afrol News, 9 April - Uganda has been strongly warned to bring some fine tuning in its economic policies in going forward to address changes in the evolving economic outlook.

The International Monetary Fund (IMF) mission, which has just conducted the fifth review under Uganda’s three-year economic programme supported by the Fund’s Policy Support Instrument (PSI), said while the country's economy still remained strong, there were worrying factors as a result of the global crisis impact to the country.

“Playing-off the global financial crisis, economic growth in Uganda is set to decelerate from the 8.5 percent or so of the last several years to 6.2 percent in 2008/09, and about 5.5 percent in 2009/10. The effects of the crisis are starting to be felt in lower export growth, a decline in foreign capital inflows, depreciation of the shilling as well as lower tax revenue collections. The deceleration in growth could be more pronounced still if the global recession turns out to be deeper than currently anticipated," the mission said in a statement.

The mission further said while it broadly supports the government’s plans to maintain a high level of development spending in the current and next fiscal years, in spite of the projected shortfall in revenue, there was however remained the challenge of ensuring effective absorption of this spending, in particular for infrastructure development.

The mission continued that, in the coming year, there was a need for the planned increase in development spending to be matched by higher recurrent outlays. "Such a balanced approach would have the dual effect of sustaining growth in the near-term and enhancing Uganda’s growth potential over the medium-term," the IMF statement advised.

The IMF mission said for monetary policy, the challenge for Uganda is to ensure that inflation remains on a downward path while providing sufficient liquidity to support a healthy level of activity. "Heightened uncertainty arising from the global financial crisis has posed new challenges for monetary policy management," said the mission adding that an appropriate combination of flexibility and caution in the approach by the Bank of Uganda and refinements to the current liquidity management framework, would help to provide a more flexible response to unanticipated shocks.

The IMF's Executive Board is tentatively expected to discuss the fifth review of Uganda’s economic program under the PSI in May 2009.

Meanwhile, the World Bank’s Board of Executive Directors this week also approved a $75 million International Development Association (IDA) credit to finance the second phase of the Energy for Rural Transformation Programme (ERT) in Uganda. The first phase of the programme was approved in 2001 and was completed in February, 2009.

The ERT programme seeks to facilitate significant improvements in the productivity of enterprises and the quality of life of households in the rural areas of Uganda by giving them access to modern services of energy, and information and communication technologies (ICT). The key outcome of the first phase of the ERT project was the creation of a functioning, conducive environment and related capacity for commercially-oriented, sustainable service delivery of rural/renewable energy and ICTs.

According to the Bank, ERT II will also receive additional financing of $9 million from the Global Environment Facility (GEF) to increase the use of renewable energy and promote energy efficiency.

By staff writer

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