Monday, April 5, 2004
IMF: Uganda Economy on the Right Track
SPECIAL CORRESPONDENT
THE INTERNATIONAL Monetary Fund (IMF) review mission that was in Uganda recently was impressed by the country's economic performance for 2003/04, the fund's resident representative in Uganda said last week.
However, the Fund officials return to Kampala in May to discuss the government's budget framework for 2004/05, which was not ready by the time they were in Uganda last month. The main areas they will want to discuss with the government are the budgetary priorities and revenue targets for the new financial year.
Peter Allum, the IMF representative in Kampala, told The EastAfrican, "The team was impressed with the economic growth rate notwithstanding the problems affecting the coffee sector." He added that the country's gross domestic product in this financial year was projected to rise by between 5.5 per cent and 6 per cent.
The latest review mission was the third under the three-year government-IMF co-operation agreement, the previous one having been in the country last December.
Uganda's coffee exports have been declining, affecting economic performance since the commodity remains a key foreign-exchange earner. Coffee exports for the first eight months of this financial year totalled 1.3 million 60-kg bags, while export earnings were $72 million.
This represents a decline of 26 per cent in volume and six per cent in value compared with the same period last year. The Uganda Coffee Development Authority attributes the decline in volume to poor weather conditions and the effect of coffee wilt disease on robusta coffee trees.
Mr Allum said the IMF team welcomed the decline in inflation, which has partly been reflected in lower prices of consumer goods, including food. According to information from the Macroeconomics Department of the Ministry of Finance, Planning and Economic Development, both annual headline and underlying inflation continued to decline in February.
Annual headline inflation declined from 4.0 per cent in January to 2.5 per cent in February, as prices for most staple foods continued to fall in most centres. Annual food crop inflation fell by 3.1 per cent. Underlying inflation, which excludes the food crops, declined from 4.7 per cent in January to 4.0 per cent in February.
Keith Muhakanizi, the Director for the Economy in the Finance Ministry, told The EastAfrican that stability in the economy as well as increased agricultural production arising from good weather were responsible for the economy's "excellent" performance.
Sudharshan Canagarajah, the World Bank's senior country economist for Uganda, told The EastAfrican early last month that GDP was expected to grow by between 5.9 per cent and 6 per cent, which was "pretty good," particularly given the gloom in the global economy. Last year, the GDP grew by 4.9 per cent. Last September, both the IMF and World Bank jointly suggested measures Uganda could take in order to raise the ratio of revenue to GDP. They said though Uganda's revenue-to-GDP ratio increased to 12.2 per cent in 2001/02 and to 12.3 per cent in 2002/03, it remains low by the standards of many other sub-Saharan countries which on average collect about 23 per cent of GDP in revenues.
The two agencies are now praising Uganda's revenue performance, which has fallen slightly below target in spite of the appreciation of the shilling. In January, taxes on international trade, which accounted for 53 per cent of total tax revenue, were 2.3 per cent below target, with both value added tax on imports and petroleum duty – the biggest two contributors in the group – both registering declines. Revenue collections so far this financial year are Ush16 billion ($8.6 million) or 1.5 per cent below target.
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