## Supporting Uganda's Recovery from the Crisis

_IMF News, July 12, 2021_

## Source details

**Canonical URL:** [Supporting Uganda's Recovery from the Crisis](https://www.imf.org/en/news/articles/2021/07/01/na070121-supporting-ugandas-recovery-from-the-crisis)

## Other formats

- [Markdown version](/en/news/articles/2021/07/01/na070121-supporting-ugandas-recovery-from-the-crisis/index.md)
- [Structured JSON version](/en/news/articles/2021/07/01/na070121-supporting-ugandas-recovery-from-the-crisis/index.json)
- [Bundle manifest](/en/news/articles/2021/07/01/na070121-supporting-ugandas-recovery-from-the-crisis/bundle-manifest.json)

## Bibliographic details
- Published: July 12, 2021

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### Program overview and financing terms
- The IMF has approved a three-year financing arrangement for Uganda under the Extended Credit Facility (ECF).
- Loan amount: about $1 billion, disbursed in tranches.
- Loan terms: zero-interest rate; grace period of 5½ years; final maturity of 10 years.
- First disbursement: around $258 million when the program was approved in June of this year.
- Disbursements are subject to half-yearly reviews of the government’s progress in implementing its economic reforms.
- Available funds will be used to finance the budget.

### Economic context and immediate impacts of the pandemic
- Pre-pandemic average economic growth: about 6 percent.
- Real GDP growth halved to only 3 percent in fiscal year 2019/20.
- Per capita income growth had started to slow before the pandemic because of high population growth.
- Poverty is estimated to have increased by 7.5 percent nationally by early 2021.
- A second wave of the pandemic triggered a new lockdown in June, expected to exacerbate already high unemployment and financing constraints.

### Program objectives and policy emphasis
- Main goals: support Uganda’s recovery from COVID-19, counteract crisis effects, and generate more inclusive, sustainable growth through private sector development.
- Fiscal consolidation is required to create space for the private sector while improving spending composition, maintaining debt sustainability, and strengthening governance.
- The program builds upon reforms in the authorities’ National Development Plan.
- Consolidation approach: broad-based fiscal consolidation in the first year, with adjustment driven mostly by an increase in domestic revenues in subsequent years.
- The increased fiscal resources will allow higher priority social spending, including on vaccines and protecting vulnerable households, and will facilitate more efficient investment in infrastructure.
- Monetary policy stance: accommodative given subdued inflation and growth below potential.
- Strengthening measures: stronger financial sector and robust governance to support the fiscal strategy.

### Growth outlook and fiscal projections
- Projected growth for fiscal year 2021-22: around 4.3 percent.
- Expected return to pre-pandemic levels: around 6 percent by fiscal year 2022-23.
- Fiscal strategy aims to reduce the country’s deficit and put public debt on a declining path, moving closer to the target of 50 percent of GDP.
- Strategy relies on higher domestic revenue, including from a broader revenue base.
- Social spending is budgeted to be higher while also contributing to deficit reduction.

### Governance, transparency, and safeguards
- Authorities committed to strict governance measures to ensure appropriate use of resources.
- Under the earlier IMF Rapid Credit Facility (RCF) loan, authorities:
  - Reported COVID-19 spending (and cash releases for fiscal year 20/21).
  - Published on-line summaries of large COVID-19-related procurement contracts (above USh500 million for works contracts, and above USh200 million for goods and services), together with the names of awarded companies.
  - Published an independent audit of COVID-19 expenditures for fiscal year 2019/20.
- A special audit of COVID-19 spending related to the first three quarters of fiscal year 2020/21 was finalized in June this year; it will be discussed in Parliament and updated when end-year results become available.
- New measures going forward:
  - A new procurement template for COVID-19 projects including information on beneficial owners of awarded companies.
  - A stronger asset declaration regime.
  - Enhanced scrutiny of financial transactions of politically exposed persons.
  - Financial sector supervision that is risk-based and focused on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).
- These reforms could contribute to Uganda's exit from the Financial Action Task Force’s (FATF) “grey list” of jurisdictions with deficiencies in AML/CFT frameworks.

### Social spending safeguards and monitoring
- First objective: protect livelihoods in the near term and secure sufficient funding for human capital development and job creation for a rapidly growing population.
- Fiscal year 2021/22 budget includes financing for COVID-19 vaccines and ring-fenced resources for social protection, education and health.
- Social spending is monitored under the program through two indicative targets that set minimum amounts for total social spending and targeted social assistance programs.

*International Monetary Fund*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Read the report](https://www.imf.org/en/Publications/CR/Issues/2021/06/30/Uganda-Request-for-a-Three-Year-Arrangement-Under-the-Extended-Credit-Facility-Press-461347)
- [Read the press release](https://www.imf.org/en/News/Articles/2021/06/28/pr21197-uganda-imf-executive-board-approves-ecf-arrangement-for-uganda)
- [Uganda and the IMF](https://www.imf.org/en/Countries/UGA)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/07/01/na070121-supporting-ugandas-recovery-from-the-crisis_