Bad news: IMF is back

Revenue collection shortfalls at URA that are becoming the norm have been noted, against higher than anticipated public expenditure, growth of unpaid government spending arrears,  low value for money on government projects, and a low tax to GDP ratio.

But if the government of President Museveni is listening, it has chosen unusual ways of signaling it. In the week running up to Lagarde’s visit, the government announced salary increases for a slew of public sectors including ministry employees, judges, and the security forces. In some cases, the salaries were raised by over 100%.

The government also was involved in a series of debates and discussion of its Budget Framework Paper for the 2017/18 FY which shows the budget swelling from Shs26 trillion to Shs30 trillion. Only 46.7% is projected to be funded from internally generated funds. The rest is expected to come from donors and debt. These dark numbers are partly a result of new budget reporting approach, but most of them reflect the hard times the economy is experiencing.

Meanwhile, the IMF has been badly flayed for its poor handling of the financial crisis in Europe, especially in Greece and Spain where it sought to introduce the same policies it has always imposed on poor African countries.  At one point, its own oversight body, the Independent Evaluation Office (IEO) criticized the IMF for poor handling of the European financial crisis. “Embarrassment for Christine Lagarde and IMF as Fund’s own watchdog slams its Eurozone record” is the headline under which the Independent newspaper of the UK ran the story.

The IMF’s favoured austerity policy approaches – including   Structural Adjustment Programs (SAPS), unfettered markets, borderless expatriation of capital gains, and social service downsizing, have all come under negative scrutiny. In some case, they have been found to be downright dangerous to economies.

“The free market fundamentalism of the World Bank and IMF has had a disastrous impact on Africa’s development contrary to the stated aims of the SAP which from the perspective of development broadly understood as involving economic growth, structural change, and elimination of poverty. Macroeconomic stability has improved modestly in a few African countries, but many analysts doubt its sustainability given the experience of Cote d’Ivoire, Senegal, Uganda, and Zimbabwe. In Uganda however, where slight macroeconomic stability has occurred, volatile external finance has been largely responsible. Moreover, stability has been achieved mostly at the great expense of domestic investment even in basic infrastructures which are central to sustainable growth and development.” That is the conclusion of a study on “The Impacts of the World Bank and IMF Structural Adjustment Programmes on Africa” by the Sacha Journal of Policy and Strategic Studies.

Therefore, it appears, when Lagarde sits across the table from President Museveni and his team from the Ministry of Finance, Bank of Uganda, and others, it will be a meeting of minds groping for ways to restore their credibility. At this time, The IMF and Museveni need each other.

After being praised as an `IMF success story’ in the 1990s, Museveni’s credentials as an astute disciple of IMF doctrine have taken a battering at the same time as the IMF role in the global economy is dwindling.

But Museveni is emboldened partly by the emergence of China as a counterweight to pressure from Bretton Woods on poor countries desperate for debt.

So Museveni and the government remain bullish and are pushing most of the budget to areas such as Infrastructure development, interest payments, security and defense, social services, and public sector management which are not the IMF’s pet projects.

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editor@independent.co.ug