Image by IMF Photo/Esther Ruth Mbabazi
  • Briefing
  • 23 December 2021

Uganda’s loans from international financial institutions (IFIs), 2018–2021

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Donor agencies are an important source of the financial resources that are helping Uganda address revenue shortfall in the face of economic shocks amid efforts to contain the spread of Covid-19 and mitigate its negative impacts.

Between 2018 and 2021, donor aid to Uganda has been a blend of both grants and loans. Grants from bilateral donors remain the most significant source of aid to Uganda; however, evidence from our recent analysis on aid flows to Uganda before and during Covid-19 revealed that the overall profile of official development assistance (ODA) to the country is switching. Uganda now receives an increased proportion of concessional loans, as key international financial institutions (IFIs) lend significantly increased loan disbursements to Uganda.[1]

This briefing presents in-depth analysis of the loans advanced to Uganda from January 2018 and until the end of June 2021 by three key IFIs (the African Development Bank (AfDB), the International Monetary Fund (IMF) and the World Bank). The analysis assesses trends, lending terms, targeting (sector focus) and debt sustainability.

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Box 1

Important note about the aid data used in this briefing

In this paper, we look at loans to show what funding has crossed into Uganda and how activities on the ground are affected.

This analysis uses data published by donors to the International Aid Transparency Initiative (IATI) – a major source of near real-time disbursements of aid. The data in this briefing comprises all loan disbursements made by a consistent set of donors to all sectors, from January 2018 up to and including June 2021. The assessment did not consider loans from bilateral lenders, particularly China, which does not publish the terms and volumes of loans.

Not all donors publish to IATI (for example, the IMF has not published data to IATI since 2018 and so this study relied on the limited loan information published on its website). Our analysis focuses on how disbursements have changed, rather than total flows.

It is possible that more loans made in 2020 and 2021 will be published to IATI after this briefing; however, this is likely to have minimal impact on the findings based on the publishing habits of donors to date.

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Key findings

The following findings are drawn from analysis of aid flows from three key IFIs (the African Development Bank (AfDB), the International Monetary Fund (IMF) and the World Bank) between January 2018 and June 2021 (inclusive). For more information about the data, see our box on the data used in this briefing.

  • The financial strain linked to the impact of the Covid-19 pandemic has resulted in a significant increase in the disbursement of loans from IFIs. For instance, loan disbursement to Uganda increased by 36% from 2018 to 2019, and by 192% from 2019 to 2020 (see Figure 1). The change from 2020 to 2021 cannot be accurately estimated because the data for 2021 is incomplete.
  • More than half (56%) of the total loans disbursed in volume terms during the period under review were from new loan commitments and disbursements from the World Bank and IMF in 2020 and 2021 alone (see Figure 1). The rest included disbursement from old loan commitments made earlier.
  • The World Bank, Uganda’s biggest lender, advanced a total of US$1.4 billion to the country: 50% of the loans disbursed by the three IFIs from January 2018 to June 2021. The World Bank substantially increased loans made in 2020, compared to 2018 and 2019 (see Figure 2).
  • The governance and security sector was the biggest beneficiary of these loans. Allocations to the sector increased significantly, by 1,433% from 2018 to 2019, and by 450% from 2019 to 2020 (see Figure 4) mainly as a result of the World Bank’s disbursements to the Uganda Covid-19 Economic Crisis and Recovery Development Policy project.
  • During the pandemic, there has been no change in sector focus towards the health sector, which was not prioritised by IFIs during the period under review (see Figure 4).
  • The IMF disbursed loans under the Rapid Credit Facility and the Extended Credit Facility, in 2020 and 2021 respectively. These were targeted at cushioning Uganda from the pandemic’s economic shock.
  • The AfDB’s lending focus was on pro-poor sectors such as infrastructure, education, and water and sanitation (which have long-term impacts) and the agriculture and food security sector (which have short- to medium-term impacts) – see Figure 7.
  • The IMF and World Bank lending rates to Uganda for ODA have historically been below market rates (concessional). This trend has continued during increased lending in 2020 and 2021 (when all loans were concessional).
  • The World Bank maintains its budget support reform conditions on loans linked to the Covid-19 crises, yet many of these reforms are focused on the World Bank’s long-term reform agenda and not directly relevant to the Covid-19 crisis.
  • The IMF is routing much of its Covid-related loans through programmes with little to no conditionality.
  • New IFI loans are adding to Uganda’s debt problem. However, most of Uganda’s non-concessional loans come from domestic borrowing. Recent growth in domestic borrowing has contributed much of the increase in public debt.
  • In May 2020 the IMF and World Bank maintained that Uganda’s debt was sustainable, with a low risk of external and overall debt distress under the Covid-19 pandemic macroeconomic framework.[2] However, there are growing concerns among local actors over high debt levels and in June 2021 the IMF warned that Uganda’s high debt burden had caused multiple indicators to breach their indicative thresholds under stress tests.[3]

Download the full briefing: Uganda’s loans from international financial institutions (IFIs), 2018–2021