The International Monetary Fund has approved a loan of US$1 billion dollars equivalent to Ugx 3.5 trillion meant for recovery from the COVID 19 effects on the Ugandan economy.
This loan was released under the Extended Credit Facility (ECF) and aims at increasing households’ incomes and inclusive growth by promoting private sector development.
“The IMF Executive Board has approved a US$1 billion financing package for Uganda to support the COVID-19 response and recovery.
The program includes reforms to strengthen governance and transparency. #IMFAfrica”.
According to a statement released by IMF’s press officer, Mr Andrew Kanyegirire, US$258 million will be released immediately to support the recently read budget.
The IMF further said that the Ugandan economy had been paralyzed by the COVID 19 pandemic hence a need to stimulate it again.
“Decade-long gains in poverty reduction were reversed, fiscal balances have deteriorated, and pressures on external buffers have intensified. A mild recovery is underway in some sectors, with economic growth in FY 21/22 expected to reach 4.3 percent before returning to pre-pandemic rates of 6-7 percent in the medium term. The outlook remains highly uncertain, with risks tilted to the downside, including from a resurgence of tighter containment measures linked to higher COVID-19 positivity rates. The IMF said.
The government under the National Development Plan (NDPIII) plans to carry out a number of structural reforms.
These include reforms to increase domestic revenue, foster public sector efficiency and strengthen governance while preparing the ground for sound management of oil revenues.
The programme will strengthen the monetary policy and financial sectors frameworks while fostering development, including through financial inclusion.
Mr Tao Zhang the Deputy Managing Director and Acting Chair said at the end of the board meeting that Uganda’s economy which has severely been affected will be helped by this loan to alleviate the effects.
“Uganda’s economy has been severely impacted by the COVID-19 global pandemic, which reversed decade-long gains in poverty alleviation and opened up fiscal and external financing gaps. The authorities’ program, supported by a new arrangement under the Extended Credit Facility, focuses on keeping public debt on a sustainable path while improving the composition of spending and advancing structural reforms to create space to finance private investment, foster growth and reduce poverty.” Mr Zhang said.
Fiscal consolidation based on revenue and expenditure measures in the first year of this program will seek to stabilize public ratio spending alias increasing social spending.
This will include the purchase of vaccines too.
Zhang added that an accommodative monetary policy stance remains suitable and the exchange rate should continue to function as a shock absorber.
He also noted that advancing governance reforms was very vital to support transparency and private sector growth.
“The authorities have made progress in publishing information on audits and the use of COVID-19 funds, but further work is necessary to enhance the AML/CFT framework and strengthen the accountability of high-level officials. Promoting human capital development and financial inclusion, including through wider credit bureau coverage and collateral requirements will further support the authorities’ inclusive growth agenda. Accelerating digitalization would enhance these efforts.” Zhang further noted.