BUSINESS: Uganda’s debt to stretches to $1billion a year

BUSINESS: Uganda’s debt to stretches to $1billion a year

Spread the love

Uganda’s debt stock is likely to increase by more than $1b per year even without taking on new loans due to failure by government to utilise borrowed funds, Parliament’s committee on the national economy has warned.

The warning is contained in a report on the state of indebtedness, grants and guarantees, issued by the committee earlier this week.

The report indicates that whereas loan disbursements against the Budget stood at 81 per cent in the financial year 2017/2018, it dropped to 77 per cent in the financial year 2018/2019 with Shs4,878.47b disbursed against a budget of Shs6,336.19b.

The report attributes the decline to failure to utilise $5.08b in borrowed funds.
“As at June 2020, Uganda had $5.08b of undisbursed debt. This debt will increase Uganda’s stock in the medium term by over $ 1 billion each year, even without signing any new loans,” the report reads in parts. The report blames the undisbursed loans on slow implementation of some of the infrastructure projects, especially in the road sectors for which the money had been sought.

Some of the slow worst performing projects include the Rwekunye-Apac-Lira-Acholi bur road project for which a $210m loan was approved by Parliament in May 2016. Only $21m had been disbursed as of December 2019.

Others include the Tirinyi-Pallisa-Kamonkoli road for which $120m was borrowed, but only $43m was disbursed; the Busega Mpigi express highway for which $91m was borrowed, but only $6.4m had been disbursed; the expansion and upgrade of Entebbe Airport for which $200m was borrowed in July 2015, but only $133.2m had been disbursed by December 2019.
Debt sustainability
The report suggests that Uganda’s public debt position is sustainable in the medium and long term, projecting that public sector debt to gross domestic product ratio will increase from 27.29 per cent in the financial year 2018/2019 and peak at 36.27 in the financial year 2024/2015 but that the figures will go down as oil revenue starts tricking in.

Even when it peaks at 36.27, the report says, it is still below the 50 per cent of GDP that Charter of Fiscal Responsibility points out as the threshold of public debt that should not be overshot.

The report however calls on government to address issues around Uganda’s trade deficit and expanding the export markets.

“Low commodity prices continue to worsen Uganda’s trade deficit by keeping export revenues at bay. To ensure debt sustainability over the longer term, export revenues should grow commensurate to the rise in external debt to enable the country have sufficient reserves to repay,” the report says in parts.

The report also calls on government to address issues around expanding the revenue base, saying that debt service to revenue is emerging as a key constraining factor.

Debt service
“Debt service to revenue is emerging as the key constraining factor. Debt service to revenue reached 51 per cent in (financial year) 2018/2019 and interest payments are projected to take up 20 per cent of revenue in the (financial year) 2019/2020. Gross financing needs, at 10.1 per cent of GDP in the financial year 2018/2019, are expected to increase and peak at 11 per cent in the financial year 2020/2021 with continued build up of debt for the ongoing infrastructure investment,” the reports says.

Hits: 19


Spread the love