Michael Atingi-Ego, the Deputy Governor Bank of Uganda called for immediate government reforms to ensure that funds that are held in different schemes like collective investment and retirement benefits schemes are unlocked to finance development.
Financial Experts have warned that the road to a 500-billion-dollar economy will also result in huge indebtedness unless the government diversifies its financing models.
Currently, Uganda and many other countries rely on foreign funding, including loans, grants and budget support funds to finance more than half of their budgets, with the domestic revenues coming in as supplementary sources.
With the multilateral lenders increasingly reducing their lending portfolios, these recipient poor countries have increasingly resorted to commercial lenders which has meant spiralling indebtedness because of the high interest rates and short loan tenure.
Dr Fred Muhumuza, a university economics lecturer, with a global debt of 250 trillion dollars as per the International Monetary Fund in 2023, which is more than twice the global economy, Uganda’s debt will also have grown exponentially by 2040.
It is for this reason that he calls on the government to support the creation of financial products that will attract investments from the public, citing the example of the gambling industry which has a lot of money but is nonproductive.
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Muhumuza was speaking at a capital markets development forum in Kampala under the theme: A Complementary Platform for Funding the Government of Uganda’s Tenfold Growth Strategy.
The forum gives experts, government and private sector leaders a platform to chat about ways of financing economic growth while navigating the increasing challenges associated with foreign finances.
Michael Atingi-Ego, the Deputy Governor Bank of Uganda called for immediate government reforms to ensure that funds that are held in different schemes like collective investment and retirement benefits schemes are unlocked to finance development.
He added that the Bank of Uganda’s focus on price and industry stability will go a long way in mobilizing and promoting long-term savings and investments.
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He also warned against leaving the financing of the 500-billion-dollar growth strategy to the government because, according to him, this will only propel the debt situation to record levels.
Instead, he says the private sector is vital in introducing new financial products into the market and building the capacity to withstand the challenges that will come with the growth.
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The forum was also intended to help benchmark the FMDQ (Financial Market Dealers Quotation) Group, a financial market infrastructure group in Nigeria that provides services for the debt capital, foreign exchange, equity, and derivatives markets.
It is said to be driving the country’s domestic capital mobilization which has been vital in reducing reliance on costly foreign finances and setting Nigeria on the recovery path, according to Bola Onadele Koko, the Chief Executive Officer.
On the possibility of replicating the Nigerian model in Uganda, Koko said encouraged Uganda to be cautious and have in mind the differences between the two countries.
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The Ministry of Finance, Planning and Economic
Development admits that there is a need to diversify sources of patient capital, saying capital markets are the best alternative.
The Permanent Secretary and Secretary to the Treasury says there a is need for urgent make policies that encourage those who want to invest, to have convenient investment areas with favourable terms.
In a statement read by Moses Kaggwa, Director of Tax Policy, PSST Ramadhan Ggoobi said the 500 Billion Dollar Growth Strategy will succeed depending on the partnership between the public and private sectors.
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Uganda has identified five priority sectors to focus on, which are expected to drive the growth strategy, and these include Agro-Industrialization, Tourism, Mineral Development (including oil and gas), and Science, Technology, and Innovation.
Capital Market Authority Executive Director Josephine Ossiya Okui said there are possible sources of cheap and patient capital, citing the bond market, which can help finance different areas.
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State Minister Henry Musasizi emphasized that Uganda’s development journey requires bold leadership and collaborative efforts between the public and private sectors, supported by strong policies and regulatory frameworks.
He urged stakeholders to champion homegrown solutions to finance Uganda's ambitious Ten-Fold Growth Strategy.
