The International Monetary Fund staff agreed to provide a US$1B facility to Uganda, the lender’s second bailout to an African nation in four days to help the continent’s economies mitigate the impact of the coronavirus pandemic.
The loan to Uganda comes after the IMF staff on May 27 agreed to provide US$1.5B to the Democratic Republic of Congo over the next three years, and following the Fund’s provision of more than US$15B for sub-Saharan African nations since the pandemic hit the region in 2020. The latest deals need final approval by IMF management and its executive board.
The funds will help Uganda, Africa’s top coffee exporter, and Congo, the world’s biggest source of cobalt, recover from the pandemic that has reduced income and pushed 30 million across the continent into “extreme poverty.” The slow pace of vaccinations is also hampering recovery in nations across the region.
“We need the money,” said Julius Mukunda, executive director of Kampala-based Civil Society Budget Advocacy Group. “It’s concessionary borrowing and therefore terms are favorable” for Uganda, which needs to plug budget deficits, he said.
The government predicted a budget gap of 9.7% of gross domestic product for the year through June.
Uganda has seen a surge in virus infections over the past month, recording 614 new cases on May 30 and taking the total tally of confirmed cases to 47,761 and 362 deaths, according to the health ministry. The infection rate is 17.4%, compared with 1.5% on May 1.
“Covid-19 continues to pose risks,” IMF said in a statement approving the three-year facility to Uganda on Tuesday. “Weaker external demand and possible resurgence of containment measures linked to higher Covid-19 positivity rates are downside risks. It will be important to identify contingency strategies in case these risks materialize.”