Muwanga Kivumbi , the Shadow Minister of Finance
Members of Parliament have raised concern on the skyrocketing public debt, warning that the trend has left Uganda’s economy vulnerable and called on the Executive to contain its appetite for loans and expenditure.
The concern was first raised by Patrick Isiagi, Chairperson Budget Committee, while presenting the report on the Appropriation Bill 2023 budget estimates, where he revealed that Uganda’s Public debt stock increased from Shs78.7981Trn in 2021/2022 to Shs80.774in the first half of FY2022/2023.
“Whereas Uganda’s Public Debt is still sustainable, in the medium, if not checked, the long term will become a very heavy burden because there are a number of vulnerabilities particularly relating to the increasing debt service burden and the risk to exports shocks. Government should be committed to fiscal discipline. Government should ensure that over the medium term, borrowing should be limited to critical projects while minimizing acquisition of debt on non-concessional terms,” said Isiagi.
However, the April 2023 State of the Economy Report by Bank of Uganda put Uganda’s provisional total public debt stock as at end March 2023 at Shs86,352.6Trn approximately 47.7 percent of GDP)).
Isiagi while presenting the report argued that whereas currently, Uganda’s external debt is largely concessional, the share of non-concessional debt had increased from 21.9% in June 20200 to 25%, which means that the lenders are tightening their policies and reviewing the terms and conditions which means that any more loans acquired by Government will come with very high interest rates and urged the Executive to be very conscious in maintaining favorable debt ratio to tax.
The Budget Committee also raised concern on the cost of debt servicing pointing out that a total of Shs17.108Trn has been proposed for Debt Service obligations in FY2023/2024, an increase of Shs2.102Trn from Shs15.005Trn approved in FY2022/2023.
Similar concerns were raised in the minority report read by Muwanga Kivumbi (Butambala County), who is also the Shadow Minister of Finance revealed that Government’s domestic borrowing has significantly increased over the years, which has undermined the private sector whereby the acquisition has become expensive to private sector actors.
Muwanga said, “The Government should enhance domestic revenue moblisation and undertake structural reforms regarding anti-corruption framework, advancing the financial inclusion agenda, climate adaption measures to guarantee affordable concessional credit from development partners.”
Although Bank of Uganda placed Uganda’s public debt has hit Shs86Trn, in the 2022/2023 national budget, the treasury Operations has been allocated Shs18.747Trn up from Shs16.799Trn the entity was allocated to manage Uganda’s public debt.
Of these funds, Shs6.013Trn will go towards interest payment on our public debt, while the rest of Shs12.733Trn will go towards other items in debt refinancing.
