Bad news: IMF is back

Poverty levels – measured by international ratings of US$1.25 earning per day per person – according to government statistics have declined to 19.7% in 2013 from 56.4% in 1993 – putting Uganda in the bracket of countries that met the target of the first Millennium Development Goal of halving poverty by 2015.

Still, Prof. Augustus Nuwagaba, an international consultant on economic transformation at Reev Consult Uganda told The Independent that Lagarde’s coming is a good opportunity for her to “touch and feel our volatile economy.”

According to him, the IMF should be considering expanding its role in Uganda.

“The IMF should consider giving short term financial support to Uganda given that development financing space is shrinking,” Nuwagaba said.

Lagarde’s visit comes when the IMF has just released a robust outlook for Sub-Saharan Africa from an estimated Year-on-Year growth rate of 1.6% in 2016 to a projected rate of 2.8% in 2017 and 3.7% in 2018.

Nuwagaba is referring to Largade visiting when Museveni is desperately looking for the IMF seal of approval to access more international debt. The World Bank and other lenders have withheld added funding to Uganda over failure by government departments to utilise already borrowed monies. At the last count, unused money amounted to Shs18 trillion.

Over the past few months, the country’s current account deficit has worsened from $216 million (Shs743 billion) to $358 million (about Shs1.2 trillion) during the quarter that ended in August 2016, according to BoU reports.

Similarly, the overall balance of payments deficit during the period was $19 million (Shs65.7 billion).

The debt burden has risen nine percentage points to 33% of GDP in the past four years, and is projected to continue rising towards 45% of GDP by 2020, according to the Moody’s Investors Service. It downgraded rating of the Government of Uganda to B2 from B1 in November last year.

Partly as a result of the squeeze on international borrowing, the Uganda government has been increasingly looking inwards for debt to finance its ambitious infrastructure, energy, and mineral development.

But at the end of its latest review mission to Uganda in October 2016, an IMF team led by Axel Schimmelpfennig, the Mission Chief met Museveni and raised concern about the government spiraling spending. It concluded that if public debt continued to grow at the same rate, Uganda faced real risk of defaulting.  That possibly is why Lagarde is visiting Kampala – to staunch a public liquidity crisis. The IMF is a strong advocate of manageable national debt as a precondition for earning its endorsement to other lenders or itself as lender of last resort.