The Uganda Debt Network (UDN) has urged all stakeholders to support Government efforts towards equitable national development, debt sustainability and increased budget revenues.
UDN officials addressed reporters today Tuesday 15th June 2021 at their offices in Ntinda, to expound on the National Budget Speech that was delivered last Thursday on 10th June 2021 by the Minister designate of State for Planning Hon. Amos Lugoloobi . Hon.Lugolobi read a 44.7 trillion budget for the 2021 /2022 financial year.
‘’Even if passed and while UDN and other partners have always been part of the entire budget process/ cycle, we still think it is imperative that we continue to dialogue and share with Government on how best the country could tread on sustainable strategies for Uganda’s public debt, while increasing budget revenues to finance the country’s development needs and obligations over FY 2021/ 22, over the medium-term and long-term’’, said officials.
The total resource envelope for FY 2021/22 is projected to comprise of the following; Domestic Revenues Shs 22.4 trillion; Petroleum Fund Shs 200 billion; Budget Support Shs 3.5 trillion; Domestic Financing Shs 2.9 trillion; Project Support (External Financing) Shs 6.8 trillion; Domestic Debt Refinancing (Roll-over) Shs 8.5 trillion; and Local Revenue by Local Governments Shs 212 billion.
According to UDN, Debt servicing in the same FY 2021/22 will take a lion’s share of the national budget resources at 34%, to debt servicing, including: External Debt Repayments (Amortization) Shs 1.8 trillion; Interest payments 4.7 trillion, Domestic Debt Refinancing (rollover) Shs 8.5 trillion; Domestic Arrears Shs 400 billion.
Occasioned by constrained economic issues and COVID-19, Uganda’s current total debt burden is currently around Shs 68 trillion. In a sample of 1-year period, Uganda’s public debt increased by 35% from Shs 49 trillion in December 2019 to Shs 65 trillion by December 2020. This sharp increase was on account of borrowing to respond to COVID-19 pandemic and other natural disasters like the locusts invasion, floods in some parts of the country and balance of payments.
‘’As such, anyone would be concerned about this rapid debt growth, against a Gross Domestic Product of $ 35 billion in 2020; and missed Middle Income Status targets in 2017 and 2020. The country must deal with key binding constraints, run-away corruption, and execution issues and also look to new strategies to sustainable debt for Uganda’’, added UDN officials.
They added that on Domestic Debt Refinancing (Roll-over), Government must devise mechanisms where the monetary policy instruments support investment into production entities and opportunities in Uganda, rather than keep the offshore and domestic investors in securities (Treasury bills and Bonds) shift from “lazy/ passive investors” by simply awaiting Government payback at maturity of the securities to “active investors” who set up factories, services and actively participate in expansion of Uganda’s GDP.
‘’We recommend that the Government will require taxing more and scaling down the profitability of securities so that Uganda significantly reduces the level of the otherwise passive investors; who will in the near-term part with at least Shs 8.5 trillion in FY 2021/22’’.
UDN recommended that while China remains the biggest bilateral lender to Uganda and Africa at large, as well as holds the biggest commercial debt portfolio, the country needs to find the road back to concessional borrowing, for instance, under the World Bank IDA terms rather than the mushrooming debt on commercial terms by bilateral lenders (e.g. Parish club) and private creditors (e.g. London Club).
‘’The short maturity period for debt repayment under the private and bilateral creditors is not sustainable for Uganda’s economy that is struggling to recover from the adverse effects of COVID-19 pandemic and attaining Middle Income Status’.
The External Debt Repayments (Amortization) Shs 1.8 trillion in FY 2021/22 is equivalent to the Agro- industrialization budget allocation of Shs 1.68 trillion, otherwise foregone in the same financial year.
The country can have better strategies against such a hemorrhage of our resources that should primarily go to improving livelihood conditions of our people in Teso and Karamoja, saving the children, having better school structures and better salaries for Teachers and our armed forces that secure the country all time, added the team.
‘’In the foregoing, therefore, Uganda Debt Network (UDN) implores the Government to accelerate the joint Government-to- Government investments in Somalia, DR Congo, Chad and Central African Republic, Burundi and others. The three proposed road projects in DR Congo should highly be guarded against corruption so that the projects are delivered in time for business opportunities, increased security amongst Uganda trade partners’’.
Government has been encouraged to provide a financial facility that supports private sector actors into the Somalia market, while discussions with Chad and the Central African Republic should commence for railway, roads, Uganda Airlines and other inter-connectivity.
Such opportunities will reportedly expand Uganda’s GDP, as well as the participating countries.
‘’Learning from the full liberalization policy and divestiture/ privatization in the 1990s to-date, the Government of Uganda should reverse some elements of this policy and practice’’.
UDN further recommended that Ugandan citizens should retain and revamp Uganda Telecoms to participate and earn profit from the expanding telecoms market in Uganda and the Great Lakes region;. Given Uganda’s special contribution against apartheid South Africa in 1990s, we should negotiate for “right-of-way” for some markets such as cement, food products and others, as kind of a compensatory measure for Uganda’s contribution.
Even with the meagre resources under the Shs 44.7 trillion (equivalent to $12.5 billion going by the current exchange rate) for FY 2021/22, the Government was encouraged to demonstrate being more aggressive against run-away corruption. The time and cost overruns exhibited in some public investment projects according to UDN should be squarely handled so that taxpayers have timely value for money.
‘’The shame of the 22 km Kampala Northern By-pass incomplete project (even if duo or multiple carriage) since commencement in 2004 continues to grossly undermine Uganda’s GDP growth, contributes to debt expansion and other economic opportunities foregone. Government should immediately institute a substantive IGG, who then should look into the matters of such projects, beginning with the Kampala Northern By-pass and furnish the country on where the real problems (not excuses) and solutions lie’’.
Similarly, the Government through Parliament was encouraged to revisit the Traffic and Road Safety Act so that the elusive Police express penalty scheme with somewhat opaque accountability since 2004 should be managed by Uganda Revenue Authority.
‘’With expanded provision for other related fines, this window of domestic revenue mobilization would earn the country at least Shs 1 trillion into revenue basket over the next 2 financial years, as sobriety against road carnage comes back to Uganda’s highways and roads’’, further revealed the team from UDN.