ECF: Uganda to receive over Shs 880bln from IMF

KAMPALA-Uganda stands to receive an additional US$ 240 million from the International Monetary Fund [IMF] under the Extended Credit Facility [ ECF ] approved by the IMF Executive Board on June 28, 2021 to the tune of US$ 1 billion [Shs 3.7 trillion].

This was disclosed as staff of IMF led by Malhar Nabar, Chief for the World Economic Studies Division, conducted a virtual mission to Uganda from October 31 – November 22, 2022, to discuss progress on reforms and government’s policy priorities in the context of the combined second and third reviews under the Extended Credit Facility [ECF].

However, the US$ 240mln that Uganda needs is subject to approval of IMF management and the Executive Board in the coming weeks.

Nabar in the statement said: “IMF staff have reached agreement with the Ugandan authorities on a conclusion of the combined second and third reviews of the ECF-supported programme.  The agreement is subject to approval of IMF management and the Executive Board in the coming weeks. Upon completion of the Executive Board review, Uganda would have access to…US$ 240 million, bringing the total IMF financial support under the ECF-financed program…to about US$ 625 million.

Uganda’s growth is projected at 5.3 percent in the financial year 2022/23, 0.7 percentage point lower than at the time of the first review in March reflecting weaker global demand and the impact of rising inflation and interest rates on domestic demand.

The country’s medium-term prospects remain favorable with oil production coming on board by FY24/25. Headline inflation is expected to rise to 8.3 percent this fiscal year due to elevated commodity prices and higher imported input costs and is anticipated to decline thereafter reflecting the expected easing of commodity price pressures and the impact of monetary tightening.

Risks to the outlook are elevated and include lower global growth, persistently higher inflation in advanced economies and associated tighter global financial conditions; an intensification of the Ebola outbreak; and more frequent disruptions in activity due to climate change.

Officials noted Bank of [BoU]’s tightening the policy rate in recent months and announced its readiness to take appropriate action to contain second-round effects of higher global prices. Given the broadening of inflation pressures and upside risks, continued tightening would help guide core inflation back to the target. The Central Bank Rate stands at 10 percent.

They said continued exchange rate flexibility is an important shock absorber and would help rebuild external buffers.

They said revenue-based fiscal consolidation enshrined in government’s Domestic Revenue Mobilization strategy remains crucial for keeping debt at a sustainable level and providing much-needed funds for Sustainable Development Goals [SDGs].

During the virtual mission to Uganda, IMF staff noted that government has adopted a plan to rationalise inefficient and costly tax expenditures. “Expenditure prioritisation will continue but a small widening of the fiscal deficit this year, relative to the target set in the first review of the ECF, is necessary to account for additional needs to support the vulnerable, including subsistence households, while remaining focused on fiscal consolidation.”

The IMF noted that Uganda’s debt remains sustainable, with a moderate risk of debt distress. The Committee on the National Economy revealed that Uganda’s public debt stock increased by 22 percent from Shs50.9 trillion in the 2019/ 22 fiscal to fiscal year to Shs 79.5trn by end of the 2020/2021 fiscal year.

Banking

“The banking sector is well-capitalised, yet existing vulnerabilities point to the need for continued monitoring and strengthening of financial stability. “The BoU is improving its supervisory framework. Implementation of the Safeguards Assessment recommendations will help solidify independence and the new risk management framework will address governance and contain risks.”

“Structural reforms remain key to unlocking Uganda’s growth potential. Priorities include strengthening the anti-corruption framework and the Anti-Money Laundering and Counter Financing of Terrorism [AML/CFT] regime, improving the social safety net, advancing the financial inclusion agenda, and adapting to climate change.

They noted the anticorruption agenda is progressing with the Companies Act amended to prepare the ground for the implementation of a beneficial ownership register allowing timely access to information.

“Tools for AML/CFT risk-based supervision for the financial sector are being developed and implemented. The authorities published information on compliance statistics for asset declarations and on applications to access the declarations, on the Inspectorate of Government’s website.”

The IMF staff commended government for the effort to maintain stability in a difficult environment.

The permanent secretary and secretary to the treasury, Ramathan Ggoobi and deputy governor of the BoU, Michael Atingi-Ego, and other BoU and senior government officials participated in the IMF virtual mission.

The IMF Staff also held discussions with representatives of the private sector, civil society organizations, and development partners in their usual practice of taking stock of economic conditions and reform priorities.

https://thecooperator.news/rwanda-imf-approves-us-319mln-loan-to-build-resilience-to-climate-change/

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