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Invest Shs1.2tn IMF money in Covid-19 fight – CSOs

The group wants government to open up on the plan for this cash

Kampala, Uganda | THE INDEPENDENT | Government needs to open up on the recent allocation of the Shs1.2trillion International Monetary Fund’s Special Drawing Rights (SDRs) and invest in the fight against COVID-19 pandemic to boost economic recovery, according to civil society organisations.

SDRs are international reserve assets, created by the IMF in 1969 to supplement its member countries’ official reserves.  SDRs are not loans thus do not have to be repaid to the IMF and neither do they come with any conditionalities attached to them. Thus, governments are at discretion to use them as they see fit.

A new SDR issuance offers some form of debt relief to recipient countries especially the Low-Income Countries (LICs) as they can now use such resources to meet their public spending needs without having to acquire any new loans.

So far, SDRs equivalent to US$281 billion have been allocated to IMF members, including SDR US$182.6 billion that was allocated in 2009 in the wake of the global financial crisis.

On Aug.23, Uganda as an IMF member, received about $346 million (Shs1.2tn) which is believed to be now in the custody of the Bank of Uganda, according to SEATINI Uganda, Oxfam, Uganda Debt Network and Civil Society Budget Advocacy Group.

Experts say, the central government has two options on investing this money – one is to keep these resources as reserves at the Central Bank and thus rely on them to influence monetary policy and ensure macroeconomic stability.

The other is that the resources could be exchanged for hard currencies such as the dollar, pound, or Euro and then get channelled to the finance ministry for budget support.

Critical observations, recommendations 

“It is however our observation that the debate on the proper and transparent use of these resources and consequent accountability have been left solely to the discretion of the Central Bank and a few technocrats within the finance ministry with limited involvement and dialogue with other key players within civil society, the media and Parliament,” CSOs said in a joint statement earlier this week.

They added, “This therefore puts these resources at risk of mismanagement or having them used for other purposes that may not be key at the moment.”

This comes as the country is indebted to a tune of Shs.70trillion and debate continues on whether this debt will be paid as per the plan.

CSOs recommends that the Bank of Uganda exchanges these resources into freely usable currencies like the dollar and channel them to the finance ministry for budget support rather than keep them on its central bank balance sheet.

They said, priority on utilization of these new funds should be placed on procuring vaccines and critical medical and protective equipment; injecting more money into the real economy; supporting micro small and business enterprises; providing adequate social welfare support through programs such as direct cash transfers among others.

They add that the Central Bank and the finance ministry should hold dialogues with Civil Society, media, Parliament and the general public to collect their views on the proper and transparent utilization and management of these resources.

Additionally, Bank of Uganda should publish regular reports on the use of these resources and that the newly acquired SDR funds should not be used for any repayment of debts owed to creditors. The government should seek debt relief from her creditors to save resources necessary to fight the pandemic.

CSOs also say that Parliament should play a stronger oversight role and ensure that these funds are used prudently.

They added that the IMF should support transparency efforts on the proper utilization of the newly issued SDR resources and other loan resources.

“IMF should also encourage the Ugandan government to take advantage of debt relief under the provided initiatives such as the G20 Debt Service Suspension Initiative,” CSOs said.

They are also recommending that the wider civil society engages parliament and the general public to raise their awareness on these resources and the need for them to track their proper use.

They also suggested a critical systemic reform of the IMF and World Bank governance to ensure global equity when it comes to allocation of these resources.

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