Growing debt risks scaring away financiers - Moody’s

Kampala. Uganda is increasingly becoming unappealing to financiers due to growing debt, Moody’s, an international rating agency, has said.
In a report published this week, the US-based rating agency said Uganda’s growing debt, which now stands in the excess of Shs37 trillion, is exposing the country to a toxic business environment that is unfriendly to financiers.
“Increasing debt burdens … even when linked with public investment aimed at enhancing growth and generating foreign exchange … weighs on our overall assessment of credit quality in … Uganda,” said David Rogovic, the Moody’s assistant vice president, analyst and co-author of the report.
“The ability to contain any further rise in debt burdens for the foreseeable future, and direct limited domestic resources toward productive uses will be important credit considerations,” he added.
However, during the budget speech last month, President Museveni said Uganda’s debt was still affordable, warning media houses, specifically Daily Monitor not to “spread false propaganda”.
President Museveni was reacting to Finance minister Matia Kasaija, who had said that the 38.1 per cent debt in nominal terms “was much lower than the 50 per cent threshold beyond which public debt becomes unsustainable”.
“Our public debt is therefore sustainable over the short to medium term, even when we include the financing required for priority projects in the pipeline,” he said.
However, the growing debt, according to Moody’s has weighed down on credit quality and is making the country unattractive to lenders, which means that its ability to pay back loans is increasingly weakening.
The report, assigned Uganda a B2 stable rating, which is highly speculative thus rendering the country a relatively unappealing outlook in the eyes of large and international lenders.
According to the report, Uganda’s debt is expected to grow by 6 per cent to 44 per cent by 2019, which at this rate, the report says, the country will have less ability to contain it.
The report also cast a bleak future on other East African countries such as Kenya, Tanzania and Rwanda, saying their debts were becoming a burden to regional growth.