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Uganda: IMF Predicts Robust Private Sector Growth
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The Monitor (Kampala)
27 March 2008
Posted to the web 27 March 2008
Dorothy Nakawesi
Kampala
THE International Monetary Fund has predicted that Uganda's robust private sector-led expansion is expected to continue over the medium-term at around 7 per cent.
The IMF officials however noted that raising growth, a further notch to deliver higher employment creation and faster poverty reduction requires significant investment to alleviate infrastructure constraints.
In this respect, reaching financial closure for the Bujagali hydroelectric project was an important step towards augmenting Uganda's electricity supply.
The IMF Mission issued a communiqué to Daily Monitor after their successful ten-day visit to Uganda. During the visit the IMF officials held meetings with Uganda's Finance Minister Dr. Ezra Suruma, Governor of the Bank of Uganda, Prof. Emmanuel Tumusiime-Mutebile, and other senior government officials and on March 21 agreed with the government that similar investment in roads and rural development are also needed.
They further advised in a statement that: "The 2008/09 budget, currently under preparation, needs to balance the allocation of resources to these areas with competing priorities and within a framework that supports macroeconomic stability".
"Bank of Uganda's continued focus on low inflation will provide an enabling environment for private sector development," the statement said.
The IMF's Executive Board is tentatively expected to discuss the third review of Uganda's economic program under the Policy Support Instrument (PSI) by end-June 2008. PSI is a programme that was created to provide a support framework for low-income countries that no longer need IMF financial assistance.
About the country's economy, the group observed: "Uganda's economy continues to expand at a brisk pace. Economic growth in 2007/08 is expected to be around 7 percent, as earlier envisaged. Strong revenue performance, rapid credit expansion, and high import demand confirm the buoyancy of economic activity".
Kenya crisis
IMF observed that the impact of the unrest in Kenya on economic growth appears to have been very limited as the disruption to the all-important routes for Uganda's exports and imports was short-lived.
"Nonetheless, together with higher international oil prices, it has contributed to a core inflation rate of some 7 per cent, somewhat above the authorities' 5 per cent target," the statement said.
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"Sound macroeconomic policy implementation is continuing. For the government budget, good performance in revenue collections and expenditure adjustments in non-priority areas are being used to offset spending pressures elsewhere, including for emergencies (the floods in the North and East and Ebola outbreak) and for larger-than-projected spending on the Commonwealth Heads of Government Meeting.
However, the Bank of Uganda is addressing the upward pressures on the money supply from large foreign exchange inflows in order to move inflation back in line with the target.
The Shilling has appropriately appreciated against the US dollar in recent months, particularly bearing in mind the dollar's weakness against major currencies. Current a dollar is trading at Shs1660/1690.
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