Kampala — NOT SATISFIED? IMF's MD Rodrigo de Rato with former finance minister Gerald Ssendaula at a regional summit in Entebbe last year. IMF is not satisfied with Uganda's growth rates

A recent review of Uganda's economy by the International Monetary Fund (IMF) has warned that the country's growth momentum has slowed down and needs to be jump-started.

For the third time in as many years, the economy failed to grow by the targeted 7% for various reasons including drought, plummeting commodity prices and rising oil prices.

A preliminary report review by the IMF, sees Uganda's economy slowing to 5.5% in 2004/05, compared to 5.9% in the last financial year due to the current drought.

According to the review, IMF's executive directors were concerned that the Government had spent more money than it had planned for and frowned at the Government's lending to private businesses, a reference to financial bailouts to Hassan Basajjabalaba and Apparels Tri-Star.

While acknowledging the rapid economic growth over the last two decades, the IMF noted that "the first wave of reforms has tapered off in recent years," before continuing, "Looking forward, the country needs a second wave of reforms to sustain high growth, reduce poverty and decrease aid dependency through balanced and social developments. In this sense, Uganda is at crossroads."

The IMF in a series of preliminary statements by its directors, said the Government would have to focus on increasing domestic revenue, fight corruption and promote private sector growth to boost the economy.

But they also noted that "important prerequisites for a successful growth strategy were peace in the north and progress in eliminating corruption."

They noted that corruption continues to bedevil the Government and "that the political will to forcefully tackle corruption might be fading."

"We support the key policies identified by authorities for raising productivity in Uganda. A medium-term framework for pursuing gradual fiscal consolidation, increasing spending on infrastructure, developing the financial sector, improving the business climate, reducing corruption and improving education and training needs to be drawn up," IMF said.

Last year, the Government's intervention to relieve Basajjabalaba of a sh21b debt with commercial banks and the financial aid to Tri-Star were a point of concern for the IMF directors.

"Government lending and guarantees to the private sector are particularly troubling. Such practices should be stopped immediately. But recent reports raise concerns," the report said.

"Weak budget controls and non-transparent government support of certain companies reinforce perceptions of corruption and send a negative signal to donors and investors."

The IMF also lamented the continued low revenue and called for urgent reforms of URA.