IMF Board completes 7th Review under PSI for Uganda

The Executive Board of the International Monetary Fund (IMF) has completed its seventh review of Uganda's economic program under the Policy Support Instrument (PSI). Despite a marginal slowdown in growth to 4.8%, there was a positive development in the current account deficit, which improved by one percentage point. Clara Mira, the IMF resident representative in Uganda, shed light on some key aspects of Uganda's economic performance and areas of focus during her interview with CNBC Africa.\n\nOne of the primary objectives of the PSI is to ensure macroeconomic stability, which includes maintaining inflation within the target rate. Mira commended the Bank of Uganda for its efforts in achieving this goal, noting that inflation had peaked at 8.4% in December 2015 but started to decline thereafter. This positive inflation outlook paved the way for monetary easing, with the Bank of Uganda reducing the CBR rate by 400 basis points starting in April 2016. While risks such as exchange rate fluctuations and food price spikes remain, Mira expressed confidence in the central bank's management of the inflation outlook.\n\nHowever, a persistent challenge for Uganda has been the low revenue collection, lagging behind regional peers like Tanzania. The IMF has emphasized the need to increase the tax to GDP ratio, with a target of at least a half percent annual increase. To achieve this, measures such as reducing tax exemptions and holidays, implementing new taxes, and enhancing tax administration procedures have been recommended. Mira highlighted the importance of strengthening audits to improve compliance among large taxpayers and bolstering evaluation controls. The IMF has been actively engaged with Ugandan authorities in dialogue and providing technical support to enhance revenue collection efforts.\n\nLooking ahead, the visit of IMF Managing Director Christine Lagarde to Kampala is highly anticipated. It will be her first visit to Uganda and is expected to focus on gaining a deeper understanding of the country's challenges and recent progress. Discussions are likely to revolve around Uganda's growth and poverty reduction strategies, infrastructure investment priorities, and the balancing of expenditure between infrastructure and social development. The visit aims to enhance collaboration between the IMF and Uganda to address key economic issues and chart a path for sustainable development in the coming years.