IMF approves another Shs470b post-Covid-19 recovery fund 

The Ministry of Finance Permanent Secretary and Secretary to the Treasury Ramathan Ggoobi, has said another $120m (Shs470b), which is has been approved by the International Monetary Fund (IMF), as a post-Covid-19 recovery package, will go a long way in supporting budget activities and the economy in general.

Speaking in press briefing in Kampala yesterday after completion of the Fifth Review of the IMF Extended Credit Facility, Mr Ggoobi said: “With the successful conclusion of the Fifth Review, another $120m will be disbursed in the next few days [and] will go a long way in supporting activities in the budget and economy in general,” noting that the disbursement and the conclusion of the Fifth Review shows the confidence 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 foreign direct investment],” he said. 

Uganda concluded the Fifth Review under the Extended Credit Facility on March 6, with the IMF saying that broad-based recovery in the economy continues but more reforms are still needed. 

In June 2021, the IMF approved a $1b (Shs3.9 trillion) Extended Credit Facility for Uganda to support the post-Covid-19 recovery by increasing household incomes and inclusive growth through fostering private sector development.

The three-year financing package sought to support short-term response to the Covid-19 crisis and sustain a post-crisis inclusive recovery, by creating fiscal space for priority social spending, preserving debt sustainability, strengthening governance, and enhancing the monetary and financial sector framework.

At the press briefing, Ms Izabela Karpowicz, the IMF resident representative in Uganda, said economic growth has been accelerating, supported by a decline in inflation and the construction of a new oil pipeline, which continues to support investment and demand for services. 

The growth has also been supported by a rebound in gold exports and tourism, while at the same time, inflation has fallen to below the central bank’s target, even as there still exists multiple inflationary pressures, resulting from the weakening of the shilling. 

The IMF also indicated that private sector credit growth remains sluggish, but the banking system is sound and there are good prospects of expanding credit growth as the economic recovery consolidates. 

Growth is projected at 6 percent in the 2023/24 financial, and is expected to rise to 7 percent in 2024/25 and the medium-term as oil production comes on stream.

However, Ms Karpowicz noted that whereas risks to economic growth had reduced, a possible reduction in concessional financing, foreign direct investment, and tourism inflows could dampen growth and widen the current account deficit, in addition to challenges presented by high international interest rates and the growing reliance on external financing on debt servicing.  

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