Uganda records Shs 31trillion public debt growth in 10 years

The debt burden on Ugandans has reached alarming levels, but the government borrowing will not stop owing to the shrinking local sources of revenue.

According to a statement tabled before Parliament by the State minister for Planning David Bahati, as at June 30, Uganda’s total Public debt stock which comprises of both domestic and external stood at $10.7bn (Shs 41.3trillion).

The figure represents an increase of $7.8bn (Shs 29 trillion) over the last ten years.

By the end of the 2006/07 financial year, the stock of public debt stood at $2.9 bn (Shs 10 trillion) when the country benefited from the Multilateral Debt Relief Initiative (MDRI), to the current $10.7bn as at the end of the last financial year.

This is attributed to the changing government budget priorities.

“Over the last 10 years, the government budget priorities have grown, which has necessitated an increase in the level of government debt since the our tax revenue effort has remained stagnant, it has left no option for government to finance its programme in order to achieve its objectives as set out in the national development plans and the NRM manifesto other than by debt,” Bahati told Parliament.

The external debt disbursed and outstanding accounts for 67.2% which is $7.2bn (Shs27.9 trillion) while the domestic debt accounts for 32.4% which is $3.5bn (Shs13.4 trillion).

The present value of the public debt to GDP increased from 27.4% as at end June, 2017 to 30.8% in June 2018.

By March this year, Uganda’s public debt stood at 38.6% of GDP but and will “raise slightly as we incur more debt to finance government infrastructure priorities.”

Bahati told Parliament that government is committed to ensuring that debt does not exceed the 50% threshold that was agreed upon under the East African Monetary Union convergence criteria.

A greater share of Uganda’s debt disbursed and outstanding is sourced from multilateral creditors like the World Bank, African Development Bank, Islamic Development Bank and it accounts for 68.2% whereas bilateral creditors like Japan, France accounts for 31.1% while money owed to commercial banks accounts for 0.7% of the total external debt portfolio as at June 30.

The share of Treasury Bills to Treasury Bonds has improved to a ratio of 26:74 in June 2018 from a ratio of 31:69 in June 2016, achieving the target share of Treasury Bills to Treasury Bonds of 30:70 under the 2013-2018 Public Debt Management Framework.

In terms of Currency composition, 92% of Uganda’s stock of external debt is in four major currencies including the US dollar, Chinese Yuan, Japanese Yen, and Euros while domestic debt on the other hand is all in denominated in Uganda Shillings.

Energy, Works and Agriculture are the biggest beneficiary sectors of the borrowing which Bahati said is consistent with the government strategy to reduce the cost of doing business, develop infrastructure to boost growth, energy for support industrial development.