Uganda’s public debt could have surpassed the Shs50 trillion mark after recent borrowings and the latest move to borrow an extra Shs3 trillion.
The motion seeking approval of Parliament to borrow up to Shs3Trn as budget support to avert effects of Coronovirus on Uganda’s economy was tabled by State Minister for Planning, David Bahati (pictured), who expressed Government’s interest to seek funding from World Bank to a tune of USD300 approximately Shs1.136Trn for Budget support for FY 2019/20 which funds would be used to provide financial resources to the Health sector and USD491.5M approximately Shs1.859Trn from International Monetary Fund (IMF) to support Bank of Uganda in stabilising Uganda’s currency.
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Uganda’s low tax revenue collections have been compounded by the outbreak of the COVID-19 pandemic that requires more resources to fight the deadly disease.
Bahati told Parliament that although Government had on 2 April, 2020, tabled a Motion seeking Parliament approval to borrow a loan of up to USD100Million for FY 2019/20 and USD90 million for FY 2020/21 from the International
Development Association (IDA) of the World Bank Group to provide sufficient financial resources to the health sector and mitigate negative effects on the economy due to COVID 19; and USD250 million from the International Monetary Fund for Balance of Payments support to Bank of Uganda, Government had to revise the loan request.
According to Government, the World Bank informed the Ministry of Finance that they have increased their funding proposal towards COVID-19 from USD100million for FY 2019/20 and USD90million for FY 2020/21 to US$300 million in total for the FY2019/20.
Additionally, the International Monetary Fund (IMF) also informed Government that it will provide emergency financing under Rapid Credit Facility (RCF) to about US$ 500million instead of the USD 250million for Balance of Payments support to Bank of Uganda. However due to foreign exchange dynamics between the SDR and USD, the amount has now reduced to US$ 491.5million.
Out of the US$491.5million, USD340million will help Bank of
Uganda in bridging the gap in the balance of payments position in the FY 2019/20 and USD31.5 million will be used as budget support to finance Government’s response plan
to the pandemic, including acquiring necessary health supplies (diagnostics kits, masks, personal protective equipment); supporting the vulnerable population, and USD120 million to support the private sector that has been affected by the adverse effects of COVID 19 by boosting the lending capacity of Uganda Development Bank.
The Ministry of Finance told Parliament that the funds to Uganda Development Bank (UDB) will support import substitution, export promotion, manufacturing and industrialization activities to address the negative effects of COVID 19 in the economy in the FY2019/2020. Uganda’s public debt ceiling is 50% of the GDP.