Boost domestic revenue mobilization, IMF country rep advises Uganda
International Monetary Fund (IMF) resident country representative to Uganda Sebastien Walker speaks during an interview with Monitor in Kampala on December 10, 2024. PHOTO/MICHAEL KAKUMIRIZI
What you need to know:
- Uganda’s external debt servicing grew from $816.34m in FY 2022/23 to $1.051 billion in FY2023/24.
A top International Monetary Fund (IMF) official has advised Uganda to preferably seek concessional loans to tame the challenge of high external debt servicing.
After presenting the regional economic outlook for Sub-Saharan Africa, IMF resident representative in Uganda Dr Walker Sebastien told Monitor that "Uganda’s fiscal policy should focus on fiscal consolidation, reduce fiscal deficit and increase domestic revenue mobilization to finance development projects or programs for livelihood improvement."
Uganda’s external debt servicing grew from $816.34m in FY 2022/23 to $1.051 billion in FY2023/24.
According to the finance ministry, the rise was due to increased principal payments, interest payments, and fees for major flagship projects; and debt service for budget support loans from the AFREXIM Bank as well as the Trade and Development Bank.
“Of the $1.051 billion external debt service in FY 2023/24, principal payments contributed 64 per cent ($ 672.96 million) followed by interest payment 34 percent ($359.89 million) and the remaining 2 percent ($19.04 million) were fees,” the ministry said in the June 2024 annual debt statistical bulletin released in September 2024.
Dr Sebastien noted that the country’s capital expenditure should be increased if it can be financed sustainably through increased domestic revenue or concessional borrowing “because capital expenditure is very important for the country’s infrastructure development.”
Commenting on Uganda’s unnecessary expenditures on Tuesday, he said: “Salaries for doctors, teachers, nurses, social protection, medicines… theses are essential forms of current spending but there may be other forms of current spending which may be of low priority and ought to be contained; they should either be capped at the same level with other forms of current spending or they should be reduced.”
On the level of savings in Uganda, Dr Sebastien emphasized that "it could be useful to increase it, but this could be challenging given the poverty levels."
“For instance, by allowing people to buy government securities through mobile money- that can be helpful in increasing the level of saving,” he added.
Dr Sebastien further stated that there is need for Bank of Uganda to continue building the country’s foreign exchange reserve level to be able to withstand external shocks.
