Civil Society, Economists Caution Government On Rising Debt

Uganda’s decision to keep borrowing is worryingly plunging the country into indebtedness even before social expenditure improves, civil society activists have warned.

This was revealed during the launch of the inaugural African Conference on Debt and Development (AfCoDD) at the Uganda In-Country Session organized by Uganda Debt Network (UDN) in partnership with African Forum on Debt and Development (AFRODAD) and SEATINI – Uganda, held at Hotel Africana in Kampala.

The conference brought together officials from IMF, MoFPED, BOU, Members of Parliament, AFRODAD, SEATINI, Academia, CSOs and members of the Media fraternity.

Officials at the Launch of AfCoDD

Hon. Stephen Mukitale , the Former Buliisa County Member Of Parliament said; ‘’The cost of Public-Private Partnerships , the conditional liabilities that come with it should be understood further if we are going to discuss the debt because there are guarantees government make for such projects and they come at cost’’, he said.

Senior Economist Dr. Fred Muhumuza said the worse may come as Uganda’s biggest markets South Sudan and Kenya are facing political instabilities.

‘’We don’t know where the politics of Kenya is headed that is our first biggest trading partners where we export. The other biggest trading partner is south Sudan as you have all noticed trucks can no longer go there .What does that mean to an investor , to someone who lent Uganda to build roads on their assumption that we are going to boost our production and export to the region’’, remarked Muhumuza.

The executive director of Uganda Debt Network, Patrick Tumwebaze  said Global institutions such as IMF should stand with Uganda that the Debt Service Suspension Initiative (DDSI) doesn’t end on December 2021, but rather up to about Dec. 2025 for African countries like Uganda to re-organize their economic stance and back to the path of debt repayment.

‘’While we look to general sovereign debt restructuring, we think some loans are due for cancellation on a case by case basis (e.g. based on the delays in disbursement that caused their underperformance). We are also glad that Government of Uganda is already positively moving in this direction through own- investment, Foreign Direct Investment and partnerships’’, he said.

Officials at the Launch of AfCoDD

It should be noted that the total resource envelope for FY2021/22 is projected to comprise of the following; Domestic Revenues Shs22.4 trillion, Petroleum Fund Shs200 billion, Budget Support Shs3.5 trillion, Domestic Financing Shs2.9 trillion,  Project Support (External Financing) Shs6.8 trillion, Domestic Debt Refinancing Shs8.5 trillion and Local Revenue by Local Governments Shs212 billion.

This indicates that debt servicing will take a lion’s share of the national budget resources at 34 per cent which includes servicing: External debt repayments (Amortization) Shs1.8 trillion; Interest payments 4.7 trillion, domestic debt refinancing (rollover) Shs8.5 trillion and Domestic Arrears Shs400 billion.

Experts attributed the rise in debt from June 2019 to new borrowing for “countering the economic distress brought about by the COVID-19 pandemic.”

The prolonged global pandemic is leading to an economic and social crisis that is plunging Africa into its first economic recession in nearly three decades and with it, accelerating a debt crisis that is leading to a reversal in social development and worsening inequality.

Uganda shuttered nearly all businesses, banned vehicle movement and public gatherings as part of its sweeping anti-coronavirus lockdown.

COVID-19 Pandemic Preventive Measures like Lockdowns and Corruption have been highlighted the major cause of the frightening debt increase.

In a period of one year, Uganda’s public debt increased by 35 per cent from Shs49 trillion in December 2019 to Shs65 trillion by December 2020. This quick rise 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 a result, Uganda’s present total debt burden is presently around Shs68 trillion.

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