What you need to know:
- Finance Minister Matia Kasaija says the current debt levels are beginning to worry government, amid a number of vulnerabilities, key among them Covid-19.
Finance Minister Matia Kasaija has started getting concerned due to the rapid surge in debt levels which has now surpassed the 50 per cent threshold to gross domestic product.
Uganda has heavily borrowed in the just concluded financial year to shore up budget shortages and Covid-19 related expenses, pushing debt levels above the 50 per cent safety valve.
Public debt to gross domestic product, according to Ministry of Finance, will in the 2021/22 financial year rise to 51.9 per cent.
Speaking during a press briefing in Kampala early this week, Mr Kasaija said he was particularly uncomfortable with the current public debt levels, noting that government would, going forward, be extremely cautious on acquiring new debt.
“We are at a level which makes me uncomfortable. Once you see you have gone beyond 50 per cent, it requires one to be concerned. So we are conscious and extremely concerned about our public debt,” he said, noting money to handle crises such as Covid-19 would be mobilised through budget cuts, especially to non-essential services such as travel, conferences and accommodation, among others.
In his report to Parliament recently about Uganda’s debt stock, Mr Kasaija said as of December 2020, total debt stock was $17.96b (equivalent to Shs65.83 trillion), indicating an increase from $13.3b (equivalent to Shs49.0 trillion) as of December 2019.
Out of the $17.96b, external debt constituted a share of 64.98 per cent or $11.67b (Shs42.6 trillion) while domestic debt constituted 35.02 per cent or $6.29b (Shs22.9 trillion).
The increase, Mr Kasaija said, was on account of increased external and domestic borrowing to mitigate the socio-economic impact of Covid-19.
Debt levels have been rising since 2019 increasing from 38 per cent to 41 per cent as of June 2020, before shooting to 47.2 per cent as of December 2020.
Experts have previously warned of rising public debt even as government has continuously insisted that the levels were within a manageable limit.
However, an increase in a number of vulnerabilities key among them reduction in domestic revenue collections, falling export receipts and the ongoing Covid-19 crisis have exposed Uganda to massive borrowing thus threatening debt sustainability.
During the 2020/21 financial year domestic debt stood at $6.29b (Shs22.96 trillion), an increase from $4.74b (Shs17.38 trillion) in December 2019.
This was mainly comprised of short term and long term borrowing and direct commercial bank borrowing from the domestic market.
As of December 2020 external debt stood at $11.67b (Shs42.79 trillion), an increase from $8.59b (Shs31.49 trillion) in December 2019, which represents an increase of $3.08b.
However, according to Mr Kasaija debt, despite the current surge, is projected to reduce on account of increased domestic revenue as government implements the Domestic Revenue Mobilisation Strategy, which targets to increase domestic revenue by 0.5 percentage points per annum.
Creditor type and stock
Major Multilaterals- $5.73b
Other Multilaterals- $1.61b
Commercial banks- $0.89b