By Patrick Mwebaze
The Government of Uganda’s objective to borrow external resources is valid to finance infrastructure projects as stipulated in the Vision 2040, the 2nd National Development Plan (NDPII) for 2015/16 to 2020/21 period and the public sector investment plan.
CSOs recognize government of Uganda’s efforts towards prudent management of public resources including debt resources as guided by key policy, legal and institutional regimes such as; The Public Financial Management Reform Strategy 2018, Public Finance Management Act 2015 (as amended), The Public Private Partnership Act (2015), Public Debt Management Framework 2013, Annual Medium Term Debt Management Debt and Cash Management Department at ministry of Finance.
CSOs commend Government towards capturing sector debt figures and consolidating a national sovereign debt position, mainly through Ministry of Finance (MoFPED) and Bank of Uganda. Whereas Government and some other institutions suggest a debt portfolio of US $10.5 million (approximately Shs41.3 trillion), this is on account of disbursed and outstanding debt (DOD). Beyond DOD, this narrative often does not account for: undisbursed debt, recoverable debt for instance, due to private sector capital investment in oil and gas exploration; domestic arrears had increased from Shs1.4 trillion in Financial Year (FY) 2014/15 to Shs3 trillion by end of FY 2016/17, contingent liabilities- having increased from Shs6.5 trillion in FY 2015/16 to Shs 7.5 trillion in FY 2016/17
Over Shs4.9 trillion by beginning of FY 2018/19 was already accumulated in Land compensation. Its little wonder, therefore, that the following institutions of Government and associates give contradicting figures of the debt situation; Ministry of Finance with total debt stock at Shs 41.4 trillion (US $10.7 billion) in June 2018; Bank of Uganda at Shs42.4 trillion in October 2018 and others.
UDN contends that the suppress of the debt figures too, by institutions such as the International Monetary Fund (IMF) World Bank Group (WBG) is drawn from their motivation to lend to developing economies including Uganda and their impartiality risks being impaired.
Meanwhile, the UDN computation puts the said various categories of Uganda’s debt situation at excess of US $15.2 billion (approximate Shs52 trillion) by beginning of FY 2018/19 July 2018) against Uganda’s GDP value of US $26 billion, which represented a paltry 0.04 per cent of the world economy in the same period.
However, the capacity to utilize, absorb and manage; and sustain borrowed resources in relation to repayment, Balance of Payments (BOP) and domestic revenue mobilization are imbalanced. The BOP position has been characterized with fluctuating, but recorded negative returns for the past 4 years, average economic growth of 4.5 per cent for the last five years and revenue to GDP ratio stagnation at approximately 13 percent amidst increasing borrowing. The trend of rising debt accumulation has continued with limited effective solutions to address causes of indebtedness.
Both Government and associate institutions should profile the comprehensive sovereign debt portfolio for Uganda, upon which appropriate policy and programming measures are accordingly formulated, updated and implemented. Challenges around changing debt architecture and current funding modalities notwithstanding, Uganda should be strategic and not in a rush to the so-called 50 per cent debt: GDP threshold, to moderate such risks as: Front-loading future funds (such as anticipated oil revenues); Default on debt payment; and endangering future Uganda’s generations and development.
The writer is the Executive Director of Uganda Debt Network (UDN)