The Executive Board of the International Monetary Fund (IMF) has completed the third review of Uganda’s economic performance under the programme supported by the Policy Support Instrument (PSI), an IMF statement said on Thursday.
The statement, sent to PANA in New York, said following the review, the IMF observed that real
gross domestic product (GDP) growth was lower than expected at the time of the second PSI
review in fiscal year 2013/14, reflecting under-execution of externally-financed public investment and adverse impact on exports of slower growth in main trading partners.
It stated: “Inflation dropped to 1.8 percent in October from 5.0 per cent in June 2014 owing to
a sharp decline in food prices and slower economic activity, and the international reserve
coverage increased to a high level of 4¾ months of imports.”
It noted that growth is projected to increase in fiscal year 2014/15, supported by scaled-up
public investment and a recovery in private demand as households and businesses start
accessing bank credit.
“Performance under the PSI-supported programme remains satisfactory. In particular, the end-June targets for inflation and international reserves were met, the ceiling on
government’s net domestic financing was observed, and the stock of government arrears was significantly reduced.
“However, the indicative target on tax revenue was missed reflecting lower growth and
shortfalls in efficiency gains,” the IMF said.
It said Uganda’s infrastructure investment needs remain considerable, stating that, “the
authorities plan to boost these investments amid stepped up efforts toward regional
integration, the coming on stream of oil production, and actions to improve the business
It also said the Ugandan authorities have committed to base the revamped infrastructure
investment programme on a well-planned rollout strategy, which will include project selection on the basis of strong feasibility studies and sequencing that takes into account the impact on debt sustainability and the absorption and implementation capacities of the economy.
On the fiscal front, the IMF noted that the overall deficit excluding the recapitalization of the Bank of Uganda increased from 3.4 to 4.1 per cent of GDP in fiscal year 2013/14.
It said challenges in tax compliance resulted in lower-than-expected revenue.
However, it said that the recent elimination of many tax exemptions, if accompanied by strict enforcement by the Uganda Revenue Authority and enhanced compliance from taxpayers, would result in a welcome enhancement of tax revenues.
“Strict adherence to the approved budget and improvements in policy coordination would complement these efforts,” the statement added.
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 programmes 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.