Tao Zhang, Deputy Managing Director and Acting Chair, IMF
The International Monetary Fund (IMF) has approved a 36-month loan arrangement under the Extended Credit Facility (ECF) for Uganda to a tune of US$1Billion equivalent to Shs3.553Trn to support the post-COVID-19 recovery.
The loan will also be used by Government to increase households’ incomes and inclusive growth by fostering private sector development.
While justifying the loan, IMF noted that Uganda’s economy was hit hard by the COVID-19 crisis which saw the decade-long gains in poverty reduction reversed, fiscal balances have deteriorated, and pressures on external buffers have intensified.
The Fund added that although Uganda is experiencing a mild recovery in some sectors, the outlook remains highly uncertain, with risks tilted to the downside, including from a resurgence of tighter containment measures linked to higher COVID-19 positivity rates.
Tao Zhang, Deputy Managing Director and Acting Chair, IMF defended the loan facility saying 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.
He said the loan is intended to keep 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.
“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,” Zhang.
The IMF also urged Government to ensure close attention is 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.
It should be noted that the Executive Board of the International Monetary Fund (IMF) in May 2020 approved a disbursement of SDR361 million (about US$491.5 million or Shs1.86 trillion) for Uganda under the Rapid Credit Facility (RCF).
Ausi Kibowa, Policy Analyst at civil society group, Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI), while reacting to the loan facility said the loan is necessary because Government isn’t in position to raise enough revenue to find its critical sectors.
He said, We can’t say we don’t need this loan at this moment, remember we are already in a financial crisis we can’t be able to tax enough revenue to finance the provision of health care and other critical services. So the only option we have is to take on this loan. Personally, I see this loan as critical, needed at this moment. First of all, it is a cheap loan, coming at 0% interest and the reason IMF is giving us this loan is that we don’t go to borrow expensively from our domestic lenders.”
He however warned about the short repayment period, noting that failure by Government to meet its obligation would force it suffocate funding to sectors like health and education in order to pay the loan.
Kibowa said, the only challenge I see is maybe the repayment period, we have to pay this loan within 10years. If the Government doesn’t sufficiently use these resources, at the time of repayment, we shall be pushed into a situation where we are struggling to pay that money and that will come at sacrifising the provision of health care.”
However, following the new loan approval, a number of Ugandans have reacted angrily at the IMF, saying the Fund has betrayed them.
Kibowa also defended Ugandans protesting the IMF loan arguing that most times when lenders put conditions like demanding audits and publications of procurement plans for these loan facilities, no action is taken against the perpetrators.
Stanley Kafuuko, one of the angry Ugandans took to Twitter and wrote, “Ugandans have been betrayed by IMF.What a shame! Its hypocritical for IMF to allocate more funds to a regime which received over $1B in 2020 for Covid relief which was instead embezzled, misdirected towards military suppression of opposition political supporters. (Ugandans).”
Kizito Lubambula didn’t hide his anger towards IMF stating, “@IMFNews is not naive! They know exactly how this money is mismanaged. They know exactly how it will be diverted. They know exactly that the rosy and hypocritical justification for the funds is a total scam! But they go ahead because they’re ECONOMIC HITMEN!
ODIOUS DEBT IT IS.”
Another Twitter user, JB Muwonge remarked, “For so long That’s how the west has been supporting Dictatorship in Africa particularly Uganda.
They don’t care about what citizens have to say. All they care about is their returns, their interests. They are anti- Human rights. That’s IMF for you. Plus World bank as well.”
Joseph Muwonge too didn’t shy away from expressing displeasure, calling for an investigation into motives by IMF towards Uganda arguing that there’s no justification to give a regime that only recently sought loan forgiveness and rescheduling & which mis-appropriated & embezzled $1 billion in Covid funds granted by IMF and WorldBank in 2020.
An angry Muwonge wrote, “Covid loans were misappropriated and embezzled to such an extent that Ugandans are dying of Covid in droves due to lack of oxygen & ICU beds in hospitals. There are only 218 ICU beds in a country of 45 million citizens.”
The IMF loan comes at the time, Auditor General, John Muwanga released an audit report in March 2021, into the management of Covid funds highlighting a number of shortcomings into how public entities implemented the measures were however also noted in the way entities these measures.