Only reforms will help Uganda reach middle income – IMF

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The International Monetary Fund (IMF) has stated that if all the necessary reforms are implemented, Uganda will achieve middle-income country status by the financial year 2026/27.
In a report for the consultation and review of the 2021 Extended Credit Facility under Article IV, the IMF said Uganda’s per capita income, if all reforms are properly implemented, will go from $812 (2.9 million shillings) to at least $1,180 (4.25 million). by fiscal year 2026/27.
However, the report also warned that if the government does not sufficiently implement the reforms, the achievement of middle income will be set back by at least three years.

The government declared in 2015 that Uganda would achieve middle-income country status by 2020.
However, the government has since changed the dates, defaulting on its promise due to the failure to implement the reforms needed to stimulate private sector growth.
Recently, the government renewed talks about achieving middle-income status, which has been a broken promise almost every promised fiscal year.
In January, President Museveni renewed the government’s commitment to elevating Uganda to middle-income country status by at least 2023.

“We want Uganda to be a high, non-middle income status – which we will achieve for sure in one or two years,” he said, noting that by “July 2022, the domestic product Uganda’s gross per capita will be close to $980.”
The government has relied on oil production to elevate the country to middle-income status.
However, Uganda is expected to reach first oil in 2025, just two years ahead of President Museveni’s projections.
According to the IMF, some of the reforms needed include improvements in governance and product markets, particularly with regard to exports and the efficiency of tax collection to increase the tax-to-gross domestic ratio by 0.5%. current, among others.

IMF Uganda Mission Team Leader Amine Mati said assessments of Uganda’s current economic environment indicate that economic recovery is underway, but the Covid -19 has exacerbated development challenges, worsening socio-economic indicators, among them rising unemployment, poverty and school learning losses.
The assessment also notes that general revenue and expenditure measures are needed to support a pro-growth path of economic consolidation consistent with a debt anchor of 50% of gross domestic product.

Uganda’s debt-to-gross domestic ratio is projected by the end of 2022 to exceed 50%, which is considered a safer level, due to an increase in borrowing resulting from spending pressures related to the Covid-19.
The assessment also noted that the implementation of the Domestic Revenue Mobilization Strategy, which builds on tax policy – ​​including rationalization of tax exemptions – and tax administration reforms, would generate additional revenue. at least 0.5% of gross domestic product per year.
Critical
The IMF assessment also notes that preserving and increasing social spending – including through higher budget allocation and increased spending efficiency – will be key to meeting Uganda’s significant development needs.
The assessment also discourages supplementary budgets and seeks to strengthen cash management and prudent debt management.

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