Civil society cautions government on rising debt

Wednesday September 14 2016

Ms Cissy Kagaba of Anti-Corruption Coalition

Ms Cissy Kagaba of Anti-Corruption Coalition said the current ambitious infrastructure investment will result in an increase in public debt 


Kampala. The civil society in Uganda has warned government against over borrowing to finance ambitious infrastructure projects in the country.
Uganda’s public debt, though still sustainable, has risen in recent years, primarily on account of borrowing to finance infrastructure projects that are necessary to improve the economy’s productive capacity and competitiveness over the medium-long term.
The director of programmes at Uganda Debt Network, Mr Julius Kapwepwe, yesterday said Uganda’s continuous upward growth in Uganda’s public debt could see the country falling into unsustainable debt burden in the long-run.

“It is the citizens who will have to pay back these debts. Unless our government becomes more disciplined with regard to borrowing, Ugandans will end up choking on debt like before under the Highly Indebted Poor Country Initiative (HIPC).”
In 1999, Uganda became the first country in Africa to qualify for the World Bank relief on debt under the HIPC because the country’s debt level had become unsustainable due to over borrowing at the time which is similar to the current trend.
In his recent interview with the Daily Monitor, the deputy governor, Bank of Uganda, Dr Louis Kasekende, said in volume terms, external debt is currently estimated at about $5 billion (about Shs17 trillion) and domestic debt (treasury bills and bonds) at Shs11.612 trillion by end of June 2016.

This projection puts Uganda among the highly indebted countries, with a worrying external debt raising concerns on the country’s capacity to pay back.
The country director Action Aid Uganda, Mr Arthur Larok, said Uganda is facing a problem of infrastructure deficit, which is affecting the country’s long term economic development.
Ms Cissy Kagaba of Anti-Corruption Coalition said the current ambitious infrastructure investment will result in an increase in public debt.

“The government really has to ensure financial discipline, it needs to borrow but ensure that the money is used for what it is meant for and the rising debt creates a deficiency in funding for the sectors that need the money,” said Ms Kagaba.
Ministry of Finance spokesperson Jimmy Mugunga, however said: “We are actually free of debt distress. Our debt is clear, according to the 2016/2017 Financial Year budget. We are managing it well and we have never gone beyond our threshold. In our view, the public debt is currently sustainable and so is the projected accumulation path, as long as the deficits are used to finance infrastructure investment (as is currently planned) and investments are implemented properly,” he said.

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