No country has developed because of too much borrowing, says Ggoobi

The Ministry of Finance Permanent Secretary and Secretary to the Treasury Ramathan Ggoobi has said no country has developed by borrowing too much, noting that government will in the 2024/25 financial year put emphasis on saving and collecting more revenue to mitigate challenges resulting from, especially commercial loans.

Speaking at the Review of the Resource Envelope for the 2024/25 financial year workshop in Munyonyo, Kampala, Mr Ggoobi said Uganda Revenue Authority (URA) would be given all the necessary support to collect more revenue as well as curb tax evasion and tax avoidance. 

During the three-day workshop, which brought together stakeholders in revenue mobilisation including URA and agencies that collect non-tax revenue, Mr Ggoobi also said that the window for borrowing for the budget had been narrowing, noting that the economy had expanded enough for government to stop commercial borrowing because "no country has developed by borrowing too much but by saving and collecting more revenue".

“The window for borrowing for the budget is closing every single year. There is no more commercial borrowing for the budget. The economy has expanded and we must move beyond words and collect more revenue,” he said, adding that government was working on a strategy to grow the economy 10-fold in the next 15 years.

In its Debt Sustainability Analysis for the 2022/23 financial year, the Ministry of Finance indicated that the major challenge to debt management were related to the high debt service burden, partly due to a rise in commercial loans. 

However, the report noted that going forward, government would prioritise concessional loans to reduce pressure on domestic revenues, which have been reducing in the last two years. 

During the period ended June 2023, Ministry of Finance data indicates that the share of external debt owed to commercial creditors increased to 13.6 percent from 10.4 percent, pointing to more reliance on commercial borrowing for deficit financing, while domestically, commercial banks held the largest share of domestic public debt, which as of June 2023 had grown to 38.6 percent.

As of June 2023, according to the Ministry of Finance, public debt stood at Shs96 trillion and is expected to increase in the 2024/25 financial year, given that government has already indicated that it will borrow Shs13 trillion in the next budget cycle.   

Government has been devising several strategies through which it is seeking to mobilise more tax revenues to finance an ever-present budget deficit. 

At the same meeting, URA Commissioner General John Musinguzi said they have put in place measures to improve tax administration and efficiency with focus on mobilising required revenues to sustain the country towards economic independence. 

In the last three financial years, URA indicates there has been consistent growth in revenue by more than 50.48 percent from Shs16.7 trillion in the 2019/20 financial year to Shs25.2 trillion, noting that continued investing in digital solutions and other innovations will go a long way in maintaining the growth momentum.

Uganda’s tax-to-gross domestic product ratio remains below sub-Saharan’s average of 16 percent at 14 percent, according to URA. 

However, Mr Musinguzi said the ratio is expected to grow to between 18 percent and 20 percent in the short to medium term, supported by a reduction in business informalities, addressing corruption, and abuse of tax incentives by investors, and integration of government systems, among others. 

Data from URA indicates that the tax register has grown by 154.96 percent from 1.59m in the 2019/20 financial year to 4.06m taxpayers due to the issuance of instant tax identification numbers and use of third-party data from utility companies, among them Umeme, NWSC, and statutory agencies such as NSSF, URSB, and  KCCA.

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