(Ecofin Agency) - With an economy that experienced a historic decline in 2020, Uganda is seeking to mobilize external financing to boost growth, starting this year. As of May 2020, the country had already secured $491 million from the IMF in emergency assistance to address covid-119.

Uganda will receive $1 billion in funding from the International Monetary Fund (IMF). The information was reported in a June 28 IMF note.

According to the statement, the money will be disbursed under an extended credit facility (ECF) approved by the institution's Executive Board this week. The program aims to support the post-Covid-19 economic recovery and the national strategy to increase household income and inclusive growth with a focus on the private sector.

More specifically, the agreement aims to increase domestic revenues, promote public sector efficiency, and strengthen governance while laying the groundwork for sound oil revenue management. It will also strengthen monetary policy and financial sector frameworks as well as financial inclusion.

The deal comes at a difficult time for the Ugandan economy, whose growth has been slowed by covid-19, against a background of rising debt levels. Last year, the IMF estimates that the country recorded a 2.1% recession compared to 8% growth the year before. This recession coincided with an increase in public external debt from 25.5% to 31.3% of GDP.

“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,” said Deputy MD Tao Zhang.

Let’s note that the approval of this agreement allows for the immediate disbursement of about $258 million to support the Ugandan government's budget. According to the IMF, Uganda's economic growth for FY 21/22 is expected to reach 4.3% before returning to pre-pandemic rates of 6-7% in the mid-term.

Moutiou Adjibi Nourou