The Ministry of Finance, Planning and Economic Development has said the new $900 million (about Shs3.18 trillion) loan government plans to borrow from the International Monetary Fund -IMF will not cause a substantial increase of Uganda’s rising public debt.
Responding to questions at Uganda Media Center today, the Director of Debt at the Ministry of Finance Maris Wanyera said the IMF loan has already been included in the debt figure that government has shared. And the 3trillion shilling loan will be disbursed in three financial years starting 2021/22 financial year which will start on July 1st. It means government will be receiving $300 million from IMF in each of the next three financial years.
According to government projections, debt will slightly eclipse the 50 percent Debt to Growth Domestic Product -GDP ratio in the 2021/22 financial year to around 51.9 percent and then decrease to about 51.2 percent in the 22/23 financial year and further decrease to 49.9 percent in the 2023/24 financial year.
Uganda last year borrowed $491.5 million (about 1.7 trillion Shillings) under the Rapid Credit Facility, a programme that provides access to rapid and concessional financial assistance to Low-Income Countries facing urgent balance of payments needs.
The question of Uganda’s growing public debt gained traction in media in recent weeks but government maintains that it is still sustainable. Uganda’s total public debt hit a record 65.82 trillion shilling as of December 2020, up from 49 trillion Shillings in 2019, according to the Auditor General’s report.
Now Uganda’s Debt Director Maris Wanyera has dismissed fears that the debt could be unsustainable, arguing that Uganda has not failed to pay any of its creditors, nor failed to pay on time.
She said government continues to review debt projects that are moving at a slow pace.
“In addition to reviewing projects that are performing slowly, we are also going to see if we have any project in our portfolio that should be canceled,” Wanyera said. “That also can reduce our debt.”
At the same press conference for launching the budget month activities, the Minister of Finance Matia Kasaija defended increasing taxes such as tax on fuel. He argued that Uganda’s business community cannot demand services without paying taxes. He described the extra 100 shilling tax government on each liter of fuel starting next financial year as negligible.
Those against taxes, Kasaija argued, present the government with a dilemma of borrowing more to finance the budget which could lead to mortgaging of the country.