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Parliament Cautions Gov't on New Debt

In its report to parliament accessed by Uganda Radio Network on the Finance Sector budget for the coming financial year, the Finance Committee chaired by Rubanda East MP, Henry Musasizi asked government to maintain a high degree of debt sustainability.
27 Apr 2019 15:11
Parliament's Finance Committee Chairperson Henry Musasizi.

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Parliament’s Finance Committee has cautioned the government against taking on a new debt after the implementation of several projects that have been funded by loans.

Some of the flagship projects cited by the committee are the power generation plants at Isimba and Karuma, the development of Kabaale International Airport and the construction of Entebbe Express High Way, among others.

In its report to parliament accessed by Uganda Radio Network on the Finance Sector budget for the coming financial year, the Finance Committee chaired by Rubanda East MP, Henry Musasizi asked government to maintain a high degree of debt sustainability. 

According to the committee, Uganda’s total debt as at December 2018 was Shillings 43.3 trillion of which domestic debt was 14.5 trillion while external debt was Shillings 28.9 trillion. 

This is up from the Shillings 33.9 trillion reported figure by Auditor General John Muwanga as of June 30, 2017. The figure was carried in his 2018 report presented to Speaker of Parliament Rebecca Kadaga in January. 

Musasizi says that with Uganda’s current debt Gross Domestic Product (GDP) ratio standing at 41.2 per cent, the country has less than 9 percent to the maximum debt as recommended by the International Monetary Fund. 

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Despite cautions to government to watch out for new debts, Musasizi says that Uganda's Public Debt still remains well below the threshold of 50 percent Debt to GDP ratio contained in the Charter for Fiscal Responsibility and the East African Community (EAC) Monetary Union Protocol. 

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But the Auditor General in his report to Parliament said that Uganda’s borrowing was worrying warning that the figure is unfavourable when debt payment is compared to the country’s revenue collection. 

Muwanga expressed concern that more than a half of the loans sampled totalling to Shilling 3.98 trillion will expire in 2020 and that, if government is to service the loans as projected in the current financial year 20182019 and next financial year 2019/2020), it would require more than 65 per cent of the total revenue collections, a figure that is over and above the historical sustainability levels of 40 per cent. 

Musasizi says that the current debt stock composition by creditor type for the external debt is dominated by multilateral creditors with 65 percent, bilateral creditors hold 34 percent of the stock, and commercial creditors have 17 percent share. 

On the other hand, Treasury bonds constituted the biggest share of the domestic debt stock in the ratio of Treasury Bonds to Treasury Bills of 75:25 in December 2018.

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