The International Monetary Fund (IMF) anticipates GDP growth, citing a hike from 3.4 percent recorded in 2016 to 4 percent in 2017, following the Fund’s recent countrywide tour.
The Fund attributes the development to this year’s bumper harvest and increased hydroelectricity generation expected to boost economic activity more than previously projected.
“The near-term outlook for the economy has improved in recent months, driven by good rains and positive sentiments in the financial markets as evidenced by increased foreign investor participation in the government securities market,” said IMF’s recent report released in June.
In addition, IMF projects that the annual inflation rate to remain at single-digit levels, notwithstanding the impact of the move toward cost-reflective electricity tariffs.
However, the Fund says improved fiscal performance and discipline are needed to sustain market confidence.
“Fiscal performance in the first four months of 2017 was mixed relative to budget estimates. Total domestic revenue (tax and nontax) fell short of the projected level while total expenditures appeared to be broadly in line with the budget.”
On the other hand IMF said though government has cleared substantial arrears, new arrears may be emerging.
Government has agreed take steps to strengthen commitment control, including by expanding the coverage of the Integrated Financial Management Information System (IFMIS) to all central government agencies.
Other remaining fiscal measures relate to reduced spending on the Farmer Input Support Program (FISP) through improved targeting of beneficiaries and limiting maize purchases to the level in the budget.
The IMF said weaknesses in the management of public finances and public investment pose significant risks to the 2017 budget objectives of “restoring fiscal fitness for sustained inclusive growth and development” and scaling up social spending.
IMF urged the authorities to continue strengthening their public debt management capacity in order to underpin their efforts to put public debt on a sustainable path.