Uganda will get US$US$1 billion, or about Shs3.5 trillion from the International Monetary Fund (IMF) that has been secured under the Extended Credit Facility (ECF) to support the East African nation plug financing gaps by the Covid-19 pandemic.
According to a statement issued by IMF, the decision was taken following virtual missions to Uganda conducted from February 2-March 5 and from May 25-May 28, 2021.
“Uganda’s economy has been hit hard by the COVID-19 pandemic that eroded people’s livelihoods. Growth has halved compared to pre-crisis levels and poverty has increased, reversing decade-long gains in wealth creation and inclusion despite the support measures introduced by the authorities. The fiscal deficit has widened considerably, pushing public debt to close to 50 percent of GDP by June 2021 and increasing financing costs. Emergency financial assistance from the IMF and the World Bank helped close financing gaps and supported mitigation measures, but important fiscal and external financing needs remain over the next few years," reads the statement.
“The IMF-supported program supports the next phase of the COVID-19 response and strengthens the fundamentals of a more inclusive private sector-led growth. As the pandemic eases, it envisages a return to revenue-based fiscal consolidation while increasing priority social spending, including on COVID-19 vaccines and to protect vulnerable households, and more efficient infrastructure investment. Building upon agreed reforms detailed in the authorities’ National Development Plan —including the strengthening of the monetary policy framework and the recent improvements in the financial sector resolution framework—the successful consolidation effort will place the public debt ratio on a declining path. These efforts—along with improved pro-growth spending composition—will help create space for private sector credit and boost human capital, setting the stage for a durable and inclusive growth."
The Fund says strengthening governance and budget transparency will be key to fostering public sector efficiency while preparing the ground for sound management of oil revenues.
Uganda is now processing documents providing information on the use of funds to mitigate the impact of Covid, which will then be scrutinized by IMF management and IMF Executive Board.
Amine Mati, the IMF mission chief led his team to discuss the financing program with Uganda’s Minister of Finance Matia Kasaija, Governor of the Bank of Uganda (BoU), Tumusiime Mutebile, among other senior government officials.