Government’s allocation of huge amounts of money to interest payments is depriving the already underfunded social economic sectors thereby exacerbating the plight of citizens whose recurrent social economic needs remain unmet, the Uganda Debt Network (UDN) says.
According to UDN, interest payments accounted for Shs309.4 billion in financial year 2007/2008; ten years later the money allocated for interest payments has increased almost nine fold to Shs2, 739 billion in fiscal year 2017/18, an exponential increase of 785.3 percent. The 2017/18 national budget stands at Shs29 trillion.
“A trend analysis of growth in interest payments in the last 10 years depicts increasing government expenditure with an annual average percentage of 78.5%,” UDN says in its latest weekly update, adding that this rate is too bad for the government that still has to borrow to fund some of its projects.
The organisation noted that Uganda’s huge expenditure on interest payments has encroached on human development and service delivery efforts. They add that Interest payments are increasingly becoming a priority, taking second position in financial year 2017/18 compared to fourth position in financial year 2016/17.
“Notwithstanding the anticipated long term benefits of loan funded projects for example in roads and energy sectors, sacrificing citizen’s current social economic priorities at such a rate is too high a price to pay,” UDN, which tracks government’s debt management says, calling for stricter scrutiny, increased restraint and moderation regarding government’s loan contraction.
UDN, in its brief, says the civil society organizations applaud the recent refusal by President Yoweri Museveni to approve the 11 loans worth one billion US dollars that they say was ‘clearly not all that crucial for the country to absorb’.
According UDN, Uganda’s slow growth rate of less than 5 percent undermines the country’s debt sustainability and economic growth projections in the near future.
UDN now urges Parliament to restrain government from excessive borrowing especially for loans with non-concessional terms. The group also wants government to streamline the already existing loan projects alongside identifying growth drivers in which to invest to generate economic dividends.
“In terms of prioritization, any subsequent loan contraction approvals should be those that focus on financing projects that can generate income within a reasonably period to pay off the debts,” the organisation says.