February 28, 2013

Uganda’s Debt Unsustainable

Civil society groups have raised concern over Uganda’s level indebtedness saying the accumulated debts have reached unsustainable levels.
A report by Uganda Debt Network tracking Uganda’s debts since 2004 indicates that the external debts had shot to almost six billion US dollars by end of 2012. The report indicates that over 3.01 billion dollars from the debts has been disbursed while another 2.5 billion dollars was yet to be disbursed.
Julius Mishambi, a director of Programmes at Uganda Debt Network, while appearing before the National Economy Committee of Parliament, said the 2.5 billion dollars continues to accumulate interests before the money is spent on intended purposes.

He says the domestic debts have also shot to over five trillion Uganda shillings with most of the money owed to individuals. The Central Bank is responsible for over 88 percent of the domestic debt through issuance of treasury instruments.

Stephen Mukitale Biraahwa, the National Economy Committee Chairperson, says such instruments could be disastrous to the private sector. He says the debts are likely to take up all money meant for service delivery for critical areas like health and agriculture.
The analysis indicates that domestic debts stock between June 2003 and 2011 had increased by over 177 percent indicating an average annual growth of 16.6 percent.

Mishambi expressed fear that the debts are likely to increase in the absence of a National Debts Strategy.  The national debt strategy that has been guiding the borrowing process expired in 2012. The Ministry of finance is yet to come up with another strategy to guide the borrowing in the next five years.

Some of the debts, according to Mishambi, are due to failure by government officials to spend within activities agreed to in the annual budgets. The Ministry of Works in 2010 reportedly had domestic arrears of over 415 billion shillings, it paid over ten billion in 2010/2011 leaving over 405 billion in arrears.
The same ministry is said to have spent over 122 billion shillings in 2010/2011 to clear outstanding bills which had not been provided for in the same financial year.

Juliet Akello, a programme assistant at Uganda Debit Network says the level of domestic debt could be much higher because finance ministry has not been providing parliament with information on the same.

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