Last August, Bank of Uganda said the country's capacity to manage its growing public debt will depend on the country's ability to export oil by 2023. This target will mostly depend on how fast government can reach common ground with oil companies.
Keith Muhakanizi, the secretary to the treasury. Uganda intends to issue long term domestically to reduce pressure on repayments
Uganda’s public debt has grown to
Uganda shillings 46 trillion (USD12.5bn) as at the end of June 2019 up from Shs
39 trillion (USD10.7bn) in June 2018, according to the latest Ministry of Finance
This raises the share public debt from
34.8% of GDP in 2017/18 to 36.1% of GDP in 2018/19.
Most of the debt is externally
sourced, Finance says in the December 2019 annual debt sustainability report.
The increment in the debt stock raises
questions over the government’s ability to pay back at the time when government
revenues are registering shortfalls.
Uganda Revenue Authority last week
reported a shortfall of Shs 700bn for the first six months of this financial year and government has indicated it depends more on borrowing to fill the gap.
According to the report, government
will prioritize issuance of longer term debt when borrowing in the domestic
market to give it flexibility on payments.
As a result, the share of longer term
dated treasury instruments (treasury bonds) in public domestic debt has been
increasing over the years, says the report.
“This is consistent with Government’s
decision to issue more long-term debt so as to reduce the refinancing risk
associated with the [debt],” says the report.
This means that government will reduce
on borrowing on a three, six months and one year basis and borrow more for
between 5 and 20 years.
Still Uganda’s interest payment has
for the last three years been the biggest expenditure in the budget. According
to the budget framework paper for the 2020/2021, at least Shs 10 trillion will
go to interest payments.
Last August, Bank of Uganda
said the country's capacity to manage its growing public debt will depend on
the country's ability to export oil by 2023. This target will mostly depend on
how fast government can reach common ground with oil companies.
More than half of
Uganda’s debt is from multilateral
creditors dominated by the International Development Association (IDA) of the
World Bank, a concessional lender, while China (non-concessional lender)
dominates the bilateral creditors (33%).
The report says the major driver of
the increase in Uganda’s debt over the last five years has been infrastructure
development. The other notable contributor to
rising debt levels has been the average real interest rate on public debt.
“This is consistent with the
increasingly less concessional [cheaper] external debt being contracted by
Government,” the report says.