Uganda’s domestic and external debt has hit Shs 41.3 trillion. This is according to Uganda’s indebtedness status report presented by State Minister for Planning David Bahati to parliament on Tuesday.
According to Bahati, the external debt accounts to about Shs 27.3 trillion while domestic debt alone is Shs 13.3 trillion.
Bahati explained that a greater share of the country’s outstanding debt is sourced from multilateral creditors like World Bank, African Development Bank and the Islamic Development Bank. Bilateral creditors including Japan, France and others account for 31.1%. Commercial banks contribute 0.7% of the total external debt portfolio by the end of June 2018.
“The four largest biggest beneficiaries of debt financing by sector are; energy, works, agriculture, which is consistent with the government strategy to reduce the cost of doing business, develop infrastructure to boost growth, energy for support industrial development,” said Bahati.
Over the last ten years, the stock of public debt has increased by $7.8bn from $2.9bn in FY 2006/2007 when Uganda benefited from the multilateral debt relief initiative (MDRI) to the current $10.7bn as at June 2018.
Bahati explained that the increase in public debt reflects the increased government budget priorities which he said have necessitated an increase in the level of government debt since Uganda’s tax revenue efforts have remained stagnate.
“It has left no option for government to finance its programme in order to achieve its objectives as set out in the national development plans and the NRM manifesto other than by debt. The increase in external borrowing has been mainly to fund infrastructure projects in energy, and transport sectors,” Bahati added.
He, however, said that government is committed to ensuring that debt does not exceed the 50% threshold that Uganda agreed under the East African Monetary Union convergence criteria. The debt currently stands at 38.6%.
“As you have seen, when you compare situation with other countries, you can clearly see that Uganda over the years, is almost the lowest. And we intend to maintain this even up to 2023 and hope by then we would changed because by then we would have started getting oil from the ground. The figure shows where we’re with Burundi, with South Sudan, Kenya, Ethiopia, Rwanda, Tanzania and Ethiopia and we’re at the lowest,” said Bahati.
Opposition chief whip, Ibrahim Ssemujju Nganda asked whether government is comfortable with the increased borrowing given that a lot of borrowed money is mismanaged.
“The question I want to ask is the question of prudence. Hon Bahati…I want to ask the question that taxpayers in the UK were asking; whether you as a person, you’re comfortable with a government that is borrowing left and right? Because…just on the money we have borrowed from commercial banks…in the budget we’re going to pay back about Shs 2.7 trillion interest on the money we’re borrowing from commercial banks. After borrowing this money then we see a head of state throwing money at every youth group – money you can’t account,” Ssemujju said.
Budadiri West MP Nathan Nandala Mafabi sentiments were not different from those of Ssemujju, saying the borrowed money is often abused by people in government.
“As soon as we pass a loan here [parliament], the first people to celebrate are those [government officials] that sit on the bench behind there that money has come in. Then the sharks [business people] out there who bid and now days they do a cartel. And the people who lose are the people of Uganda because we pay for that money in form of taxes. That is why you’re even taxing mobile money to fund such leakages in the budget,” Nandala said.
Pian County MP Achia Remigio supported a move by government to borrow for development purposes but appealed that the purposes for borrowing should be fulfilled. He cited an $85m loan borrowed in November 2013 to construct the Nakapiripiriti-Muyembe road, but five years later, works on the ground are yet to commence.
However, Finance minister Matia Kasaija said that government has not yet received the money for construction of that Muyembe-Nakapiripiriti road because one of the conditions for borrowing the money was that the Uganda government has enough money to compensate the land owners which at the time government lacked. But now that the compensation money has been found, Kasaija revealed that he just came back from signing for the money in Australia.
Deputy speaker Jacob Oulanyah sent the report to the National Economy Committee for discussions with stakeholders and make recommendations to parliament.