The International Monetary Fund (IMF) has advised government to consider better fiscal policy and improve monitoring of government’s spending arrears if Uganda is to attain its 5% projected growth in the 2016/17 financial year.
In its seventh review of the country’s economic program under the Policy Support Instrument, IMF also challenges government to adhere to raising its revenue base and proper project management.
The review undertaken by a team from IMF was conducted during a visit to Kampala from October 12 to 26 this year.
Axel Schimmelpfennig the IMF Chief of Mission for Uganda at a press conference held on Wednesday said; “Government strengthened its public financial management framework with poverty alleviating expenditures however key fiscal targets for 2015/16 FY were missed.”
“The Mission notes the difficult environment for fiscal policy in 2015/16 FY. While revenue collection increased as a share of GDP, it fell short of program expectations, reflecting lower than projected nominal GDP growth. Current spending was higher than anticipated,” Schimmelpfennig added.
IMF recommends that Uganda improves its spending efficiency in order to ensure value for money.
“Over the medium term, the government needs to ensure that scaled up infrastructure investment yields the targeted increase in GDP growth to improve the lives of all citizens and maintain the country’s low risk of debt distress.”
Bank of Uganda was applauded for further reduction of the lending rate to 13% and keeping core inflation in the target band.
According to IMF, Uganda’s financial sector remains ‘well capitalized’ but notes that non performing loans have edged up resulting in commercial banks rigidity to ease on their lending rates.
During the same press conference, Finance Minister Matia Kasaija pleaded with the IMF to supplement government’s efforts to have the suspension of World Bank funding on the two road projects (in the North and Albertine regions) worth over USD 400 million lifted.
“We hope that IMF will add a voice so that the suspended funding is eased. It is too costly for our small economy,” Kasaija noted.
Regarding the current state of the economy, Kasaija stressed; “We are in struggling situation but we are not desperate. People are confusing slowness in certain sectors of the economy with recession.”