The Ugandan economy has weathered the first-round impact of the global financial crisis relatively well. Despite lower foreign direct investment, economic growth remained strong by international standards at 5.6 percent.
This is the analysis of the International Monetary Fund, whose Executive Board today completed its seventh review of Uganda's economic performance under the Policy Support Instrument.
IMF Policy Support Instrument for Uganda aims at maintaining macroeconomic stability and alleviating constraints to growth. It also supports the strengthening of institutions ahead of expected oil production and Uganda's participation in the future East African Monetary Union.
A statement issued today by the IMF says Uganda experienced an economic slowdown this year. It says economic activity decelerated due to a prolonged drought and the uncertainties about the path of global growth.
Despite this, the IMF says the medium-term outlook remains favorable. The prospect of substantial oil revenues offers an opportunity to raise growth and eliminate poverty, but also poses important policy challenges. The IMF says Uganda will need robust fiscal and financial institutions, a supportive business environment and scaled-up infrastructure to prepare for this event.
Naoyuki Shinohara, Deputy Managing Director of the IMF, says prudent macroeconomic policies have enabled Uganda to maintain macroeconomic stability despite a series of external shocks. He says output growth has been strong and is expected to rebound quickly.
Inflation has moderated and limited central bank intervention has helped smooth excessive exchange rate volatility, and the financial sector has remained sound.