Blog: Uganda’s US$491.5M Loan From IMF To Fight Covid19 Has Stringent Safeguards For Greater Accountability

Like other countries around in Africa and the rest of the world, Uganda’s economy and population have been hit hard by the coronavirus pandemic.

Uganda’s economy has no doubt shrunk in terms of domestic and foreign demands as well as supply disruptions.

Likewise, both foreign direct investment and personal remittances have sharply declined.

The IMF estimates that foreign direct investment, remittances, and tourism inflows to Uganda will decline by 45-50 percent compared to pre-Covid19 projections.

This means foreign direct investment in Uganda will drop to about US$600 million down from US$1.2 billion of FDI the country received in 2019.

The IMF also says that between 780,000 to 2.6 million Ugandans could fall into poverty due to the lockdown measures Uganda has instituted.

It is this context that Uganda secured a US$491.5 million loan from the IMF under the Rapid Credit Facity (RCF) for reinforcing healthcare, support the most vulnerable and generally stabilize the economy.

This RCF loan is zero-interest, with a grace period of five and a half years, and a 10-year maturity.

About 70 percent of the RCF resources will be used as a shock absorber to protect Uganda’s economy and reserves. The rest of the money will finance Uganda’s response to the COVID-19 pandemic in two ways.

The financial resources will support health care and fund social programs that are assisting the most vulnerable Ugandans.

Perhaps, the most innovative part of the US$491.5 million interest-free loan is the agreement between Uganda and the IMF on how to ensure that the money is used for the purpose it is intended.

Evidently, the Ugandan authorities committed to several transparency and accountability safeguards, including the following three measures:

First, Uganda is to report RCF funds received separately to allow easier tracking of resources;

Second, Uganda will publish all large procurement contracts funded by RCF money, together with the names of awarded companies and their beneficial owners; and

Third, Uganda will undertake an independent audit on the use of the RCF funds in one year and publish the results of the audit.

The audit will validate the delivery of the large procurement contracts funded by RCF money.

The US$491.5 million IMF loan is welcome and should be be appreciated by the people of Uganda for two reasons.

First, the loan is timely and will no doubt assist, as Uganda has been hit hard by the Coronavirus pandemic.

Second, the transparency and accountability safeguards adopted by Uganda are welcome. In the past, donor resources have been known to mysteriously disappear due to poor accountability.

With the noted safeguards, the resources will do nothing else but fight Covid19 in Uganda.

The author is an economist and senior citizen