The International Monetary Fund (IMF) has approved the immediate disbursement of USD 240M (Ugx.886bn) under the Extended Credit Facility (ECF).
The approval follows an agreement between the IMF staff mission to Uganda with the government authorities on a conclusion of the combined second and third reviews Uganda’s performance under the arrangement.
The approval brings the total agreed disbursement so far to USD 625M (2.307 trillion shillings).
Bo Li, the Deputy Managing Director IMF said that Ugandan authorities have managed to preserve macroeconomics stability while sustaining the post Covid-19 recovery despite rising pressure from global shocks, including new public health challenges.
He added that Uganda’s economy is projected to grow by 5.3 percent in the financial year 2022/2023, which is lower than the 6 percent that had been projected during the first review in March last year.
“The forecast also shows higher inflation rates compared to those recorded 10 months ago, with the IMF saying that these revisions reflect the impact of war in Ukraine, tighter external financial conditions, drought, and rising domestic borrowing costs,” read the statement.
The IMF advises that tight macro policies and continued exchange rate flexibility will help strengthen the economy against external shocks.
“Notwithstanding the challenging environment and a heavy reform agenda, all but one quantitative performance criteria and most indicative targets for March, June, and September 2022 were met and the authorities have taken important steps to advance structural reforms,” the statement added.
Li added that enhanced domestic revenue mobilization, including the elimination of inefficient tax exemptions, rationalization of non-priority spending, and shifting the composition of spending towards priority social areas will help achieve the fiscal objectives and address large development needs.
“The introduction of the Parish Development Model (PDM) was a welcome development,” Li said.
ECF is a relief arrangement by the IMF for member countries with widespread or prolonged balance of payments problems, especially following the impact of the COVID-19 pandemic on low-income and developing economies.
The arrangement for Uganda for a total of about 1 billion dollars (Shs 3.7 trillion) was approved by the Executive Board on June 28th 2022, aiming to support the near term response to the pandemic and boost more inclusive private sector led long growth.