Uganda’s public debt shoots up

Uganda’s public debt has moved within 9 percentage points of the International Monetary Fund (IMF) risky threshold, according to the latest report of the Auditor General.

The latest figures show that the public debt has grown by 22% from Shs 33.9 trillion as of June 30, 2017 to Shs 41.5 trillion as at June 30, 2018.

This implies that at the time of the National Budget reading last June, there had been an increase of Shs 2.6 trillion since the figures that the Finance Minister Matia Kasaija presented to Parliament at the time put the public debt at $10.53 billion (Shs 38.9 trillion), of which $7.18 billion (Shs 26.5 trillion) external and $3.35 billion (Shs 12.4 trillion) was from domestic sources.

The report puts Uganda’s debt to GDP ratio at 41% which is  below the IMF risky threshold of 50% and compares well with other East African countries but unfavourable when debt payment is compared to national revenue collections.

According to the Auditor General John Muwanga, 50% of the loans sampled totaling Shs 3.98 trillion will expire in 2020.

“If Government is to service the loans as projected in the next financial years 2019/2020, it would require more than 65% of the total revenue collections which is over and above the historical sustainability levels of 40%,” the report states.

Interest payments domestic and external during the year amounted to Shs 2.34 trillion which is 17% of the total revenue collections, above the 15% limit set in Public debt management Framework 2013 which has been on the rise from the last four years.

“Although absorption of external debt has improved compared to last financial year, I noted some loans with absorption levels as low as 10% and below. An example is the USMID project with over Shs 95billion which is 95% still on the various abandoned works due to non-payment to contractors,” Muwanga stated.

“I noted that significant value loans have stringent conditions which could have adverse effects on Uganda’s ability to sustain its debt. These conditions include; waiver of sovereign immunity by government over all its properties and itself from enforcement of any form of judgment, adoption of foreign laws in any proceedings to enforce agreements, requiring government to pay all legal fees and insurance premiums on behalf of the creditor,” he added.

He further noted that although absorption of external debt had improved compared to last financial year, there are some loans with absorption levels as low as 10%.

A case in point is the Mbarara-Nkenda and Tororo-Lira power transmission lines that have delayed for almost 8 years resulting into cancellation of the loan by the funder with an undisbursed loan amount of $6.5 million (Shs 24 billion).

“Because of lack of a proper policy, tax incentives are given to investors without an accompanying budget. Close of financial year debts for incentives had grown by 83% of Shs153.6Bn up from Shs83.8Bn in the previous,” Muwanga noted.