IMF considering Uganda’s US$900m loan bid but…

The Ugandan government days ago announced it had run to the International Monetary Fund (IMF) for a loan facility of US$900 million that would help the country mitigate further effects of Covid-19, first confirmed in the country in late February 2020.

However as the loan negotiations take centre stage, this news website is reliably informed that the three-year package loan, which might be cut downwards, will come with stringent conditions attached by one of the world’s leading multi-lateral lenders.

“The exact final amount will depend on Uganda’s estimated balance of payments needs and the strength of policies the authorities commit to implement. And, of course, as is always the case, the ultimate approval of the arrangement rests with our Executive Board,” said IMF official Gerry Rice while holding a question and answer session with the media.

The IMF official said discussions about the matter were on-going between the IMF and the Ugandan government.  “I can tell you discussions have progressed well with details yet to be ironed out on the potential magnitude of that financial assistance and on the authority’s reform programme that would be the complement to any financial arrangement from the IMF.”

“And then as some of you may recall, the authorities requested and indeed obtained emergency financial assistance from the IMF last year. That was for about US$491 million, again, to help fight the crisis—part of our overall response to the crisis. Some 86 countries, as some of you may know, have received assistance from the IMF over the past year, Uganda was one of them.”

A development economics analyst when contacted for a comment on Uganda’s chances of getting the US$900 million said that IMF is about or has tasked the government of Uganda to account for US$491 million given to the country in emergence financial assistance as Covis-19 pandemic set in. “The government of Uganda will have to show how it used that money (US$491 million) before being given the latest credit (US$900 million),” he said.

Meanwhile, the Finance Ministry has already reported that as of December 2020, Uganda’s total debt stock stood at US$ 17.96 billion (Shs 65.83 trillion) indicating an increase from USD 13.3 billion (Shs 49.0 trillion) as at end of December 2019.

“Out of the total public debt stock, external debt constitutes a share of 64.98 percent equivalent to US$ 11.67 billion (Shs 42.6 trillion) whereas domestic debt constituted 35.02 percent equivalent to US$ 6.29 billion (Shs 22.9 trillion),” the ministry said.

The Shs65.83 trillion public debts indicate that each Ugandan owes creditors not less than Shs 1.2 million. The country is estimated to have 42 million people.

The rise in public debt is also hinged on increased external and domestic borrowing to address the socio-economic impact of Covid-19 and mitigate the negative effects of the economy.

A cursory look at debt to GDP (nominal)ratio for other countries (2020) show Kenya at 69 percent, Rwanda at 60 percent, Burundi at 69 percent, Tanzania at 38 percent, Ethiopia at 55 percent, South Africa at 77 percent, United Kingdom at 85 percent and United States of America at 98 percent.

Uganda’s major infrastructural projects that account for increase in debt include: Karuma hydropower project, Isimba dam, oil roads, expansion of Entebbe international Airport, meter and standard gauge railway, development of Kampala Industrial Park, among others.

Public debt which stood at 47.2 percent of GDP at the end of December 2020 is projected to remain sustainable for now, ministry’s officials say.

The ministry reported that the public debt is projected to rise to 51.9 percent to GDP in the financial year 2021/22 on account of borrowing to finance key infrastructure projects especially in transport, oil and gas sectors.

The country’s debt is projected to decline thereafter on account of increased domestic revenue as the government implements the domestic revenue mobilisation strategy which targets to increase domestic revenue to GDP by 0.5 percent points per annum.

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