Public debt projected to grow to 48% next year   

Friday December 11 2020
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Standard Chartered Bank has said Uganda’s public debt will rise exponentially to increase to just within a few points of the 50 per cent mark

By MARTIN LUTHER OKETCH

Standard Chartered Bank has said Uganda’s public debt will rise exponentially to increase to just within a few points of the 50 per cent mark. 
The Covid-19 crisis, according to Ms Razia Khan, the Standard Chartered Bank head of research, Africa and Middle East, will leave Uganda with an elevated debt ratio with public debt forecasted to reach 48 per cent of gross domestic product by June 2021. 

This, the bank said, will be a result of increased pressure to finance a widening revenue deficit resulting from falling tax collections and increasing expenditure pressure.
“Public debt is forecast to reach 48 per cent of gross domestic protect in the 2021 financial year (end of June 30), from 40.8 per cent at end of the 2020 financial year,” Ms Khan said, warning that the revenue deficit will widen to 7.5 per cent in 2020 before, growing further to 10.4 per cent in 2021.

Standard Chartered noted that government will in the period “seek additional multilateral financing to fund the deficit, alongside increasing domestic borrowing requirement to a tune of Shs4.3 trillion in the 2021 financial year from Shs3.6 trillion. 
In September, Bank of Uganda indicated that Covid-19 related borrowing had pushed up public debt between June 2019 and June 2020.

During the period between February and June , the Central Bank said, government had borrowed Shs6.362 trillion from International Monetary Fund, Trade and Development Bank, formerly PTA Bank, and Stanbic Bank towards countering economic distress brought about by Covid-19.
Experts have warned against the continued growth in domestic borrowing, arguing it is increasingly suffocating private sector credit. 

According to Bank of Uganda, the stock of public debt (in nominal value) stood at Shs56.526 trillion as of June, which translated to 40.8 per cent of gross domestic product. 
During the period to September, according to Bank of Uganda, external debt grew by 18 per cent while domestic debt increased by 19.4 per cent.

However, the Central Bank has previously said that whereas there has been “an increase in borrowing, Uganda’s debt levels remain sustainable with low risk of debt distress but significant vulnerabilities, originating from massive expenditure pressures, subdued economic activity, declining tax revenues and a possible decline in grants, continue to present challenges. 
 

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