By William Kalema
The Executive Board of the International Monetary Fund (IMF) has agreed to give Uganda an interest-free loan of one billion US dollars, repayable over a period of 10 years.
The IMF Board reached the decision on June 28, 2021, to give Uganda the lifeline support as a way to prop up the economy battered by the COVID-19 pandemic.
The interest-free loan is a major achievement considering recent trends that showed Uganda was increasingly failing to get cheap or concessional loans for social programs from multilateral lenders.
The financial assistance is however pegged on some strict transparency and accountability measures including publications of expenditures, regular publication of assets owned by key government officials.
The IMF, through its website also referred to as the Fund, says the money will be released in three tranches over a period of three years with the primary aim of boosting the government’s social spending without worsening it’s debt problem or crowding out the private sector.
IMF says: “The government aims to increase priority social spending while keeping debt sustainable. It aims to strengthen public financial management, fortify the banking system, and advance structural reforms, including in governance. These changes will help private sector development and generate more inclusive growth.
It adds: “The central objective of the authorities’ reform program supported by the IMF’s Extended Credit Facility (ECF) is to boost recovery from the COVID-19 pandemic, while generating strong and inclusive private sector-led growth. The budget deficit and debt will be reduced over time (as the COVID-19 shock eases) through higher government revenue. Meanwhile, greater public sector efficiency will ensure increased spending on social programs, including on health, education, and social assistance.”
The Fund says Uganda’s debt position remains sustainable even though the country has recently substantially increased its appetite for loans including another huge loan obtained again from IMF worth $491.5 million.