Uganda has lowest share of commercial debt in EAC

Whereas Uganda's commercial bank has been growing, it is lower than any other member state in East Africa. Photo / File 

What you need to know:

  • During the period ended September 2022, out of $20.33b (Shs76.5 trillion) total stock of public, the share of commercial debt stood at 10.4 percent, which was lower than any other East African member state 

Uganda holds the least share of commercial debt in East Africa, according to the Ministry of Finance Status of Uganda’s Debt report. 

The report, which highlights different aspects of Uganda’s financing, including sustainability, stock and source of public debt indicates that whereas the share of Uganda’s commercial debt as opposed to bilateral and multilateral debt has been growing, it remains lower compared to other East African member states. 

For instance, according to the report, during the period ended September 2022, out of $20.33b (Shs76.5 trillion) total stock of public debt, the share of commercial debt stood at 10.4 percent, which was lower than any other East African member state. 

Tanzania holds the largest share of commercial debt at 31.8 percent, followed by Kenya, which holds 26.6 percent of its public debt in commercial loans. Rwanda, at 13 percent, is comparably lower than the two countries but higher than Uganda. 

However, data indicates that all East African member states have been reducing their share of credit from multilateral and bilateral lenders while increasingly drawing more loans from expensive credit sources such as commercial banks.

Such loans, analysts argue, have exposed a number of countries to risks given that in some cases governments have had to use sovereign assets as collateral for credit. 

Currently, Uganda’s stock of public debt is composed of multilateral credit, which stands at 61.7 percent, World Bank (34.5 percent) while bilateral lenders contribute 27.9 percent. 

Commercial debt from China has been growing from 17.8 percent to 20.7 percent, while that from commercial banks has grown from zero to 10.4 percent in the last seven years.  

Debt sustainability remains a challenge across East Africa. However, different studies have noted that Uganda’s debt remains within sustainable levels despite growing vulnerabilities. 

For instance, according to the 2022 Debt Sustainability Analysis released last month, the Ministry of Finance indicated that government would focus on fiscal consolidation over the medium term, which would see public debt to gross domestic product decrease to 47.6 percent by June 2023, which is below the stipulated 50 percent ceiling. 

Public debt to gross domestic product, the Ministry of Finance indicates, is expected to fall further, dropping to 46.1 percent by June 2024, before falling further to 43.7 percent by June 2026. 

Government conducts an annual debt sustainability analysis to ascertain the sustainability of public debt over the medium to long term. 

Emphasis is placed on key debt burden indicators, such as the size of debt relative to gross domestic product as well as the share of domestic revenues needed to meet debt service obligations. 

The analysis also identifies risks and vulnerabilities and proposes remedial policy interventions to mitigate such risks and vulnerabilities.

Share of commercial debt  

Country

Share

Tanzania 

31.8 Percent 

Kenya

26.6 Percent

Rwanda

13 Percent

Uganda 

10.4 Percent