IMF’s policy programme backs financers

Oct 10, 2010

THE International Monetary Fund (IMF)-backed programmes in Uganda gives the country room to boost its infrastructure budget with other sources of financing like sovereign bonds, to achieve high economic growth.<br>

By Sylvia Juuko
THE International Monetary Fund (IMF)-backed programmes in Uganda gives the country room to boost its infrastructure budget with other sources of financing like sovereign bonds, to achieve high economic growth.

A report released recently by the IMF’s African department says its policy support programme (PSI) allows the country to seek other forms of financing away from concessional funding to meet the infrastructure gap.

“Policy programmes in Mozambique, Rwanda, Tanzania, and Uganda allow for less concessional financing from multilateral development banks and export credit agencies,” the report says.

“More use of public-private partnerships and, potentially, external sovereign bond issues,as long as the new approach does not endanger fiscal and external debt sustainability,” the report adds.

The PSI is an IMF instrument designed for countries that do not need balance of payment financial support, but still seek the fund’s advice, monitoring and endorsement of policies.

This year, the IMF approved a new PSI for Uganda which focuses on helping the country in the management of future oil revenues and maintaining macro-economic and structural policies aimed at scaling up infrastructure spending.

The report notes that previously, IMF programmes with low-income countries allowed only non-concessional external borrowing in exceptional circumstances.

Uganda is deemed to be at a low-to-moderate risk for debt distress and to have broadly adequate, albeit still rudimentary, public financial and debt management capacity.

“Their PSI-supported programmes include potential non-concessional external borrowing in amounts ranging from 2.4 to 7.5% of GDP over three years, which would be aimed at stepping up public investment,” the report notes.

However, such borrowing would increase the country’s debt burden, but would remain at low risk for debt distress.

Studies by the IMF and other development banks have shown how disproportionately large infrastructure gaps serve as a binding constraint to higher factor productivity and growth in low-income countries in sub-Saharan Africa.

According to the report, the PSI programmes embed a broad range of structural reforms aimed at boosting the efficiency of public investment spending and of public financial management more generally.

“These range from better linking budget planning and implementation, to setting up effective assessment and monitoring frameworks for public-private partnerships, to controlling accumulation of budgetary arrears.”

They also contain measures to enhance domestic revenue intake significantly, both through administrative improvements and policy reforms.

Naoyuki Shinohara, the IMF deputy managing director, in an earlier statement said that Uganda’s main challenge was to accelerate infrastructure development while ensuring macro-economic stability.

“The new PSI-supported programme aims to support the objectives of the recently adopted national development plan. The authorities aim to raise domestic revenue and, if needed, use a limited amount of non-concessional borrowing to finance the increase in public spending,” she said following the approval of the new PSI mid this year.

Reuters

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