By Andrew Irumba
Kampala: Uganda’s public debt surged 20.5% in the 12 months to June as the east African country soaked up new credit to help deal with the economic impact of COVID-19, the central bank said on Tuesday.
The new loans mostly came from international lenders including the World Bank and the International Monetary Fund (IMF).
As of the end of June, Uganda’s public debt was 56.5 trillion shillings ($15.33 billion), according to the Bank of Uganda (BoU) in its report.
About two-thirds of the debt is held by external creditors, and the public debt is now 40.8% of GDP.
The report attributed the 20.5% rise in debt from June 2019 to new borrowing for “countering the economic distress brought about by the COVID-19 pandemic.”
Uganda’s opposition and the IMF have in recent years expressed unease about the ballooning public debt and potential repayment problems.
The government of President Yoweri Museveni, seeking to finance its infrastructure construction programme and shore up political support, has secured large credit lines from China over the last decade.
The central bank said Uganda was still relatively far off potential debt distress but that “significant vulnerabilities are evident.”
“The associated increase in interest payments will be a substantial drain on resources that could have otherwise been used to finance development,” the central bank said.
Uganda’s economic output in the quarter to June shrank by a faster pace, contracting by 3.2%, compared to 1.7% in the previous quarter.
These come after the stock of Uganda’s total public debt grew from $12.55 billion (Shs46.36 trillion) at end June 2019 to $13.33 billion by end December 2019, which is equivalent to Shs48.91 trillion, due to increased borrowing by the government in the recent past.
The Ministry of Finance, Planning and Economic Development said this, external debt was $ 8.59 billion, which translates into Shs31.53 trillion), while domestic debt was $ 4.73 billion, which is about Shs17.38 trillion.
Addressing a news conference at Uganda Media Centre earlier this year, state minister of finance general duties Dr Ajedra Gabriel Gadison Aridru said this represents an increase in nominal debt to GDP from 36.1 per cent in June 2019 to36.97 per cent in December 2019.
“Measured in present value terms, the total stock of debt as at end December 2019 amounted to 28.54 per cent of GDP up from 27.3 per cent as at end June 2019,” he said.
Dr Ajedra said based on the recent Debt Sustainability Analysis (DSA) report 2019, the nominal total public debt is projected to increase to 40.9 per cent of GDP in FY2019/20, before peaking at 49.5 per cent in FY2023/24.