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Monday July 4, 2011
The World Bank on Thursday approved credit worth $50m (sh130b) to finance Uganda’s national budget.
Chris Kassami, the finance ministry’s permanent secretary and secretary to the treasury, said the fund would complement resources for the national budget for the fiscal year 2011/12.
According to Kassami, the money will be used to finance infrastructure and other priorities of government, including deepening the financial sector.
“This credit will be disbursed into the consolidated fund and the Government will have flexibility to allocate it to finance its priority expenditures using our own country systems,” he said.
The funding follows the approval of Uganda’s Policy Support Instrument review by the IMF board on Thursday.
“These developments are a clear manifestation of the positive economic outlook and credibility of the economic reform programme aimed at improving the investment climate and reducing the cost of doing business,” said Kassami.
He said the basic indicators that Uganda’s economy is healthy were having fiscal policies that are in line with macroeconomic policies and having budget priorities that are in line with growth and commitment to reduce inflation.
Uganda’s inflation, which hit a record 16% in May, had at the end of June slowed down to 15.8%, according to the Uganda Bureau of Statistics.
Kassami’s deputy, Keith Muhakanizi, said the economy of Uganda is still strong despite the past turbulence caused by the high food prices and the exchange rates.
“Despite high prices and exchange rate, the economy has continued to grow at 6%. The inflation rate is going down and I think we should take heart because the future looks bright,” he said.
He admits these issues are still a challenge, but is optimistic that the situation will calm down as donors release funds, which will have an effect on the exchange rate.
Kassami also said resources from the credit would boost our foreign reserves and assist in stabilising the exchange rate.
The shilling started depreciating swiftly nearly two weeks ago and hit a record high of sh2,725 against the dollar on Wednesday, before the Bank of Uganda intervened.
About $40m (sh99b) was sunk into the economy to save the depreciating shilling. At the end of the financial year last week, more dollars were sold to commercial banks to strengthen the shilling.
Kassami said the Government was optimistic that the World Bank would approve the 9th Poverty Reduction Support Credit worth $100m (about sh260b) in the first half of this financial year.
“This credit in the form of general budget support will be in recognition of Uganda’s continued efforts towards improving service delivery and poverty reduction,” he said.
The World Bank has provided about $6.5b (about sh17 trillion) in loans and grants to Uganda since 1963. It has also committed $1.2b (sh3 trillion) to finance various programmes and projects between 2009 and 2011.
The bank’s current portfolio in Uganda consists of 20 IDA-financed projects with a net commitment of about $1.5b (about sh4 trillion).
A source at the World Bank confirmed the approval, but declined to give details.
“Yes, the World Bank board has approved $50m as Uganda financial sector development policy credit. This will be budget support for the development of the pension sector,” the source said.
Public service has been struggling to raise money to offset the growing pension arrears, which are estimated at sh65b by the end of last month.
It is estimated that every month, the ministry gets 450 new pensioners, which means about 5,400 pensioners every year.
Pension is a payment made to a retired civil servant based on years of service and their salary scale.
By Mary Karugaba and Chris Kiwawulo: The New Vision Newspaper
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