The International Monetary Fund has agreed to release about $1 billion (Shs3. 5 trillion) in funding to Uganda to support the nation’s economic recovery amid a surge in Covid-19 cases.
Uganda’s economy was hit hard by the Covid-19 crisis. 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 three-year loan approved by the executive board under the fund’s Extended Credit Facility will enable the immediate disbursement of about $258 million to help support the nation’s budget following on $491.5 million in emergency support in May 2020, the IMF said in a statement Monday.
Tao Zhang, Deputy Managing Director and Acting Chair said, “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.”
“Fiscal consolidation, appropriately based on both revenue and expenditure measures during the first year of the authorities’ program, seeks to stabilize the public debt ratio while increasing social spending, including for vaccines. The implementation of the authorities’ Domestic Revenue Mobilization Strategy, better management of public investment, control of domestic arrears and advances in cash management will support the fiscal strategy.”
The loan comes as the government of East Africa’s third-largest economy strives to narrow its fiscal deficit to 6.4% of gross domestic product in the year starting July 1 from an estimated 9.9% in the current period. That forecast assumes that spending won’t be ramped up in 2021-22, and that the government will achieve its target of increasing revenue by 15%.
Uganda is battling a new wave of Covid-19 infections, having confirmed almost 80,000 cases and over 1,000 deaths, according to the latest data from the Ministry of Health.
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