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Tough Times As Uganda’s Public Debt Hits Shs34Trn

Uganda’s public debt has increased to Shs34trillion according to the ‘State of the Economy June 2017’ report released by the Bank of Uganda (BoU).

“The provisional total public debt stock (at nominal value) as at end May 2017 stood at Shs34.0 trillion, an increase of 14.1 per cent relative to June 2016 and 16.7 per cent in the same period a year ago. It comprised Shs21.1 trillion (USD 5.7 billion) in external debt, commanding a dominant share of 62.4 per cent of the total public debt, and Shs12.7 trillion in domestic debt,” the report obtained by Business Focus reads in part.

It adds: “Total committed external debt (total of disbursed and outstanding plus undisbursed) at the end of May 2017 stood at USD11.2 billion.  Undisbursed external debt stood at USD 5.3 billion, down from USD 5.5 billion as at end June 2016.”

Uganda’s population is estimated at 38 million people. This means that to clear the debt each Ugandan would be required to pay close to Shs900, 000. This excludes interest rates.

“As at end May 2017 most of the public domestic cost and risk indicators were outside the Public Debt Management Framework (PDMF 2013) benchmarks, but improved markedly relative to June 2016,” the report says.

On balance of payment, the report says in the twelve months to May 2017, the current account balance (CAB) improved by 29.8% to USD 1,094.7 million from USD 1,559.9 million in the twelve months to May 2016. Trade balance improved by 26.8%  from a deficit of USD1,921 million to USD 1,405.4 million in the same period.

“ Exports increased by 16% from USD 2,690.2 million in the twelve months to May 2016 to USD 3,121.9 million in twelve months to May 2017. On the other hand, imports of goods (FOB) declined by 1.8% from USD 4,611.2 million to USD 4,527.4 million in the same period,” the report says.

However, expenditure on imports for consumption increased by 6.1% while capital and intermediate goods’ imports declined by 3.0% in the same period.

Export receipts increased on account of an increase in both coffee and non-coffee export receipts. Total non-coffee export (excluding non-monetary gold) and net exports of non- monetary gold receipts increased by 3.9% and 97.3% to USD 1,872 million and USD 79.1 million, respectively.

Receipts from coffee exports increased by 29.5 per cent from USD 360.8 million to USD 467.4 million, as a result of an increase in the volume and price of coffee exported. The volume of coffee exported during the twelve months to May 2017 increased by 395.2 (60Kg) bags to 4,023.9 (60kg) bags, while the price increased to USD 1.92 from USD 1.65 per kg.

During the twelve months to May 2017, the total import bill decreased by 1.8 per cent to USD 4,527.3 million, largely on account of a decline in government imports.

Government  expenditure on import of goods decreased by 43.0 per cent to USD 280.2million from USD 491.9 million in the twelve months to May 2016.

Additionally, expenditure on private sector imports of goods (excluding non-monetary gold) decreased only marginally by 0.3 per cent to USD 3,913.1 million, driven by decreased expenditure on non-oil imports.

Non- oil import expenditure decreased by 1.5 per cent to USD 3,217.6 million, while oil import expenditure increased by 5.9 % to USD 695.0 million.

BoU report adds that the stock of reserves at the end of May 2017 was estimated at USD 3,294.5 million (including valuation changes), equivalent to 5.2 months of future imports of goods and services.

“The stock of reserves as at 28th June 2017 amounted to USD 3,362.18 million (equivalent to 5.3 months of import cover),” BoU says.

BoU adds that it has cautiously pursued an expansionary monetary policy throughout 2016/17.

The Central Bank Rate (CBR) has been reduced by a cumulative 7 points from 17% in February 2016 to 10% in June 2017 to support recovery of economic activity. The continued easing of monetary policy stance has been at the back of soft inflation outlook, the report says.

“During the FY 2016/17, growth in Private Sector Credit (PSC) has remained subdued, despite the monetary policy easing. In the first eleven months of FY 2016/17, PSC has so far recorded an annual growth rate of 4.2 per cent, which is much lower when compared to 16.2 per cent growth rate over the corresponding period of FY 2015/16,” the report says, adding: “In May 2017, annual PSC growth declined slightly by 0.6 PPs to 5.7 per cent, relative to 6.3 per cent, in April 2017.  Average annual PSC growth was stable at 6.1 per cent, in the quarter to May 2017 as in the quarter to February 2017.”

The report projects the economy to recovery since Real Gross Domestic Product (GDP) growth is estimated to have slowed to 3.9 per cent in 2016/17, 0.6 PPs lower than the revised projection of 4.5 per cent and 0.9 PPs lower than the out turn of 4.8 per cent in FY 2015/16.

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