Finance Committee of Parliament has cautioned the government against taking on a new debt after the implementation of several projects that have been funded by loans. Some of the top projects cited by the committee are the power generation plants at Isimba and Karuma, the development of Kabaale International Airport and the construction of Entebbe Express High Way, among others.
In its report to parliament on the Finance Sector budget for the coming financial year, the Finance Committee chaired by Rubanda East MP, Henry Musasizi asked government to maintain a high degree of debt sustainability.
According to the committee, Uganda’s total debt as of December 2018 was Shs43.3tn of which domestic debt was Shs14.5tn while external debt was Shs28.9tn. This is up from the Shs33.9tn reported figure by Auditor General John Muwanga as of 30th June 2017. The figure was carried in his 2018 report presented to Speaker of Parliament Rebecca Kadaga in January.
Musasizi says that with Uganda’s current debt Gross Domestic Product (GDP) ratio standing at 41.2%, the country has less than 9% to the maximum debt as recommended by the International Monetary Fund.
Despite cautions to government to watch out for new debts, Musasizi says that Uganda’s Public Debt still remains well below the threshold of 50% Debt to GDP ratio contained in the Charter for Fiscal Responsibility and the East African Community (EAC) Monetary Union Protocol.
But the Auditor General in his report to Parliament said that Uganda’s borrowing was worrying, warning that the figure is unfavorable when debt payment is compared to the country’s revenue collection.
Muwanga expressed concern that more than a half of the loans sampled totaling to Shs3.98tn will expire in 2020 and that, if government is to service the loans as projected in the current FY 2018/2019 and next FY2019/2020, it would require more than 65% of the total revenue collections, a figure that is over and above the historical sustainability levels of 40%.
Musasizi says that the current debt stock composition by creditor type for the external debt is dominated by multilateral creditors with 65%, bilateral creditors hold 34% of the stock, and commercial creditors have 17%share.
On the other hand, Treasury Bonds constituted the biggest share of the domestic debt stock in the ratio of Treasury Bonds to Treasury Bills of 75:25 in December 2018. For comments, call or text us on 0704142939.
