IMF and Uganda reach staff-level agreement on a three-year US$1 billion financing package
A staff team from the International Monetary Fund (IMF) led by Mr. Amine Mati conducted virtual missions to discuss a 36-month program under the Extended Credit Facility.
At the conclusion of the mission, Mr. Mati issued the following statement:
“IMF staff have reached agreement with the Ugandan authorities on a medium-term program that could be supported by IMF resources of about US$1 billion under the Extended Credit Facility (ECF). The staff-level agreement is subject to IMF management approval and Executive Board consideration, which is expected in the coming weeks.
“Uganda’s economy has been hit hard by the COVID-19 pandemic that eroded people’s livelihoods. Growth has halved compared to pre-crisis levels and poverty has increased, reversing decade-long gains in wealth creation and inclusion despite the support measures introduced by the authorities. The fiscal deficit has widened considerably, pushing public debt to close to 50 percent of GDP by June 2021 and increasing financing costs. Emergency financial assistance from the IMF and the World Bank helped close financing gaps and supported mitigation measures, but important fiscal and external financing needs remain over the next few years.
“The IMF-supported program supports the next phase of the COVID-19 response and strengthens the fundamentals of a more inclusive private sector-led growth. As the pandemic eases, it envisages a return to revenue-based fiscal consolidation while increasing priority social spending, including on COVID-19 vaccines and to protect vulnerable households, and more efficient infrastructure investment. Building upon agreed reforms detailed in the authorities’ National Development Plan —including the strengthening of the monetary policy framework and the recent improvements in the financial sector resolution framework—the successful consolidation effort will place the public debt ratio on a declining path. These efforts—along with improved pro-growth spending composition—will help create space for private sector credit and boost human capital, setting the stage for a durable and inclusive growth.
“Strengthening governance and budget transparency will be key to fostering public sector efficiency while preparing the ground for sound management of oil revenues. Managing public investment appropriately, reducing domestic arrears, and strengthening cash management are all critical priorities for improving the business climate and attracting private investment. The authorities’ commitment to strengthen anti-corruption efforts is welcomed and encouraged. Further progress with publishing COVID-19 procurement contracts and providing information on the use of funds to mitigate the impact of COVID-19 is expected in the next few days, in line with the government’s commitments.
“COVID-19 continues to pose risks. Weaker external demand and possible resurgence of containment measures linked to higher COVID-19 positivity rates are downside risks. As projections remain subject to significant uncertainty, it will be important to identify contingency strategies in case these risks materialize. The IMF staff team looks forward to continuing the close engagement with the Ugandan authorities and support their efforts in achieving the program’s objectives.
“The IMF staff team is grateful to the authorities for the candid and constructive discussions and their efforts to craft a convincing and ambitious program supported by the IMF.
“The staff team met with the Minister of Finance, Mr. Kasaija, acting Permanent Secretary and Secretary to the Treasury, Mr. Ocailap; Governor of the Bank of Uganda (BoU), Mr. Mutebile; Deputy Governor of the BoU, Mr. Atingi-Ego; and other BoU and senior government officials. Staff also had productive discussions with representatives of Parliament, the private sector, civil society organizations, and development partners.”