Uganda: Government Projects Public Debt to Rise to 54.1% By 2023

Rising expenditure pressures resulting from the need to finance infrastructure projects and an increase in Covid-19 related borrowing will push Uganda’s public debt to 54.1 per cent by the end of the 2022/23 financial year, according projections by the Ministry of Finance.

Details contained in the Debt Sustainability Analysis report authored by the Ministry of Finance, indicates that public debt is projected to increase to 49.9 per cent of gross domestic product by June 2021, before peaking to 54.1 per cent by the end of 2022/23 financial year.

In the next few years, the Ministry of Finance said, public debt is projected to increase on the account of an increase in the pace of borrowing to finance infrastructure projects, especially in the transport and oil and gas sectors.

The stock of total public debt grew from $12.55b at the end June 2019 to $15.27b (Shs56.94 trillion) by June 2020, which represented a 21.7 per cent growth.

Of this, external debt stood at $10.45b (Shs38.97 trillion) while domestic debt was $4.82b (Shs17.98 trillion), according to the Ministry of Finance.

The Debt Sustainability Analysis report informs decision making at different levels of government and is a key input into government’s medium term debt strategy, national budget strategy, medium term fiscal framework, and fiscal risks statement.

It is also used to track progress on government commitments under different protocols.

In a preface about the report, Mr Patrick Ocailap, the Treasury deputy secretary, said the report is an important facet of debt management and an avenue by which risks and vulnerabilities associated with the country’s debt trajectory can be identified and mitigated.

“The report comes at a time when the world is faced with the worst health crisis – Covid-19. The global and domestic response to Covid-19 has had far reaching implications for the economy, with real gross domestic product growth slowing to 2.9 per cent during the 2019/20 financial year from 6.8 per cent,” he said, noting that Covid-19 had presented a number of challenges among them sharp decline in domestic revenues and additional expenditure requirements, which have necessitated heavy borrowing.

Composition of public debt, as at June 2020, indicates that external debt comprised 68.4 per cent of total debt up from 66.5 per cent, mainly on account of Covid-19 related borrowing.

The share of external debt owed to commercial banks increased significantly, from 1.8 per cent of total external debt in the 2018/19 financial year to 7.2 per cent in the 2019/20 financial year.