IMF approves Uganda's oil revenue plan
May 18, 2010
A NEW three-year policy support instrument (PSI), which will help the country in the management of future oil revenues, has been approved by the International Monetary Fund (IMF).
By Sylvia Juuko
A NEW three-year policy support instrument (PSI), which will help the country in the management of future oil revenues, has been approved by the International Monetary Fund (IMF).
Naoyuki Shinohara, the IMF deputy managing director, said the PSI will facilitate maintenance of macro-economic stability, scale-up public investment and strengthen institutions ahead of expected oil production.
“Large-scale oil production and the establishment of the East African monetary union will present opportunities, but also pose significant policy challenges for Uganda in the years to come.
“The authorities are taking steps to strengthen institutional and policy frameworks, which, together with improving infrastructure, should help the country prepare effectively for these developments,†Shinohara said in a statement last week.
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.
Shinohara pointed out 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.â€
The IMF forecast show that there was a slow-down in the economy due to a prolonged drought and the uncertainties about the path of global growth.
“Growth is expected to reach 5.6% for 2009/2010, but should rebound quickly over the next couple of years,†it said.
In the medium-term, Uganda’s outlook remained favourable due to the prospect of substantial oil revenues, which offers an opportunity to raise growth and eliminate poverty.
However, the IMF cautions that this development poses important policy challenges.
“Uganda will need robust fiscal and financial institutions, a supportive business environment and scaled-up infrastructure to prepare for this event.
“The fiscal policy framework must also be further bolstered in preparation for the establishment of the East African Monetary Union.â€
Shinohara suggested that a cautious monetary stance, flexible exchange rate regime and a comfortable level of reserves will help keep the fiscal and debt positions within sustainable bounds.
“To improve efficiency and raise future growth, the Government is committed to reinvigorating structural reforms.
“These will focus on public financial management, including strengthening spending controls and efficiency, and increasing domestic tax revenue,†he added.
He argued that financial sector reforms would enhance banking stability and facilitate financial deepening.
A NEW three-year policy support instrument (PSI), which will help the country in the management of future oil revenues, has been approved by the International Monetary Fund (IMF).
Naoyuki Shinohara, the IMF deputy managing director, said the PSI will facilitate maintenance of macro-economic stability, scale-up public investment and strengthen institutions ahead of expected oil production.
“Large-scale oil production and the establishment of the East African monetary union will present opportunities, but also pose significant policy challenges for Uganda in the years to come.
“The authorities are taking steps to strengthen institutional and policy frameworks, which, together with improving infrastructure, should help the country prepare effectively for these developments,†Shinohara said in a statement last week.
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.
Shinohara pointed out 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.â€
The IMF forecast show that there was a slow-down in the economy due to a prolonged drought and the uncertainties about the path of global growth.
“Growth is expected to reach 5.6% for 2009/2010, but should rebound quickly over the next couple of years,†it said.
In the medium-term, Uganda’s outlook remained favourable due to the prospect of substantial oil revenues, which offers an opportunity to raise growth and eliminate poverty.
However, the IMF cautions that this development poses important policy challenges.
“Uganda will need robust fiscal and financial institutions, a supportive business environment and scaled-up infrastructure to prepare for this event.
“The fiscal policy framework must also be further bolstered in preparation for the establishment of the East African Monetary Union.â€
Shinohara suggested that a cautious monetary stance, flexible exchange rate regime and a comfortable level of reserves will help keep the fiscal and debt positions within sustainable bounds.
“To improve efficiency and raise future growth, the Government is committed to reinvigorating structural reforms.
“These will focus on public financial management, including strengthening spending controls and efficiency, and increasing domestic tax revenue,†he added.
He argued that financial sector reforms would enhance banking stability and facilitate financial deepening.