* Economy seen growing 5 pct in 2012/13
* Interest rates were hiked to fight inflation
* Fight against graft must be toughened
KAMPALA, Jan 15 Uganda's tight monetary stance
to combat inflation has sharply slowed economic growth but
medium-term growth will reach its potential level of 6 percent
to 7 percent, the International Monetary Fund (IMF) said.
East Africa's third biggest economy jacked up interest rates
in the second half of 2011 to fight soaring prices as inflation
peaked at over 30 percent. It then launched a run
of monthly growth-boosting rate cuts in June last year, which it
paused for the first time this month with inflation at 5.5
Although inflation has been brought under control, economic
expansion is comfortably below its potential growth rate of
about 7 percent, the central bank has said.
"Reviving economic activity is therefore an urgent priority
for Uganda's low-income economy," the IMF said in a statement
late on Monday.
"To this end, the authorities' short-term policies are
appropriately geared at maintaining essential public investment
and encouraging a gradual resumption of bank lending, while
continuing to allow the shilling to reflect market conditions."
The IMF forecast in November the Ugandan economy would grow
5 percent in the 2012/13 fiscal year from 3.4 percent in the
The Washington-based body also said the recent theft of
donor funds by Ugandan officials, which led to some donors
suspending aid, signalled the need for a more radical fight