How debt burden is choking development budget

Members of Parliament under the Physical Infrastructure Committee and Kampala Capital City Authority officials inspect Sir Apollo Kaggwa Road on April 24, 2023. PHOTO | DAVID LUBOWA

What you need to know:

  • Uganda’s public debt burden stands at Shs86.7 trillion as at June 2023, 47 percent of GDP. Shs17trillion of the current shs52trillion budget was allocated to debt financing.

Funds available for the government to spend at discretion are projected to fall further in the coming financial year, which will limit resources available for development ventures.
The acting budget director at the Ministry of Finance Planning and Economic Development, Mr Ishmael Magona, attributed this to the hike in interest payments and external debt repayments. 

Figures in the budget strategy for the financial year 2024/2025, indicate the total government discretionary resource has reduced by Shs3.470 trillion from Shs25.2 trillion in the current financial years to Shs21.73 trillion.  In the current financial year, the discretionary envelope was reduced by Shs24b.
Interest payments have increased by Shs1.5trillion to Shs7.6 trillion, while external debt repayments increased from shs2.6trillion to Shs3.2 trillion.

Mr Henry Musasizi, state minister in charge of General Duties at the Ministry of Finance, said this will translate into less funds for development and investment. 
“Our obligations on interest payments and the principle because any borrowing we do eats into discretionary expenditure. The overriding factor has been interest payments. There is growth in interest payments year in year out,” he said.

Mr Musasizi added: “What suffers is the development side. We are beginning to look at doing what cannot wait. For instance if it is a road and we think it can wait, we stay, instead of doing tarmac, we can do first grade marram and maintenance.” 

The revelations came during the launch of the Presidential Advisory Committee on Budget (PACOB) for the coming financial year, in Kampala yesterday. The Committee works to ensure alignment in priorities in the manifesto of the National Resistance Movement, Vision 2040, the National Development Plan, and the budget.

In the wake of constrained resources, Mr Ignatius Mudimi, Elgon county MP and chair of the technical sub-committee, said the PACOB’s mandate is to “review priority areas set by the programmes/ MDAs and come up with priorities within priorities.”