There are worries that Uganda’s public debt could hit past the 50% threshold.
According to the State of the Economy Report released by Bank of Uganda (BoU) in July 2019, the total public debt is projected to rise from 42.2 percent to 45.7 percent of GDP in nominal terms in FY 2019/20.
“As the government cuts back on the deficit due to completion of flagship infrastructural projects, the rate of debt accumulation is expected to reduce in the medium term,” the report reads in part.
It adds: “Uncertainties around spending pressures, contingent liabilities, or a growth shock could push public debt above the debt ceiling in the Charter for Fiscal Responsibility of 50 percent of GDP in net present value terms.”
It also adds that with the exception of the ratio of the stock of government securities to the stock of private sector credit which stands at 104.5 percent, above the benchmark of 75 percent, all the public domestic debt risk indicators were within the Public Debt Management Framework (PDMF 2013) medium term benchmarks.
In addition, the report says, the risk indicators improved relative to FY2017/18, with the exception of the percent debt maturing in one year and the ratio of the stock of government securities to the stock of private sector credit.
“Although Uganda remains at low risk of debt distress, significant vulnerabilities loom large. Uganda’s debt carrying capacity has been raised to strong from medium. Even though debt burden indicators remain below their indicative thresholds, they have increased compared to the previous Debt Sustainability Analysis (DSA),” the report adds.
The assessment rests on four assumptions: (i) infrastructure investments yield the envisaged growth dividend; (ii) revenue collection improves by ½ percent of GDP per year over the next five years; (iii) oil exports commence in 2023; and (iv) infrastructure investment is reduced once the current projects are completed.
According to the Report of Budget Committee on 2019/20 budget estimates, Uganda’s total public debt stock increased by 12.5% to USD11.52bn (approximately Shs43.31 trillion) as at end December 2018 from USD10.24bn (approximately Shs38.5 trillion) at end December, 20l7.
The report further stated that the external debt stock increased by USD 0.78Bn to USD7.66Bn by end of December 2018 from USD6.88Bn at the end of December 2017, with the increase mainly from China (25 percent) and World Bank (40 percent).