Bank of Uganda’s Executive Director for Research, Dr Adam Mugume says if the 2021/2022 budget proposals are passed, the total outstanding debt of the country will rise to Shs86.9 trillion, which will be 52% of the GDP.
government remains adamant about the debt burden on the country, despite now
having exceeded the dreaded level of 50 % of the value of the economy (GDP),
according to the latest records.
countries in East Africa agreed with the International Monetary Fund (IMF)
three years ago to limit their levels of indebtedness to below 50% of GDP,
recognizing that beyond that, it would strain the countries to the extent of
failure to pay back.
that period, Uganda’s debt rose from 37% in 2017 to 41% of GDP in 2018/2019. In
that same year, the cumulative debt burdens for Kenya and Rwanda exceeded that
level and Uganda and Tanzania were continuously hailed for what was considered
‘prudent’ borrowing policies, though the IMF called for caution.
Uganda’s debt level remains at low risk of debt distress, Directors caution
that debt metrics had weakened, some investment projects may not generate the
envisaged return, and interest payments are rising”, said an IMF statement.
thus called on the authorities to keep debt below 50 percent of GDP over the
medium term to safeguard the favourable debt sustainability rating.
the outbreak of covid 19, parliament approved loans totalling 18.7 Trillion
($5.1 billion). This all came amidst objections from political leaders and
sections of the government, particularly the Bank of Uganda.
of Uganda’s Executive Director for Research, Dr Adam Mugume says if the
2021/2022 budget proposals are passed, the total outstanding debt of the
country will rise to 86.9 Trillion Shillings, which will be 52% of the
Mugume says that what worries people are the bilateral loans mainly from China,
but that these amount to only $3 billion. He says a bigger chunk of this is
borrowed from external sources, with 69% coming from multilateral development
partners, like the IMF and the World Bank, with long repayment period and low-interest
rates. He says that these are therefore easy to pay.
in: “These are loans…
Cue out: “…that is a burden.”//
Mugume gave examples of large economies like Japan whose burden in more than
200%, while others like Italy, the U.S, and South Africa have rationed
however says that debt repayment and payment of interest is from the tax
the government planning to spend more than 6 Trillion
financial year to pay back loans and interest, there is a need
for increased mobilization of tax revenue because, otherwise, other services
will be affected.
adds that what Ugandans should be concerned with is whether the loans are being
applied to productive sectors like infrastructure and others that add to the
country’s production capacity, which leads to debt sustainability.
//Cue in: “The first principle ….
Cue out:….used productively.”//
Mugume drew caution from Jason Rosario Braganza, the Executive Director of
AFRODAD (the African Forum and Network on Debt and Development), who said the
government should take caution how it spends money, especially where budgets
are not strictly followed, as well as on cases of corruption.
//Cue in: “It’s like comparing …
Cue out: …very careful here.”//
Debt Network Executive Director Julius Kapwepwe reasoned that the government
figures do not give the real picture of its indebtedness. He cites items, like
government guaranteeing loans, debts owed to local governments or even accrued
payments like land compensations and awards by the Uganda Human Rights
Commission, are not taken into account.
he adds that even if the government figures were correct, there must be a plan
to reduce the burden.
the contrary, even as the country pays debts, it is bent on continuing to
calls for a total cancellation of debts owed by Uganda and other poor African
countries because the initiatives like the Debt Service Suspension Initiative
offered by the G20, a group of rich lending nations, will not have much impact.
//cue in: “But also to not …
Cue out: … total debt cancellation”//
at a dialogue between the government and the civil society on Uganda’s rising
indebtedness, NGOs including the UDN, SEATINI and AFRODAD urged Uganda and
other African countries to take up the debt relief offer supported by the IMF
and the G20.
end of January, only three African countries had applied for this, while
others, including Uganda, are reluctant due to the expected consequences on
is feared that by going for debt relief, a country loses its sovereign rating
and it will be hard for it to get credit in future.
NGOs told the African countries to join efforts and tell off the credit rating
companies, which advise lenders on which county to lend to and how.
however advised the government to review its spending habits, especially on
public administration among others.