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IMF executive board approves Shs870b disbursement to Uganda
Some Ugandan youth pictured taking a nap under tree shades in the country's capital Kampala. Several people lost their jobs as companies closed due to Covid induced lockdown before the situation was exacerbated by Russian invasion of Ukraine. PHOTO/ FILE
What you need to know:
- The IMF executive board further granted a waiver of nonobservance of a performance criterion on the stock of net international reserves of the Bank of Uganda.
- The IMF executive board further granted a waiver of nonobservance of a performance criterion on the stock of net international reserves of the Bank of Uganda
The International Monetary Fund (IMF) executive board has approved two reviews of a financing agreement with Uganda that allow for the immediate release of about $240 million (about Shs870b) to the East African country.
According to the IMF deputy managing director, Bo Li, Ugandan authorities remain committed to their economic programme amidst a challenging environment.
“Most quantitative targets were met in 2022. Six of the twelve structural benchmarks due between March and December 2022 have been completed. A structural benchmark on the asset declaration regime was converted into a prior action for the review and has been met. Sound programme implementation in the period ahead remains important to ensure economic resilience and support the country’s social and developmental objectives,” Li is quoted as saying in a Tuesday statement released by IMF.
In December, Uganda and IMF staff had reached an agreement for the combined second and third reviews of its 36-month Extended Credit Facility, paving the way for the release of the financing, which brings total disbursements under the arrangement launched in June 2021 to $625 million.
“The ECF Arrangement for Uganda for a total of SDR 722 million (200 percent of quota) or about US$1billion was approved by the Executive Board on June 28, 2021, aiming to support the near-term response to the COVID-19 pandemic and boost more inclusive private sector-led long-term growth. Reforms focus on creating fiscal space for priority social spending, preserving debt sustainability, strengthening governance, and enhancing the monetary and financial sector frameworks,” the statement added.
The IMF executive board further granted a waiver of nonobservance of a performance criterion on the stock of net international reserves of the Bank of Uganda.
Uganda's finance ministry projects economic growth for 2023/24 will be 6%, helped by increased activity in oil sector construction, growth in regional trade, and a rebound in agriculture.
“The banking system is well-capitalized and financial stability risks should continue to be minimized. Monetary policy should continue to tighten to achieve the core inflation target. Continued exchange rate flexibility is needed to preserve external buffers, with foreign exchange interventions limited to smoothing excessive exchange rate fluctuations. Continued improvements in Bank of Uganda’s autonomy and governance framework would be important,” Li added.
Uganda projects it will borrow some $2.6 billion for that fiscal year.
In recent years, Uganda has been taking on increasingly large amounts of debt, particularly from China, to finance energy, transportation and other infrastructure with officials banking on expected oil revenue to clear the debt.
Mr Li argues that accelerating the momentum on structural reforms is essential to help move Uganda towards attaining its goal of middle-income status. Priorities include enhancing domestic revenue mobilization, strengthening governance, transparency, the anti-corruption framework and the AML/CFT regime, advancing the financial inclusion agenda, and climate adaptation measures.
