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Cabinet Approves More Borrowing From World Bank

Judith Nabakooba, the Minister of ICT & National Guidance

Uganda’s Cabinet has again approved the borrowing of funds from the International Development Association of the World  Bank Group.

The amount to be borrowed hasn’t been specified.

This revelation is contained in a statement issued by Judith Nabakooba, the Minister of ICT & National Guidance about Cabinet Decisions taken during the Cabinet meeting held on Monday 1st March 2021 at State House Entebbe.

Nabakooba said the loan will finance Uganda’s  COVID-19 Response and Emergency Preparedness Project and the Uganda Reproductive, Maternal and Child Health Services Improvement Project.

Recently, the same Cabinet approved the proposal to borrow up to USD 166 Million (609.8bn) and Euro 200m (Shs884.5bn) from the African Export Import Bank (AFREXIM); and Euro 200m (884.5bn) from Trade & Development Bank, to finance the development and infrastructure budget for the FY 2020/21.

The loans  will total to Shs2.37 trillion.

It should be noted that Uganda’s total public debt increased by 21.7 percent in FY2019/20, the Bank of Uganda (BoU) Monetary Policy Report for December 2020 revealed.

According to the report, external debt increased from US$ 8.35 to US$ 10.45 billion, while domestic debt increased from Shs16.2 trillion to Shs19.1 trillion.

“As a percentage of GDP, nominal public debt increased from 35.3 percent in June 2019 to 41.0 percent in June 2020. In Present Value terms, public debt to GDP increased from 27.0 percent to 31.8 percent,” the report reads in part.

The Debt Sustainability Analysis Report 2019/20 released in December 2020 by Ministry of Finance, Planning and Economic Development says  public debt is projected to increase on account of the increase in the pace of borrowing to finance key infrastructure projects, especially in the transport and oil & gas sectors.

“Nominal public debt is projected to increase to 49.9 percent of GDP by end June 2021 and peak at 54.1 percent in 2022/23 before starting to gradually decline. In present value terms, total public debt will follow a similar trend, increasing to 39.3 percent of GDP in FY2020/21 and then peaking at 42.9 percent in FY2022/23, well below the ceiling of 50 percent in the Charter for Fiscal Responsibility and convergence criteria under the East African Monetary Union protocol,” the report says.

It adds: “While this DSA reveals increased risks and vulnerabilities in the next few years, public debt is projected to remain sustainable. The escalation in risks increases Uganda risk of debt distress from low to moderate. The major vulnerabilities to the outlook relate to the slow growth of exports and the increasing debt service burden. Debt service as a percentage of revenue has increased over recent years to over 20 percent, a level usually seen in low income countries faced with high risk of debt distress. The increase in debt service has majorly been a result of increased domestic borrowing (which is typically costlier) and non-concessional / commercial external debt.”

Uganda has already  exceeded the dreaded level of 50 % of the value of the economy (GDP), according to the latest records.

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