Uganda’s Secretary to the Treasury, Ramathan Ggoobi, has said that the successful conclusion of the fifth review of the Extended Credit Facility (ECF) backed Economic Program, another SDR 90.25 million (approximately US$ 120 million) will be disbursed in the next few days which will go a long way in supporting activities in the budget and the economy in general.
“Beyond the ECF disbursement, the successful conclusion of the fifth review shows the confidence that the IMF has in Uganda’s economic trajectory. This confidence is shared by other development partners as well as foreign investors leading to continued growth in the country’s FDI,” said Ggoobi on Thursday while addressing the press at Finance ministry offices in Kampala.
The International Monetary Fund (IMF) and the government of Uganda are implementing a three-year economic program aimed at creating a stable and sustainable macroeconomic position, consistent with poverty reduction and growth.
The key reforms under this ECF arrangement are focused on creating fiscal space for priority social spending, preserving debt sustainability, strengthening governance & enhancing the monetary & financial sector framework.
The program was approved by the IMF Executive Board on June 28, 2021 and will run until June 2024.
The ECF-backed economic program is premised on two equally important components; budget Financing of approximately US$ 1.0 billion (SDR 722 million) over three years (this is an interest-free loan from the IMF) and adoption of economic policies and structural reforms that will maintain the country’s fiscal stability and ensure low risk of debt vulnerabilities.
Ggoobi lauded the Uganda Investment Authority (UIA) for drawing in investors, showcasing the nation and positioning it as the top investment destination.
“Uganda is off the grey list; come and invest with confidence knowing will have a high return on investment,” he noted.
In a March 6 statement, the Executive Board of the International Monetary Fund (IMF) said it had concluded the fifth review of Uganda’s Extended Credit Facility (ECF) Arrangement.
The completion of the fifth review enables the immediate disbursement of SDR 90.25 million (about US$120 million). This brings the aggregate disbursement under the ECF Arrangement to SDR 631.75 million (about US$870 million).
According to the IMF, tight fiscal policy will reduce financing and debt risks, while maintaining fiscal space for social and development expenditure.
“The monetary policy should be data dependent, and a flexible exchange rate will help rebuild external buffers,” reads the IMF statement.
The ECF Arrangement for Uganda for a total of SDR 722 million (200 percent of quota) or about US$1 billion was approved by the Executive Board on June 28, 2021, (IMF Executive Board Approves US$1 billion ECF Arrangement for Uganda), aiming to support the near-term response to the COVID-19 pandemic and boost more inclusive private sector-led long-term growth.
“Uganda’s economic recovery is gaining pace, with growth projected at 6 percent in FY 23/24, and rising to 7 percent in FY 24/25 and the medium-term. The inflation outlook has improved, with core inflation expected to remain subdued at 2.8 percent in FY 23/24 and rising to the Bank of Uganda’s target of 5 percent in the medium-term,” reads the statement.
It added: “A further tightening of external financial conditions could constrain the availability of syndicated loans and jeopardize fiscal financing and the ongoing recovery. The passing of the Anti-Homosexuality Bill, 2023 (AHA) could negatively impact foreign investment, loans, and grants, as well as tourism. Uganda’s mostly rain-fed agriculture also remains vulnerable to weather-related shocks. Risks to inflation are also on the upside, reflecting a slightly positive output gap, risks of higher international fuel prices from the ongoing Israel-Gaza war, exchange rate depreciation pressures from portfolio outflows, and weather-related shocks.”
