Country Report Uganda March 2011

Economic policy: The government falls foul of the IMF

Meanwhile, a press release from the IMF in February announced that the Fund had not been able to complete its first review of performance because the government's macroeconomic policies were judged to be "inconsistent" with the objectives under the policy support instrument (PSI) programme that was agreed in May 2010 (June 2010, Economic policy). The press release did not specify which of the government's policies the Fund was unhappy with, but revealed that discussions would continue under the framework of the second review, with further meetings planned for March. It is believed that the IMF was unhappy with a USh600bn (US$262m) supplementary budget that the government passed in January, which increased expenditure in the lead-up to the elections. A PSI agreement does not involve any financial support from the IMF, and its main purpose is to provide a stamp of approval from the Fund to reassure foreign donors and investors. It has been apparent, though, ever since the potential of Uganda's oil resources was confirmed, that the government has been taking a more independent line with the IMF and donors.

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