IMF Executive Board Approves US$1 billion ECF Arrangement for Uganda

IMF News, June 28, 2021

Source details

Canonical URL: IMF Executive Board Approves US$1 billion ECF Arrangement for Uganda

Approved a 36-month arrangement under the Extended Credit Facility (ECF) for Uganda equivalent to SDR722 million (200 percent of quota or about US$1 billion).
Approval enables immediate disbursement of about US$258 million, usable for budget support.
This follows Fund emergency support under the Rapid Credit Facility (RCF) in May 2020 of SDR361 million (100 percent of quota or US$491.5 million).

The COVID-19 pandemic reversed decade-long gains in poverty reduction, deteriorated fiscal balances, and put pressure on external buffers.
A mild recovery is underway in some sectors.
Economic growth in FY 21/22 is expected to reach 4.3 percent before returning to pre-pandemic rates of 6-7 percent in the medium term.
The outlook remains highly uncertain, with risks tilted to the downside, including from a resurgence of tighter containment measures linked to higher COVID-19 positivity rates.

The three-year financing package will:
- Support the short-term response to the COVID-19 crisis.
- Help sustain a post-crisis inclusive recovery.
Reforms will focus on:
- Creating fiscal space for priority social spending.
- Preserving debt sustainability.
- Strengthening governance.
- Enhancing the monetary and financial sector framework.
The authorities’ program, enshrined in the third National Development Plan (NDPIII), is built around:
- Private sector-led inclusive growth.
- Public sector reforms to strengthen governance and transparency.
- Multi-year fiscal consolidation while increasing priority and high-quality infrastructure spending.
Specific program measures cited:
- Increase domestic revenue (Domestic Revenue Mobilization Strategy).
- Foster public sector efficiency and strengthen governance, including preparing the ground for sound management of oil revenues.
- Better management of public investment, control of domestic arrears and advances in cash management.
- Strengthen the monetary policy and financial sectors frameworks while fostering development, including through financial inclusion.

Fiscal policy:
- Fiscal consolidation in the first year should be appropriately based on both revenue and expenditure measures to stabilize the public debt ratio while increasing social spending, including for vaccines.
Debt management:
- Prudent debt management is important to reduce vulnerabilities, given Uganda’s moderate risk of debt distress.
- Seek concessional financing and pursue relief under the Debt Service Suspension Initiative.
- Contingency plans should be in place to help mitigate risks.
Monetary and financial sector policy:
- An accommodative monetary policy stance remains appropriate.
- The exchange rate should continue to function as a shock absorber.
- Efforts to increase central bank independence should be sustained.
- Consider flexible use of banks’ capital buffers to address COVID-19 uncertainties.
- Minimize financial stability risks through strict adherence to accounting and prudential standards, and modernize the banking resolution and emergency liquidity assistance frameworks.
Governance and inclusion:
- Advance governance reforms to support transparency and private sector development.
- Further enhance the AML/CFT framework and strengthen the accountability of high-level officials.
- Promote human capital development and financial inclusion, including through wider credit bureau coverage and collateral requirements.
- Accelerate digitalization to enhance development and inclusion efforts.

SDR722 million (200 percent of quota or about US$1 billion) — ECF arrangement amount.
About US$258 million — immediate disbursement enabled by the ECF approval.
SDR361 million (100 percent of quota or US$491.5 million) — RCF support in May 2020.
36-month — duration of the ECF arrangement.
FY 21/22 growth expected to reach 4.3 percent.
Medium-term growth expected to return to 6-7 percent.

IMF Press Release No. 21/197, June 28, 2021.