Kenya to benefit from rebound of Ugandan economy

The PSI helps countries design effective economic programmes that, once approved by the IMF’s executive board, signal to donors, multilateral development banks, and markets the fund’s endorsement of national policies.

The mission met with the Uganda Minister of Finance, Development and Planning, Syda Bbumba, governor of the Bank of Uganda (BOU), Prof Emmanuel Tumusiime-Mutebile, and other senior government officials.

Appropriate framework

Prof Mutebile said in a publication posted on the BOU website recently: “Against the background of a truly global economic crisis on an unprecedented scale, it is unrealistic to expect that Uganda will emerge unscathed. Nevertheless, if we continue to manage the macroeconomy in a sound manner, we can mitigate the worst effects of the global crisis and ensure that the Ugandan economy avoids recession and continues to grow, although growth will inevitably slow down from the very robust rates averaging 9.4 per cent per annum recorded during the period (2006 to 2008).”

Ms Guerguil cautioned that there were downside risks to the economic outlook in Uganda, largely related to the uncertain prospects of the global economy, as well as the regional security situation and possibility of high food prices.

The regional drought, while devastating for some of Uganda’s neighbours, has boosted Ugandan exports of food, thus offsetting some weakness in external demand for traditional exports such as coffee.

“The mission shares the authorities’ concern with the recent surge in food prices. It recognises that the resulting high level of headline inflation is clearly driven by drought-related factors, and welcomes the continued decline in core inflation, which excludes the impact of food and energy prices,” said Ms Guerguil.

The decline in core inflation is evidence that the BOU’s monetary policy framework is appropriate though its main challenge will be to prevent the high levels of food prices from spilling over to underlying or core inflation.

“The mission supports the emphasis in the June 2010 fiscal year budget on infrastructure investment to promote future growth, while consolidating and expanding the gains of poverty reduction efforts of recent years,” she said.

Structural reform is however needed in Uganda is order to increase the capacity of using the funds to rebuild infrastructure.

The mission intends to return to Kampala in March 2010 to discuss with the authorities a possible new three-year PSI that would be timed to be aligned with Uganda’s annual budget cycle.