The Deputy Governor Bank of Uganda, Michael Atingi-Ego has revealed that Uganda’s public debt has hit the Shs80Trn rate and cautioned MPs against approving loans that aren’t to spur growth of the economy.
He said, “Our debt today is about Shs80Trn both domestic and external. But in terms of sustainability, I think we are still sustainable, the only challenge we have is the liquidly indicators, those indicators that you observe in order to assess whether you are able to pay. So if you look at our debt service to revenue collection it is very worrying, it is about 30% it means that for every shilling you collect as taxes, 30 cents goes on debt service which means you are crowding out other important expenditures like social and investment expenditures to service the debt.”
The Deputy Governor made the revelation while appearing before Parliament’s Finance Committee where he had been summoned to explain the current high inflation in the country.
He revealed that the Central Bank has cautioned the Ministry of Finance to ensure that going forward, all commercial loans obtained by Government have a grace period of at least five years because there are a number of loans in the pipeline whose payment dates have matured, something that has imposed pressure on Uganda’s foreign reserves.
“Because if you look at Bank of Uganda cash rates right now, we have a challenge that the debt service in the next two years is quite big. As a result of the commercial loans that we took. They have a short repayment period. It would look like if we don’t raise the necessary foreign currency to service and that is why our reserves are partly affected. In 2022/2023 we are spending close to US$1Bn on government imports and debt servicing,” said Atingi.
Adam Mugume, Executive Director Research and Policy at Bank of Uganda explained that the public debt contains external debt that stands at US$12.6Bn equivalent to Shs47Trn and domestic debt stands at now stands at Shs33Trn.
Enos Asiimwe (Kabula County) tasked the Central Bank team to explain if the Ministry of Finance consults Bank of Uganda before any loan is sought in Parliament.
He asked, “I want to understand the role of Bank of Uganda in acquisition of debt. At what point do you come in? Of recent we have just passed a debt in Parliament, it is going to be put in the consolidated account. So I am wondering whether they actually consulted you first, or they just go for the debt without consultation that is why I am asking at what point do you come in when government is obtaining loans?”
The same sentiments were shared by Moses Aleper (Chekwii County) who asked the Central Bank officials to explain their role in debt acquisition, asking, “Where do you come in the space for government to acquire loans? Which space do you play in the negotiation of these loans?”
However Muwanga Kivumbi (Butambala County) questioned the figures furnished by the Central Bank aren’t the actual state of public debt, arguing that the figures supplied don’t contain the domestic arrears government owes to its suppliers. When you want to stimulate an economy and you have humble Ugandans, yet you are meeting all the debt obligation of the donors but these simple people who mortgage their property with the view that Uganda will pay and government doesn’t pay and you tell us these aren’t national debtors when you compile,” argued Muwanga.
