The IMF board on Monday approved a $1 billion, three-year loan for Uganda to help the African nation recover from the economic crisis caused by the Covid-19 pandemic.
The new aid provides $258 million immediately to help the government cover spending, and comes on top of an emergency loan of nearly $500 million last year, the International Monetary Fund said in a statement.
The pandemic upended years of progress in reducing poverty, but the Washington-based crisis lender noted a modest recovery underway even amid continuing uncertainty and risks to the outlook.
"Uganda's economy has been severely impacted by the COVID-19 global pandemic, which reversed decade-long gains in poverty alleviation and opened up fiscal and external financing gaps. The authorities' program, supported by a new arrangement under the Extended Credit Facility, focuses on keeping public debt on a sustainable path while improving the composition of spending and advancing structural reforms to create space to finance private investment, foster growth and reduce poverty.
"Fiscal consolidation, appropriately based on both revenue and expenditure measures during the first year of the authorities' program, seeks to stabilize the public debt ratio while increasing social spending, including for vaccines. The implementation of the authorities' Domestic Revenue Mobilization Strategy, better management of public investment, control of domestic arrears and advances in cash management will support the fiscal strategy.
"Prudent debt management is important to reduce vulnerabilities, particularly given Uganda's moderate risk of debt distress. Every effort should continue to be made to seek concessional financing and pursue relief under the Debt Service Suspension Initiative. Contingency plans put in place would help mitigate risks.
"An accommodative monetary policy stance remains appropriate and the exchange rate should continue to function as a shock absorber. Efforts to increase central bank independence should also be sustained. Flexible use of banks' capital buffers should be considered to address uncertainties surrounding the COVID-19 pandemic. Close attention should be paid to minimizing financial stability risks, including through strict adherence to accounting and prudential standards, and modernizing the banking resolution and emergency liquidity assistance frameworks.
"Advancing governance reforms remains crucial to support transparency and private sector development. The authorities have made progress in publishing information on audits and the use of COVID-19 funds, but further work is necessary to enhance the AML/CFT framework and strengthen the accountability of high-level officials. Promoting human capital development and financial inclusion, including through wider credit bureau coverage and collateral requirements will further support the authorities' inclusive growth agenda. Accelerating digitalization would enhance these efforts."
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