Govt to borrow more as Uganda national debt rises to Shs 93tn

This is an increase from $23.66 billion that was recorded at the end of the last financial year (June 2023). This resulted in the debt-to-GDP ratio reducing from 48.4 to 46.9 per cent, because of the expansion of the economy, rather than a reduction in debt stock. 

External public debt accounted for $14.64 billion (Shs 55.37 trillion) while domestic debt was $9.96 billion (Shs 38.01 trillion), according to the public debt sustainability analysis conducted in December. Finance Minister Matia Kasaija says more borrowing is necessary to fund the budget, though it needs to be prudent. 

“Government of Uganda’s public financing is guided by the principle of prudent current national and global challenges that have necessitated increased borrowing to finance the budget for the year 2023/24. Despite the above, government is still committed to contracting more external concessional financing and less of domestic and commercial debt,” says the minister. 

However, with the increasing cost of debt (servicing) relative to the domestic revenue, which, by law, is supposed to service and repay the debt, the ministry admits is a cause of concern. The ratio of total debt service to domestic revenue amounted to 32.6 per cent in FY 2022/23 and thus debt service burden still remains a key area of concern for debt sustainability, according to the minister. 

By the end of December 2023, total public debt service amounted to $1.983 billion of which 59.9 per cent was in principal repayments, 39.8 per cent interest service payment and 0.3 payment of commissions and charges. It means $1.1878 billion (Shs 4.5 trillion) is wanted towards clearing the debt. 

Similarly, new loans equivalent to $1.563 billion were approved by parliament and signed, showing that more loan values are being acquired than what is being paid back, hence the increase in the debt stock. 

For 2023/24 financial year, parliament passed a total budget amounting to Shs 52.737 trillion and the total external financing for the first half amounted to Shs 1.415 trillion against the target of Shs 3.846 trillion. 

According to the ministry, the shortfall was mainly attributed to the lower-than-expected disbursements under projects and programs, delayed commencement of some major infrastructure projects and lower budget support disbursements. On the domestic scene, half-year net domestic financing amounted to Shs 3.162 trillion against the target Shs 1.341 trillion. 

The difference was attributed to the government’s “need to cover the financing gap that resulted from delayed mobilization of external budget support as well as low domestic revenue performance,” the report says.

The ministry says the outstanding debt stock including arrears from multilateral creditors is largely from the International Development Association of the World Bank (IDA), representing 51 per cent followed by African Development Fund at 17 per cent and IMF at 16 per cent.

Exim Bank of China remains the dominant bilateral creditor representing 71 per cent of the outstanding Bilateral debt stock including arrears as of December 2023 despite a reduction of 3 percentage points from 74 per cent in December 2022.