IMF staff concludes review mission to Uganda

The International Monetary Fund (IMF) recently conducted the seventh review of Uganda's economic program under the Policy Support Instrument. The mission chief for Uganda at the IMF, Axel Schimmelpfennig, discussed the current economic landscape of Uganda and its future prospects with a focus on monetary easing, fiscal policy, and structural reforms. Despite a slight slowdown in growth to 5% this year, the IMF expects Uganda's economy to expand by 5.5% in 2017, driven by infrastructure spending. Schimmelpfennig highlighted the importance of sustainable fiscal and monetary policies in achieving higher and sustained growth over the medium term. Monetary policy in Uganda has seen the Central Bank revise the CBR (Central Bank Rate) four times in less than a year. When asked about the impact of these revisions on inflation and growth, Schimmelpfennig emphasized that the Bank of Uganda aims to steer inflation close to its target of around 5%. With forecasts aligning between the IMF and the central bank, there is room for further policy rate adjustments. The IMF supports these measures as long as they are in line with maintaining stable inflation and economic growth. The Policy Support Instrument (PSI) serves as a framework for macroeconomic policies in Uganda to promote higher and sustainable growth. It sets targets for fiscal and monetary policies, ensuring coordination between the two to achieve set objectives. Although challenges may arise, especially during election years when fiscal spending tends to increase, Schimmelpfennig stressed the importance of maintaining a sustainable path for fiscal policy. This involves managing the debt ratio at a reasonable level while ramping up infrastructure spending to address growth bottlenecks. One of the key objectives under the PSI program is to raise Uganda's tax to GDP ratio by half a percent annually. With the country's revenue GDP ratio at a relatively low 13.5%, the government aims to enhance domestic revenue mobilization to finance crucial sectors like infrastructure, healthcare, and education. Structural reforms play a vital role in achieving this goal, with a focus on both administrative measures and tax policy adjustments. By implementing strategies to improve taxpayer compliance and introducing targeted tax changes, Uganda aims to increase its revenue base and create a larger resource pool for essential spending. In conclusion, Uganda is navigating its economic challenges with a focus on sustainable growth and development. The IMF's review mission highlights the importance of sound fiscal and monetary policies, coupled with structural reforms, to drive Uganda's economy forward. As the country works towards enhancing revenue generation and addressing infrastructure constraints, the path to a more robust and resilient economy becomes clearer.