Economic Recovery: IMF approves $1bn funds to Uganda

The International Monetary Fund has agreed to release about $1 billion in funding to Uganda to support the nation’s economic recovery amid a surge in Covid-19 cases.

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.

The pandemic has reversed a decade-long improvement in poverty alleviation and opened fiscal and external financing gaps, Tao Zhang, the fund’s deputy managing director, said after the board discussion.

Ugandan authorities’ program, supported by the IMF loan, “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,” Zhang said.

The IMF sees growth of 4.3% for Uganda in fiscal years 2021 and 2022 before returning to the pre-pandemic rate of 6%-7% in the medium term, according to the fund statement.

The outlook remains highly uncertain, with risks tilted to the downside, including from a resurgence of tighter containment measures linked to higher rates of Covid-19 cases, the IMF said.

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 1,000 deaths, according to the latest data from the Ministry of Health.

Bloomberg/Hauwa Abu