Uganda's Debt Likely to Exceed 50%

  • Posted on: 12 February 2019
  • By: sanyu-fm-news

The International Monetary Fund (IMF) Division Chief for Africa Department, has warned that Uganda's debt to Growth Domestic Product (GDP) is likely to exceed the 50% threshold. 

Axel Schimmelpfennig says though Uganda's debt to GDP ratio is projected to peak at 49.5% in the financial year 2021/22 according to government projections, the debt could surpass this set ceiling because of many government spending pressures.

Uganda's debt to GDP ratio, currently stand at 41.5 percent. Government has on several occasions assured concerned economists that the debt will not surpass the 50 percent risky threshold recommended by the World Bank and International Monetary Fund. 

The Auditor General last month revealed that the public debt had increased from 33.99 trillion Shillings as of June 30, 2017, to 41.51 trillion Shillings as of June 30, 2018. External debt accounted for 67.2 percent (USD 7.2 billion) and domestic debt 32.8 (USD 3.5 billion).

But Finance Minister, Matia Kasaija hastened to argue that there no need for raising alarm because debt is under control. Kasaija argued that Uganda's public debt has largely been provided by multinational creditors such as World Bank and Africa Development Bank who offer concessional terms that include 50 percent grant element, average maturity period of 35 years, a grace period of not less than 6 years and low-interest rates below 1.5 percent.

Addressing journalists on Tuesday at the Ministry of Finance, Axel said IMF is concerned because government has in the past years revised upwards debt figures projected in the budget.

Axel said IMF recommends that government should adopt a binding strategy that will restrict the debt to GDP ratio to 50%. If government is to process a quick unplanned loan, he said it should substitute a planned loan for the unplanned loan. This, Axel said is what will keep the debt in check.

At end of 2017/18 financial year, Uganda registered a trade deficit of USD 2.59 billion.  Uganda's exports in the 2017/18 financial year were valued at USD 2.89 billion while imports were worth USD 5.48 billion.

 Countries with which Uganda had the highest trade deficits are China (USD 845 million), India (USD 596 million), Saudi Arabia (USD 384 million) and United Arab Emirates (USD 277 million), according to Bank of Uganda statistics.

Axel says Uganda trade deficit has been increasing and will continue increasing due to imports that will be needed to develop oil and infrastructure sectors.