The International Monetary Fund (IMF) has said Uganda’s economy performed well under a complex environment last financial year.
IMF team was in Uganda between the 12th and 26th this month, to conduct the seventh review of the country’s economic program under the Policy Support Instrument (PSI).
“Performance under the PSI has been mixed. The Bank of Uganda successfully steered core inflation toward its target of 5 percent and increased international reserves buffer. The government further strengthened its public financial management framework, poverty alleviating expenditures were in line with project objectives,” Axel Schimmelpfennig, Advisor African Department said in a media briefing last week.
Schimmelpfennig said good progress has been made on the economy, but highlighted that election early in the year, muted global growth, and regional developments weighed on sentiment, reduced growth to 4.8 percent.
IMF underscores the current high frequency indicators suggest improvement leading to the projected growth of 5.0% this fiscal year and 5.5% in 2017/18.
Schimmelpfennig said IMF notes the difficult environment for the fiscal policy in the FY2015/16. He observed that while revenue collection increased as a share of GDP, it fell short of program expectations, reflecting lower than projected nominal growth.
IMF said current spending was higher than anticipated and these taken together showed that the overall deficit target was missed by 0.4 percent of GDP and that government partly relied on advances from the central bank to finance its needs, therefore execution of externally financed projects lagged below target.
Keen to the future, IMF welcomed the governments’ intent to adhere to the FY2016/17 fiscal objectives outlined in the sixth review under PSI which include among others, raising tax to GDP ratio by a half, prioritization of social and development spending in a tight envelop, and strengthening project management to ensure value for money.
“Over the medium term, the government needs to ensure that scaled-up infrastructure investment yields the targeted increase in GDP growth to improve the lives of all citizens and maintain Uganda’s low risk of debt distress. In parallel, efforts to enhance the effectiveness of social spending are equally important,” Schimmelpfennig said.
He urged government to step up on-going efforts to reduce and improve monitoring of government spending arrears which undermine budget processes.
The Minister of Finance, Planning and Economic Development, Matia Kasaija, said government must continue to develop appropriate policies and guided principles to make the economy more attractive not only to local but also foreign investors.
He said security, infrastructure investments are key in deriving growth in the economy going forward. “We are struggling, the situation is not easy but it is not that threatening,” Kasaija said in reference to the current economic situation.