Debt burden: Uganda not yet badly off, says US economist 

Director of Center for Sustainable Development, Prof Jeffrey Sachs (left), is welcomed to the National Planning Autority (NPA) head offices by NPA Board Chairperson, Prof Pamela Mbabazi, on February 26, 2024. PHOTO/ISAAC KASAMANI

What you need to know:

  •  The world-renowned economics professor is in the country on a four-day official visit to assess the implementation of the UN Sustainable Development Goals 2030.

A visiting American university don over the weekend appeared to ignore fears Uganda’s debt burden is approaching unsustainable levels when he proposed the country can still borrow to finance its budget.
Prof Jeffrey Sachs, the director of the Centre for Sustainable Development at America’s Columbia University and president of the UN’s Sustainable Development Solutions Network, also chided international financing institutions for maintaining unfair lending terms.
The world-renowned economics professor is in the country on a four-day official visit to assess the implementation of the UN Sustainable Development Goals 2030.
While meeting Prime Minister Robinah Nabbanja on Sunday, Prof Sachs observed that developing countries such as Uganda pay a premium to access development financing.

“With the IMF and the World Bank, I’m sorry to say they don’t really get it either. They are telling your government… not to borrow so much; don’t get into trouble, and keep your debts low. I disagree with this philosophy very much,” he said.
“I think you should borrow a lot, but it should be a 40-year loan. Because in 40 years, this is going to be a rich country and so what looks like a lot right now is going to look like a little in 40 years,” he added.
Prof Sachs also asked the rhetorical question: “…if you don’t borrow now, how are you going to ensure all the things you need to do that can’t fit in the national budget right now?”
“…the truth is the credit rating agencies and the IMF and the World Bank are… mistaken in their analytical approach,” he said. 
“When I said this last year to senior technocrats at Moody’s, which is one of the main credit rating agencies, they said to me, but Mr Sachs, we don’t understand anything about development. We just predict credit events. Therefore, they don’t understand what they’re doing very deeply,” he added.
Uganda’s credit ratings, however, remain rather poor. In October last year, the US-based rating agency, S & P Global placed Uganda at B-minus, which was a downgrade. Moody’s Investors Service gave Uganda a B2-negative in November 2022, which was also a downgrade.
It was only Fitch Ratings that gave Uganda a B+ in June 2022.
As a consequence of the poor ratings, the country falls under the highly speculative section with a low credit rating. A credit rating assesses an entity’s ability to fulfil their financial commitments such as debt repayment,
Data from the International Monetary Fund show that Uganda’s public debt has reached Shs96.1 trillion. This reflects a debt-to-GDP ratio of around 52 percent, which is two percentage points above the declared policy threshold. Of this, Shs44.6 trillion is domestic debt while Shs52.8 trillion is from foreign sources. The debt is almost twice the Shs53 trillion national budget.
These amounts exclude Shs7 trillion worth of loans pending approval by Parliament. There are concerns that rising public debt coupled with growing debt servicing costs, stagnating domestic tax revenues, and declining export revenues are putting Uganda closer to a debt crisis.
The debt-to-GDP ratio measures public debt against the monetary value of all goods and services produced in a country within a specific period.
According to Uganda’s Charter for Fiscal Responsibility (FY 2021/22 – 2025/2026), the total debt should be maintained below 50 percent of GDP.
Mr Julius Mukunda, executive director of the Civil Society Budget Advocacy Group, yesterday warned Uganda is carrying a huge debt burden.
“Almost half of our debt is non-concessional, which implies that the cost is very high and also the maturity period is very short and in business, that’s a wrong deal,” he said.
“Which means that we are spending a big portion of our revenues on debt servicing and that constrains us from investing the money in development work…,” he said.
What needs to be done?
He, however, observed that while the debt burden is worsening by the day, Uganda can still contract long-term concessional loans and agree with the lenders to restructure existing loans.

On February 27, Mr Julius Kapwepwe, the programmes director at the Uganda Debt Network, said borrowing should only happen if it is for investment in areas that will generate more revenue.
“We should only borrow to stop borrowing i.e. borrow to invest in only those areas critical to increased revenue generation,” he said.
On SDG progress
Prof Sachs indicated Uganda is on the right path. According to his Sustainable Development Solutions Network and SDG Centre for Africa, in 2021, Uganda was more than 50 percent of the way towards achieving the goals by 2030. Among the 52 African countries, Uganda is ranked 18th with an overall score of 54.88.
“…the steps that you are taking for the SDGs are exemplary. The integrated structure, the clear commitments, the long-term vision, and the plans of action are exactly the kinds of measures that are needed because this is a complicated agenda,” he said
“I’m very impressed and very proud to be together with you with all of your accomplishments in a framework of governance for the SDGs,” he said.
He said Uganda needs to focus on six core areas, including education, science, technology, and innovation.
“So the first investment is I want Ugandan children to be world leaders in knowledge in 20, 30 years. I want to make sure every child in this country is in a good school with qualified teachers, with classrooms that have electricity and connectivity; can get online, with a modern curriculum, and with the ability to compete internationally. And that requires more funding than you can afford,” he said.
In her rejoinder, Ms Nabbanja said “Uganda has over the years been a front runner in the implementation of the 2030 agenda for sustainable development goals… [with] implementation guided by the SDG National Coordination Framework under the office of the prime minister”.
The prime minister said the government has started developing the fourth National Development Plan (NDP) which is intended to address specific challenges to overall SDG implementation efforts.

About Prof Jeffrey Sachs
Jeffrey D. Sachs is a university professor and Director of the Center for Sustainable Development at Columbia University. 

Among others, he is president of the UN Sustainable Development Solutions Network, commissioner of the UN Broadband Commission for Development, academician of the Pontifical Academy of Social Sciences at the Vatican. 

He has been special advisor to three United Nations Secretaries-General, and currently serves as an SDG advocate under Secretary General António Guterres.

He spent over 20 years as a professor at Harvard University, where he received his BA, MA, and PhD degrees. He has received 42 honorary doctorates, and his recent awards include the 2022 Tang Prize in Sustainable Development, the Legion of Honour by decree of the president of the Republic of France, and the Order of the Cross from the president of Estonia. 

His most recent books are The Ages of Globalisation: Geography, Technology, and Institutions (2020) and Ethics in Action for Sustainable Development (2022). 

Editor's note: This article has been updated to reflect the correct IMF position on Uganda's public debt.