The International Monetary Fund (IMF) has approved the release of $491.5 million loan money to Uganda to respond to COVID-19, the Fund said in a statement in Washington D.C. on Wednesday.
At least 40 African nations have approached the IMF requesting for massive loans to combat COVID-19.
Just over a week ago, the IMF approved the humongous loan of $3.4 billion to Nigeria after similars loans to Ghana in West Africa and Ethiopia in the East.
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The loans are needed to fund government spending but there were fears the money could be stolen.
For Uganda, the IMF said the economy is “severely affected by the COVID-19 pandemic”, and the money would be used to address the urgent balance-of-payments and fiscal needs.
More specifically, the loan secured under the Rapid Credit Facility (RCF) “will help finance the health, social protection and macroeconomic stabilization measures, meet the urgent balance-of-payments and fiscal needs arising from the COVID-19 outbreak and catalyze additional support from the international community”, the IMF said.
Mr. Tao Zhang, IMF Deputy Managing Director and Acting Chair, the global COVID-19 pandemic is expected to “severely hit the Ugandan economy through several channels, with detrimental effects on economic activity and social indicators.”
He said the external and fiscal accounts are expected to deteriorate, creating substantial urgent external and fiscal financing needs.
“The IMF’s emergency financial support under the Rapid Credit Facility, along with the additional donor financing it is expected to help catalyze, will help address Uganda’s urgent balance of payments and budget support needs,” Zhang said.
He implied the loan money was justified because with the current climate, “a temporary widening of the fiscal deficit is warranted in the short term to allow for the implementation of the response plan.”
“Despite a temporary worsening of debt indicators and heightened vulnerabilities, public debt is expected to remain sustainable. The authorities remain committed to ensuring debt sustainability, including through their efforts to enhance revenue collection and strengthen public investment management,” he added.