The appetite for borrowing is increasing at a time that international low interest and concessional loans are dwindling, meaning the countries have to pay heavily in servicing the debts.
Debt experts have tipped Uganda and other African countries on the magic bullet to defeat uncontrollable debt in defeating illicit financial flows.
According to them, the government is losing too much money through undesirable means, such as regressive tax policies, tax incentives, corruption, and mismanaged mineral wealth.
If these were tackled to any extent, the debt need would be greatly reduced.
This was at a three-day Regional Dialogue on the impact of Illicit Financial Flows (IFFs) and Debt on Domestic Resource Mobilization organized by SEATINI Uganda at Entebbe.
Crusaders for domestic resource mobilisation and prudent borrowing from Eastern and Southern Africa, condemned practices like fighting for investors through tax incentives, investment agreements with multinationals, and tax maladministration, among others.
The recent tax expenditure reports within the region show that Kenya loses 15 trillion Shillings (510.56 billion Kenya Shillings) annually, followed by Tanzania with about 4.5 Trillion (3.08 Trillion Tanzania Shillings) and Rwanda with about 1.5 Trillion Shillings or 550 billion Francs.
On the other hand, Uganda forfeits 2.97 Trillion Shillings according to a 2023 survey report.
"These losses undermine efforts by EAC member states to achieve the 25% tax-to-GDP ratio set under the Monetary Union Protocol, limiting their ability to mobilize resources for sustainable development reflecting weakness in the tax administration and contributing to the over-reliance on external financing," says a joint statement.
Mwambutsya Ndebesa, the Chairperson SEATINI Uganda, called for efforts to increase local mobilisation of resources to prevent the countries from falling into recolonisation through high debt levels.
//Cue in: "For example, Uganda...
Cue out:...even avoid recolonisation."//
Unfortunately, the appetite for borrowing is increasing at a time when international low-interest and concessional loans are dwindling, meaning the countries have to pay heavily in servicing the debts.
Uganda this financial year targets to raise 32 Trillion Shillings, yet the country's debt servicing obligations amount to 34 trillion, which shows that it is walking a dangerous path despite the Government continuously asserting that the national debt (49 percent of GDP) is sustainable.
In turn, this denies the needed financial allocation to critical areas of the economy and stifles the growth and socioeconomic development of the communities.
John Oduk, Policy Assistant, African Forum and Network on Debt and Development (AFRODAD) expressed worry about the huge amounts going to debt servicing.
//Cue in: "This is mostly...
Cue out:....but costly loans."
Countries like Kenya and Rwanda have debt ratios higher than 65 percent, while in EAC, Tanzania has the lowest at about 35 percent.
The speakers urged the countries to stop the exportation of unprocessed minerals saying the benefits are instead going to the already developed countries which import the raw materials and deny the exporting countries vital revenues and jobs.
They also called for urgent action in the two regions to adopt alternative strategies to address the growing debt crisis and damaging illicit financial flows (IFFs).
The actions suggested include debt swaps, restructuring, and renegotiation mechanisms to alleviate the burden of unsustainable debt while ensuring that borrowed funds are directed toward long-term, productive development.
They also called for regional tax harmonization efforts to reduce tax evasion and capital flight, strengthen tax administration, enforce multilateral tax agreements, and create fairer tax environments, which are crucial to mobilizing domestic resources more effectively.
The joint statement also called for annual Regional Presidential Roundtables, at EAC and SADC levels, for the leaders to discuss "serious policy adaptations and innovations" that can address IFFs and debt burdens facing both regions.
Aloysious Kittengo, Program Coordinator, Financing for Development, SEATINI Uganda called for a mechanism and also proposed a cost-benefit analysis for the tax exemptions being awarded in the name of attracting investment in the EAC, to ensure value for money.
//Cue in: "And when it...
Cue out:...are losing revenue."
Other speakers included Lurit Yugusuk, Outreach Officer, Institute of Public Finance (IPF), Kenya, Zvikomborero Sibanda, Senior Economist, Zimbabwe Coalition on Debt and Development (ZIMCODD), and Irene Otieno, East African Tax and Governance Network (EATGN).
The Ministry of Finance, Planning and Economic Development insisted that there is no cause to worry amidst Uganda's rising debt.
Joy Gessa, Principal Economist, Debt and Cash said Uganda's debt is targeted to start falling in 2028 when heavy Investments in energy, oil and gas and transport infrastructure reduce.
She says, however, that even before then, several measures have been out in place including limiting the amount of debt secured from any sources, as well as rejection of loan requests for unplanned projects.
//Cue in: "When there's no...
Cue out:...five billion dollars."//
Gessa also says they are no longer accepting loan recommendations from the President in case the ministry or loans committee decide that the terms are not convenient to the country.
