Uganda debt nears crisis level

Map of Uganda.PHOTO
Map of Uganda.PHOTO

Uganda’s public debt is projected to hit 47.5 percent of the Gross Domestic Product (GDP) which is Shs150.267 trillion in the Financial Year 2020/2021, because of increased borrowing and expenditure to counteract the COVID-19 pandemic on the economy, this is according to the Ugandan government as reported by local daily Daily Monitor.

According to experts, the projected rise in public debt implies that the country is not collecting enough domestic taxes to meet the ever-increasing government expenditure and that it also puts a lot of pressure on the government to service the debt.

Speaking during the fourth Economic Growth Forum in Kampala, the commissioner for the macroeconomic department at the Ministry of Finance, Planning and Economic Development, Dr. Albert Musisi, said the COVID-19 pandemic has affected the government’s fiscal position, with domestic revenues far below target while spending needs increased.

“Widening of fiscal deficit declined from 4.9 percent in FY 2018/2019 to 7.2 percent in FY 2019/2020 and 9.8 percent in FY 2020/2021. Increase in the debt GDP ratio, from 35.4 percent in FY 2018/2019 to 40.2 percent in FY 2019/2020. (Debt threshold is 50 percent of GDP),” he said.

Dr. Musisi said revenue collections declined significantly especially in the third quarter of Financial Year 2019/2020 due to the pandemic and lockdown policies.

Despite the projected increase in public debt over the years, he expressed optimism that Uganda’s public debt level is still sustainable since it is below the 50 percent threshold.

On May 1, 2019, the International Monetary Fund (IMF) said Uganda remains at low risk of debt distress, even though debt metrics have deteriorated and one in five Ugandan shillings collected in revenue will be spent on interest in FY2019/2020.