Uganda: Next up for IMF's Policy Support Instrument

Oct 26, 2005

We've been talking about the IMF's Policy Support Instrument (PSI) a good deal on this list. It is basically IMF oversight of your country's economy without any loans. We surmised that it was being proposed at the same time as the G8 debt deal as a way of coercing countries that would otherwise have little or no ties to the IMF to remain under its thumb. But the first country to use a PSI was Nigeria, which is not in line for IMF debt cancellation (they needed the program to secure Paris Club bilateral debt cancellation).
But Uganda fits the theory better. It was the first country to "graduate" from the HIPC debt relief program, in '98, and in fact got to graduate at least twice, since somehow or another its debt kept working its way back into officially "unsustainable" levels. Now, with much praise from the IMF, it can graduate from IMF funding, but still be kept under the institution's protective wing. That will insure that Uganda keeps some truly awful policies in place. Recall, for example, that it was Uganda's Finance Minister who argued that the country should not accept a grant from the Global Fund on AIDS, Tuberculosis & Malaria on the grounds that the IMF would say such an amount entering the economy would make inflation raise unacceptably fast.

Soren Ambrose - 50 Years Is Enough Network / Solidarity Africa Network in Action

Oct. 26 2005

Press Release - International Monetary Fund

Mr. Peter Allum, Senior Resident Representative of the International Monetary Fund (IMF) in Uganda, made the following statement earlier today in Kampala:

"An IMF mission visited Uganda during October 13-25, 2005 for discussions with the Ugandan government on the sixth and final review under Uganda's three-year economic program supported by the IMF's Poverty Reduction and Growth Facility (PRGF). The SDR 13.5 million (US$19.5 million) PRGF was approved by the Executive Board of the IMF on September 13, 2002. Discussions for the review also took place with civil society, the business community, and Uganda's development partners.

"The mission, headed by Mr. John Green, held productive discussions with the Ugandan authorities, including President Museveni, on a number of key policy issues relating to the sixth PRGF review. These included: implementation of the 2005/06 budget; plans for addressing domestic expenditure arrears; progress in strengthening the Uganda Revenue Authority; financial sector policies; and a range of structural reforms critical for improved growth performance, further poverty reduction, and achievement of the 2015 Millennium Development Goals (MDGs).

"The mission also discussed with the government prospective relations with the IMF, following the expiry of the current PRGF program in December 2005.

"The IMF team welcomed the government's strong track record under the three-year PRGF program, including its demonstrated commitment to macroeconomic stability, which has been key to fostering high and sustained rates of growth. The IMF team noted that Uganda's balance of payments position is strong, and agreed with the government that Uganda is well-placed to graduate from IMF financing. The government has indicated that it will maintain the momentum of macroeconomic policy reforms with a program under the IMF's Policy Support Instrument (PSI) framework. This framework is designed for low-income countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring, and endorsement of their policies.

"The mission has returned to headquarters in Washington D.C., where it will continue to work closely with the authorities with a view toward completing the sixth PRGF review. The IMF's Executive Board is expected to discuss the staff's report on this mission in late 2005. With the consent of the government, the report will be published on the IMF's website."

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