The IMF mission led by Assistant Director and Division Chief,
The mission met with the
"Performance under the government's IMF-supported SCF programme has been broadly favourable,"
With continued prudent monetary policy and benign developments in food prices in the region, inflation is expected to further moderate by mid-2014 to the medium term target of five per cent."
"Fiscal pressures last year resulted in the ceiling on net domestic financing agreed under the government's IMF-supported programme being breached by 1.2 per cent of GDP.
During the current fiscal year (2013/14), revenues are falling short of the assumptions embedded in the budget approved by Parliament," he said in the statement.
According to him the government was appropriately cautious in releasing funds for budget implementation to attain a fiscal deficit close to the five per cent of GDP target in the budget.
The upcoming mid-year budget review is expected to reduce expenditure allocations to align these with available resources. The IMF official however said expenditure arrears had increased considerably, especially for road projects.
To preserve the credibility of fiscal policy, further policy measures were needed to avoid the accumulation of new arrears and to clear existing ones after verification, he cautioned.
"Preserving macro-economic stability is necessary for rapid growth to continue in the medium term.
The key challenge is to preserve fiscal space for infrastructure investment and priority social spending while gradually reducing the fiscal deficit to maintain debt sustainability.
"The government's tax policy reforms under preparation, including a review of the value added tax, have the potential to improve efficiency and to mobilize additional resources while sharing the burden more fairly.
"Nevertheless, the revenue shortfalls and subsequent expenditure compression experienced during the current fiscal year reinforce the importance of making realistic revenue assumptions during the upcoming budget cycle," he said.
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