were missed, reflecting lower-than-expected growth and election effects.
Investment spending fell short, while current expenditure overshot.
Structural reforms have progressed, albeit with some delays.

The banking sector remains overall well capitalized, despite elevated non-performing loans.
The BoU took over an undercapitalized bank and is identifying a strategic investor.
Uganda remains at a low risk of debt distress.
The scaling-up of infrastructure investment implies a temporary increase in debt, putting a premium on domestic revenue mobilization and ensuring that public investment yields the intended growth dividend.

Close cooperation with the Financial Action Task Force to ensure Uganda’s swift exit from its “gray” list.
Strengthen domestic arrears monitoring.
Amend the Bank of Uganda Act to reinforce central bank independence.
Enhance public investment management to achieve the desired growth dividend from infrastructure investment.

Source: Press Release No. 17/04, IMF Communications Department, January 10, 2017.