Government worried over rising debt


Kampala. Government is concerned about Uganda’s rising debt levels whose accumulated interest alone accounts for 30 per cent of the budget, according to Finance state minister in charge of Planning.
Speaking during a dialogue in Kampala to discuss Uganda’s tax policy and its impact on the country’s quest for economic transformation, Mr David Bahati said government was “worried about our debt levels”, arguing that it was critical that “we keep an eye the debt stability”.
“It is important to note that we have not reached the 50 per cent threshold yet. We are managing our debts at the moment and it will take us another four to five years to get to the 50 per cent threshold,” he said.

Mr Julius Kapwepwe, from Uganda Debt Network, said the rising debt and government’s appetite to borrow was cause for concern.
With nearly Shs40 trillion debt as of the previous financial year, and still counting, he said, this matter needs to be treated with the attention it deserves because it is about the future of the country.
As of June 2017, according to Ministry of Finance, Uganda’s total public debt stood at 38.4 per cent of GDP, an increase of 2.4 since June 2016.

However, this is expected to expand further given the country’s overly ambitious infrastructure projects.
Dr Fred Muhumuza, a Makerere University lecture, said the 50 per cent threshold should not be an excuse for government to overly borrow as it is doing.
“The 50 per cent threshold is skewed towards optimism than realism. Government must watch out before it all goes wrong,” he said.

Other panelists including Kampala City Traders Association chairman, Everest Kayondo and Ms Miria Matembe, an activist and former ethics minister, raised concern over the continued borrowing of money that is not put to intended use.
“There are fund absorption problems, heavy administrative burden and investment in non-productive sectors, so why should we borrow?” Mr Kayondo wondered.
On her part, Ms Matembe argued that the country’s priorities are skewed towards wrong activities which could explain the rising debt levels.

Analysts say African countries, among them Uganda, debt indicators are reaching thresholds that are not sustainable, despite having a large share of their debts written off under the World Bank/IMF debt relief programmes.
Most of these countries, according to details, continue to accumulate debts. Many of their distresses loans have been restructured under the Heavily Indebted Poor Countries Initiative of 1999 and Multilateral Debt Relief Initiative of 2005.
However, many of them are already showing signs of debt distress.

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