By Abraham Kizza
KAMPALA. The Minister of Finance, Matia Kasaija has said that Uganda’s debt is still manageable with nominal debt to Gross Domestic Product (GDP) of 41.5%.
“I would like to assure the country at large, that our debt is sustainable and is projected to remain sustainable in the medium to long term. The debt levels are comfortably below the international sustainability thresholds (below 50% debt to GDP ratio) beyond which debt starts getting unsustainable, and are significantly below the sub-Saharan average (45.4% debt to GDP),” he said.
Minister Kasaija said the money borrowed is financing the flagship projects like the power generation plants at Isimba and Karuma, the development of Hoima International Airport and the construction of Entebbe Express High Way, among others.
The Auditor General, in his report on Uganda’s public debt presented to Parliament on 4th January, raised concern that the national debt was getting out of hand and that Uganda could lose its assets to creditors due to failure to service its loans.
But addressing journalists at the Uganda Media Centre on Tuesday, Minister Kasaija said, “I would like to correct this information to indicate that government borrowing is controlled and guided by the Public Debt Management Framework (PDMF-2013)."
He added that the government aims at financing its activities and projects in the most cost effective manner.
He said that as at the end of June 2018, Uganda’s total public debt stock (domestic and external) amounted to USD 10.7 billion, equivalent to UGX 41,326.1 billion. Out of this, external debt disbursed and outstanding accounted for 67.2% (USD 7.2 billion or UGX 27,939.9 billion) while domestic debt contributed 32.4% to total financing (USD 3.5 billion or UGX 13,386.2 billion).
“I want to inform the country through you the media that Uganda’s public debt has been provided largely by multilateral creditors who offer concessional terms that include a grant element of more than 50% with an average maturity of over 35 years and a grace period not less than 6 years coupled with relatively low interest rates below 1.5% annually,” he said.
He said that with the investments that Uganda’s debt is financing, "the capacity of our economy to service its debt obligations will significantly increase", adding that the increase in revenue arising from implementation of the new Domestic Revenue Mobilization Strategy will reduce the country’s borrowing requirements in the future.
“In addition, all debt payments are programmed and prioritized to ensure that debt is paid as and when it falls due. The risk for government defaulting on debt repayment is nonexistent in our budgeting cycle and should not be of concern to anyone.
Government will however continue borrowing cautiously and selectively for infrastructure development with intention to grow the economy which in turn boosts domestic revenues, promote exports to earn foreign exchange which we use to service our external debt thus enhancing our capacity for debt sustainability,” he said.