The International Monetary Fund (IMF) has approved the immediate disbursement of $120 million (Shs440 billion) to Uganda under its Extended Credit Facility (ECF).
This brings the aggregate disbursement to Uganda under the ECF arrangement to about US$750 million.
According to the statement by IMF, the funds are aimed to support Uganda’s near-term response to the Covid-19 pandemic and boost more inclusive private sector-led long-term growth.
It should be remembered that the ECF arrangement for Uganda for about US$1billion (200% of quota) was approved by the executive board on June 28, 2021.
At the conclusion of the executive board’s discussion this week, Kenji Okamura, Deputy Managing Director and Acting Chair of the multilateral lender commended Ugandan authorities for remaining firmly committed to their economic program amidst a challenging environment.
“Most quantitative targets were met in December 2022 and March 2023. The Quantitative Performance Criterion (QPC) on the ceiling on the Bank of Uganda (BoU) net credit to government (NCG) was missed by a very small margin in March 2023. All structural benchmarks due between March and June 2023 have been met,” Okamura said.
He added, “The full implementation of the Domestic Revenue Mobilization Strategy (DRMS), including the additional tax administrative measures identified by the authorities, is crucial to help maintain the debt-to-GDP ratio on a declining path, and allow for an increase in social spending over the medium term. Increasing the pace of Public Financial Management (PFM) reforms is essential to enhance the capacity to execute social spending in a timely manner.”
However, Okamura highlighted that the asset quality of some Ugandan banks has deteriorated, noting that safeguarding financial stability and strengthening the supervisory framework remain paramount.
“The current monetary policy stance is appropriate, but the BoU should stand ready to resume its tightening if signs emerge of a slower-than-expected disinflation. Exchange rate flexibility remains crucial to preserve external buffers,” he said.
As part of the package, Uganda is expected to ensure structural reforms focusing on strengthening governance and anti-corruption frameworks, enhancing domestic revenue mobilization, including through more ambitious rollback of tax expenditures, and boosting financial inclusion.
Meanwhile, the IMF has warned that the recent signing into law of the Anti-Homosexuality Bill, 2023 could have a larger-than-anticipated impact on the availability of grants and external loans from development partners, as well as Foreign Direct Investment (FDI) flows and tourism.
