The East-African nation’s debt has been under sharp focus recently, with international lenders and rating firms like IMF, World Bank, Moody’s and S&P downgrading its creditworthiness.
The World Bank and IMF have warned countries to ensure that their national debt never exceeds 50% of their GDP. This is because such high debt levels downgrade a country’s creditworthiness, leading to a higher interest rate whenever the government borrows, the effect of which is passed onto the final consumer.
In a meeting with MPs, the Deputy Governor Bank of Uganda, Michael Atingi-Ego, cautioned the Ministry of Finance against approving loans that do not spur the economy’s growth.
According to him, all commercial loans obtained by the government have a grace period of at least five years because there are a number of loans in the pipeline whose payment dates have matured, putting pressure on Uganda’s foreign reserves.
“We have a challenge that the debt service in the next two years is quite big. In the year 2022/23, we are spending close to $ 1.8 billion for government imports and debt service,” he added.
Commenting on the rise in national debt, Adam Mugume, executive director of Research and Policy at the Bank of Uganda, explained that the public debt contains external debt that stands at Shs47 trillion and domestic debt of Shs 33 trillion.
“The only challenge we have are indicators to assess whether we are able to pay,” Ating-Ego said.
The recently released parliamentary committee report on the national economy and the state of indebtedness, grants, and guarantees indicates that the money Uganda owes to different creditors shot up to USh69.513 trillion ($19.54 billion) by the end of the financial year 2020/21, from USh56.938 trillion in FY 2019/20.
According to economic experts, the country’s public debt has grown tremendously recently, largely pushed up by huge infrastructural projects and growing volatilities in the global market.