IMF Relaxes Lending Restrictions to Uganda

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Uganda can now receive cheaper loans from the International Monetary Fund, thanks to the new policy changes targeting low incomes countries.

The Ugandan government has over the past three years limited its borrowing from the IMF, because of the high interest rates and other charges before the loan can be accessed.

In 2009, the IMF increased its lending to low income countries from around one billion dollars per year, to nearly four billion dollars per year.

Government has been borrowing loans from the Islamic Development Bank and Africa Development Bank, some Arab countries and China which have relatively less stringent terms and conditions.

But Caroline Atkinson, the International Monetary Fund External Relations Director, says that Uganda can now access loans at zero cost for two years on all new and existing loans.

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Atkinson says IMF has also developed new ways of lending in response to criticisms that it has not been flexible in its lending terms.

Atkinson, who is in Uganda for a meeting with finance and other policy bodies, says the IMF loans will now be offered at more flexible terms in line with the conditions in the country.

The government has until recently been receiving only technical support from the IMF under the Policy Support Instrument.

The Policy support instrument enables the IMF to help countries like Uganda to design effective economic programs with out necessarily receiving money.

Rose Akol the National Economy Committee of parliament Chairperson has described the latest move by IMF as a good opportunity. She however noted that the cheaper loans may still not be accessed because of some conditionality.

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Tindamanyire Kabondo, the Parliament Finance Committee Chairperson, says IMF policy change towards to Uganda and other African countries is inevitable, because of the competition from China and Institutions offering pro-poor financing.

The IMF has until recently prioritized its lending to more developed economies, most of which were hit by the global financial crisis.