Rédaction Africa Links 24 with Uganda Monitor
Published on 2024-03-08 13:12:26
The Ministry of Finance’s Permanent Secretary and Secretary to the Treasury, Ramathan Ggoobi, recently announced that an additional $120 million (Shs470 billion) has been approved by the International Monetary Fund (IMF) as part of a post-Covid-19 recovery package. This financial support is expected to significantly bolster budget activities and the overall economy in Uganda.
During a press briefing in Kampala following the completion of the Fifth Review of the IMF Extended Credit Facility, Mr. Ggoobi emphasized the positive impact of the disbursement of the $120 million. He highlighted that this funding will play a crucial role in supporting various activities within the budget and the broader economy. He further stated that the IMF’s confidence in Uganda’s economic trajectory is evident through the successful conclusion of the Fifth Review and the subsequent disbursement of funds. This confidence is also shared by other development partners and foreign investors, leading to continued growth in foreign direct investment.
The Fifth Review under the Extended Credit Facility was finalized on March 6, with the IMF acknowledging the country’s ongoing broad-based economic recovery. However, the IMF also emphasized the need for further reforms to strengthen the economy. In June 2021, the IMF initially approved a $1 billion (Shs3.9 trillion) Extended Credit Facility for Uganda to facilitate its post-Covid-19 recovery efforts, aiming to increase household incomes, promote inclusive growth, and support private sector development.
The three-year financing package is designed to address the short-term impacts of the Covid-19 crisis and pave the way for a sustainable inclusive recovery by allocating resources to priority social spending, maintaining debt sustainability, enhancing governance, and fortifying the monetary and financial sector framework.
At the press briefing, Ms. Izabela Karpowicz, the IMF resident representative in Uganda, highlighted the accelerated economic growth, driven by factors such as declining inflation, investments in the construction of a new oil pipeline, and increased demand for services. The rebound in gold exports, tourism, and a decrease in inflation below the central bank’s target have further contributed to economic growth.
Despite these positive developments, the IMF noted that private sector credit growth remains sluggish. However, the banking system is deemed stable, with potential for credit growth expansion as the economy continues to recover. Economic growth is projected to reach 6 percent in the 2023/24 financial year, with expectations of a further increase to 7 percent in 2024/25 and the medium-term as oil production commences.
Ms. Karpowicz also highlighted potential risks to economic growth, including a reduction in concessional financing, foreign direct investment, and tourism inflows, which could potentially dampen growth and widen the current account deficit. Challenges such as high international interest rates and increased reliance on external financing for debt servicing also pose risks to the country’s economic stability.
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