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IMF: No Change in Average Income of Ugandans

Delivering the preliminary statement at the Ministry of Finance headquarters in Kampala, the head of the review mission, Axel Schimmelpfennid, said the country is in a state of very slow growth, translating into zero per capita for this financial year.

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Findings by the International Monetary Fund (IMF) indicate that the per capita growth of Ugandans remained stagnant for the past one year today, meaning there has been no change in average income of citizens.

This is contained in the concluding statement of the 2017 IMF Consultation Mission and Discussions for the 8th Review under the Policy Support Instrument. The review is an annual ritual of the IMF.

For two weeks, an IMF mission has been in Uganda having consultations with Ministry of Finance and Bank of Uganda technocrats, as well as other stakeholders in the economy countrywide.

Delivering the preliminary statement at the Ministry of Finance headquarters in Kampala, the head of the review mission, Axel Schimmelpfennid, said the country is in a state of very slow growth, translating into zero per capita for this financial year.

In 2015, Uganda's GDP per capita was recorded at 673 dollars, equivalent to 2.5 million Shillings, translating into about six thousand Shillings daily.

 

Uganda's GDP per capita is equivalent to five percent of the world's average. Schimmelpfennid said over the medium term if the huge investments in infrastructure go as planned and agricultural production rebounds growth, in three to four years, GDP per capita could increase to 6 and 6.5 percent in three to four years, although that projected growth could be affected by downside risks.

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The IMF's latest information is that economic growth for this financial year is down from the earlier projected 4.5 percent to 3.5 to four percent.

Although the GDP per capita is zero, this is an average figure but not the reality because there are those who really have loads of money and there are those who simply don't have it.

A recent report by Oxfam Uganda revealed that Uganda's 10-percent rich own 35 percent of the country's wealth, leaving the 65 percent for 90 percent of the population.

Schimmelpfennid said the IMF believes that Uganda's growth strategy, emphasis on infrastructure development especially roads and electricity is appropriate, although in order to achieve sustainable and inclusive growth there should also be social spending.

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Commenting on the zero per capita growth, the Permanent Secretary in the Ministry of Finance, Keith Muhakanizi, said even with economic growth at 3.5 percent Uganda could have still had increase in per capita growth had it not been for high population growth rate.

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The 2014 national census puts Uganda's population growth rate at three percent. The Uganda Demographic and Health Survey 2016 reported that although fertility in Uganda has declined from 7.4 children per woman in 1988/99 to 5.4 percent in 2016. 

The survey adds that fertility is notably higher among rural women than among urban women. On average, rural women will give birth to nearly two more children during their reproductive years than urban women, that is 5.9 and 4.0, respectively.

The IMF report indicates that the banking sector is well-capitalised, although credit is subdued. It says inflation has edged up, mainly reflecting the effects of the drought.

On macroeconomic policies, the IMF says although the 2017/18 budget accommodates infrastructure needs, it also implies tight current expenditure envelope.

The IMF also notes that the Bank of Uganda's inflation targeting framework has served Uganda well, appropriately reducing the central bank rate now at 11 percent.

Based on the findings, the IMF board will in early July discuss Uganda and then issue a final report.