Uganda's Debt Burden Hits US$11.2B

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In short
Ugandas external and domestic debt has hit 11.2 billion dollars according to the latest Bank of Uganda State of the Economy report.

Uganda's external and domestic debt has hit 11.2 billion dollars according to the latest Bank of Uganda State of the Economy report.
 
The report says provisional total public debt stock (at nominal value) as at the end May 2017 stood at 34 trillion Shillings, an increase of 14.1 per cent relative to June 2016 and 16.7 per cent in the same period a year ago.
 
It comprises 21.1 trillion Shillings or 5.7 billion dollars in external debt, commanding a dominant share of 62.4 per cent of the total public debt, and 12.7 trillion Shillings in domestic debt.
 
The external public debt at the end of May 2017 stood at 11.2 billion dollars. Undisbursed external debt stood at 5.3 billion dollars, down from 5.5 billion dollars as at end June 2016.
 
The former Finance Minister, Maria Kiwanuka in 2013 introduced a Public Debt Medium Framework (PDMF) in an effort make Uganda's public debts sustainable.
 
But the Bank of Uganda says latest figures indicate that most of the domestic debt cost and risk indicators were outside the Public Debt Medium Framework (PDMF) benchmarks and domestic debt stock continues to exhibit roll over risk.
 
The rate of public domestic and external debt has been worrying though finance Minister Matia Kasaijja in June insisted that it was sustainable.
 
President Museveni in July declared that he must personally approve all loan applications requested by the government before they can be put to a vote in Parliament.
 
The President's decision was aimed at reducing what he called wasteful spending while the country navigates its way out of choppy economic waters. Museveni also halted the approval of 11 loans worth 914.79 million dollars.
 
The current high public debt has been attributed to ongoing infrastructure developments in the road sector, oil and gas and hydro power projects. 
 
Uganda's public debt burden has risen by 12.7 percentage points to 38.6 per cent of the Gross Domestic Product (GDP) in 2016/17 from 25.9 per cent of GDP in 2012/13 and is projected to continue rising towards 45% of GDP by 2020.
 
Debt as a percentage of revenues has risen by 54 per cent since 2012 and is expected to exceed 250 per cent by 2018.
 
The debt burden, which is equivalent to this year's budget, accounts for 33.8% of the country's Gross Domestic Product (GDP).
 
The preliminary Debt Sustainability Analysis shows that Uganda is likely to face moderately high risk.
 
There is also a risk of a further increase in the already high interest costs in the budget, which currently account for more than 10 per cent of Government expenditure.
 
Debt Sustainability Analysis is a tool developed by the World Bank and the International Monetary Fund to help donors in mobilizing critical financing for low-income countries, while reducing the chances of an excessive build-up of debt.
 
Uganda's debt had peaked to unsustainable levels nearly two decades ago, such that the economy did not have the capacity to meet its debt obligations.
 
The situation was only turned around when Uganda qualified for debt relief under the Highly Indebted Poor Country (HIPC) Initiative in 1998 and subsequently under the Enhanced HIPC in 2000.
  
Uganda also benefited from another form of debt relief under the Multilateral Debt Relief Initiative (MDRI) in 2006.
 
 These eased Uganda's debt service obligations but Bank of Uganda is concerned that government borrowing is exceeding Public Debt Medium Framework (PDMF) 2013.