This, he said, was one of the initiatives undertaken by the government to reduce its debt levels.
He said, “Uganda is still among the few countries in the developing world with sustainable debt. We shouldn’t allow ourselves to get into crisis mode. Towards the end of the financial year 2022/23, we invited our domestic lenders to come up with innovative ways of financing our debt. Some responded. We ended up getting an innovative facility that saved the Ugandan taxpayer Shs 1.98 trillion that we should have paid over and above what we are going to pay for this facility. Shs 1.98 trillion of interest was saved from innovative ways of getting this financing.”
Ggoobi was speaking at the launch of the study on sustainable, inclusive, and environmentally responsive debt in Uganda, organized by the Economic Policy Research Center at the Sheraton hotel in Kampala.
According to the recently passed budget for the financial year 2023/24, Uganda’s total public debt stood at Shs 80.7 trillion. Of this amount, Shs 47.7 trillion is external debt, while Shs 30 trillion is domestic debt. Uganda’s debt stock increased significantly to 47 percent of Gross Domestic Product (GDP) in 2020/2021, from 41 percent in 2019/20.
According to the EPRC, this debt is mostly non-concessional, with an average weighted interest rate of 14 percent, no grace period, and primarily less than 10 years of maturity. This implies high debt service costs, which may crowd out many drivers of economic growth.
To finance this financial year’s budget of Shs 52 trillion, Uganda will need to borrow an additional Shs 6.16 trillion on top of revenue collections.
Ggoobi said, “Domestic lenders should reduce expectations for us as government to just give them paper while they give us money at whatever cost. We are not going to do that. We want to support the private sector but for us to be able to support them, they should also give us money at relative rates.”
Although Uganda’s economy was affected by external shocks such as Covid-19 pandemic and the Russia-Ukraine war, Ggoobi said the government was also stepping up their revenue mobilization efforts to finance development.
He said: “We are collecting more revenue by ensuring that whoever is supposed to pay tax pays it. We have also adopted effective administration of our tax revenues and tax ratios.”
Ggoobi added that the government was cutting down expenditure in areas with a low multiplier effect. He said the government would not be buying new vehicles except ambulances and vehicles used by extension agricultural workers, revenue mobilization, and security. “Travel abroad is now ringfenced for statutory individuals that have to travel abroad within the law. Each financial year, the government spends Shs 241 billion on travel abroad. This has been cut to less than Shs 90 billion.”
While presenting his paper, Paul Lakuma, a research fellow at the Economic Policy Research Centre, said there were concerns about the social implications of the growing debt, especially for vulnerable groups such as women and youths. These, he said, will disproportionately bear the consequences of reduced expenditure.
To reverse this course, Lakuma recommended the adoption of policies that can increase the participation of women in the construction sector. He also appealed for the limiting of factors that hold back women and youths from participating in economic development. Some of these factors are lack of education, lack of necessary information, and high costs of credit amongst others.
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