Breaking

Oil Exports Key for Uganda to Handle Growing Debt – BoU

In the report, the Central Bank indicates that Uganda’s public debt stock will grow from current USD 10.74 billion (39 trillion Shillings) to USD 13.4 billion Shillings (49 trillion Shillings) in the 2019/20 financial year. This translates into a rise from 42.2 per cent to 45.7 per cent of GDP in 2019/20.
BOU Governor Emmanuel Tumusiime-Mutebile
Uganda’s capacity to manage its growing public debt will depend on the country’s ability to export oil by 2023, a Bank of Uganda June 2019 State of the Economy report has shown.  

In the report, the Central Bank indicates that Uganda’s public debt stock will grow from current USD 10.74 billion (39 trillion Shillings) to USD 13.4 billion Shillings (49 trillion Shillings) in the 2019/20 financial year.  This translates into a rise from 42.2 per cent to 45.7 per cent of GDP in 2019/20.  

Others key factors to maintaining Uganda’s capacity to handle accumulated debt are that infrastructure investments yield the envisaged growth dividend; revenue collection improves by ½ per cent of Gross Domestic Product (GDP) per year over the next five years.

Uganda’s race to produce oil has been pushed from several target days – 2016, 2018, and now the government says it might be ready by 2023. This, however, will depend on faster negotiations with oil companies, setting up the pipeline, and refinery in the next four years.

Uganda has 6.5 billion barrels of oil and between 1.4 billion to 1.7 billion barrels are commercially viable. Exporting some of this oil is expected to turn in billions of dollars to offset part of the country’s debt. 

The Central Bank says Uganda’s debt carrying capacity has been raised from medium to strong. But if it fails to export oil in 2023 and its infrastructure projects don’t yield enough growth, its capacity will be downgraded. 

Also, the Bank of Uganda says that as the government cuts back on the deficit due to completion of flagship infrastructural projects, the rate of debt accumulation is expected to reduce in the medium term. 

The Central Bank warns that although Uganda remains at low risk of debt distress, significant vulnerabilities loom large if the debt goes above the debt ceiling in the Charter for Fiscal Responsibility of 50 per cent of GDP in net present value terms. 

Uganda has been trying to source money from China to build the Standard Gauge Railway but Beijing is reluctant to offer the money on fears that Uganda may not afford the rising debt burden.

This shows countries are posing to see if the country can handle debt it has already acquired.

Images 1

Keywords