Kampala — STRONGER economic growth underlined by a sustained 7 percent Gross Domestic Product and higher revenue collections have been cited as most important priorities to reduce poverty in Uganda.

Although Uganda's economic growth over the past decade has outpaced most African countries, it is not enough to achieve rapid improvements in living standards, according to the IMF.

In an exclusive interview with Daily Monitor on February 21, the IMF Senior Resident Representative, Mr Peter F. Allum, said that poverty remains Uganda's main challenge, with 38 percent of the population still in poverty.

"One issue is Uganda's rapid population growth, which undercuts the benefits of strong growth. If economic growth remains in the 5-6 percent range, and if Uganda's world-record population growth continues, it will take 27 years to double Uganda's current income levels," Allum warned.

The current household wealth is unevenly distributed according to the latest household survey with majority still living under abject poverty.

"To ensure all households gain, Uganda should aim for sustained growth of 7 percent and above." Allum attributed Uganda's inability to adequately finance key anti-poverty programmes to weak tax collections.

Uganda's tax collections amount to around 12 percent of GDP, well below the 20 percent average for sub-Saharan Africa.

He said Uganda should aim to boost its tax collections to at least 15 percent to achieve a fast growth rate.

The shortfall, however, reflects Uganda's large informal sector, which is difficult to tax. Similarly, strong control of public expenditures is needed. Public administration costs, according to Allum, have exceeded budget targets in recent years.

Consequently, this has required supplementary budgets, funded by destabilising cuts in other spending programmes.

Allum commended the Finance Ministry's intention to limit future supplementary budgets to emergency cases such as livestock diseases or crop failures. But he said this would require better discipline from free-spending ministries and agencies.

He also called for a quick fix for the electricity crisis to boost growth by launching the works at Bujagali and installing new thermal power plants.

Another key priority, he said, is to listen to the needs of the business sector so as to help them promote productivity and competitiveness domestically and internationally.

He also underlined the need to keep transport costs at their lowest possible, and strengthen critical public institutions such as the land and property registries, customs authorities, and commercial courts.

Allum said the IMF agreed on January 23, to support government's reform programme under its new non-lending facility, the Policy Support Instrument (PSI).

This facility was introduced for low-income countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring and endorsement of their policies. Approval of Uganda's PSI signals IMF endorsement of the government's current economic policies that can be critical for financing by other development partners.

"All the donors have welcomed the programme (PSI) because we (IMF) provide professional judgments in the macroeconomic situation," he said.

The IMF PSIs are voluntary and demand driven.

The first review of the PSI will be based on performance through June 2006. Consideration is also being given to extending the PSI to a three-year time frame.