Minister of Finance, Planning and Economic Development Matia Kasaija, has refuted claims that Uganda’s Public Debt was getting epidemic and that the country could lose most of its assets to its debtors soon.
The Auditor General, in his report on Uganda’s public debt that was presented to Parliament on 4th January, showed concern that the national debt was getting out of hand and that Uganda could lose its assets to creditors due to failure to service its loans.
The report further indicated that most of the government’s debt was unplanned and unconstitutional.
Finance Minister, Matia Kasaija while addressing the matter today at Uganda media centre said Uganda’s Public debt is ‘sustainable, and is projected to remain sustainable in the medium to long term.
The debt level he said are comfortably below the international sustainability thresholds which is below 50% debt to GDP ratio, beyond which debt starts getting unsustainable.
Uganda’s debt to GDP ratio, he added, is significantly below that of the sub-Saharan average which is 45.4%.
According to Kasaija, Uganda’s total public debt stock both domestic and external amounts to USD 10.7 billion, equivalent to UGX 41.3 trillion as of June 2018
“Out of this, external debt disbursed and outstanding accounted for 67.2% USD 7.2 billion (about UGX 27.9 trillion) while domestic debt is about UGX 13.3 trillion” he said.
However Kasaija agrees that the percentage of Uganda’s debt against its GDP has increased since last year.
The Net Present Value (PV) of Public Debt to GDP increased to 30.8% in June 2018 from 27.4% as at the end of June 2017.
In Nominal Value Debt to GDP as at the end of June 2018 was 41.5% compared to 37.3% at the end of June 2017.
The Net Present Value (NPV) of a loan is the sum of all future debt service obligations (principal plus interest) on existing debt, discounted at the market interest rate while, the Nominal Value of a loan equals the loan amount borrowed.
Kasaija said that compared to other peer countries, Uganda is better off because most of its debt has been contracted on concessional terms, unlike other countries in the continent who have contracted a lot of commercial debt like Eurobonds.
He further states that the loans are from bilateral loaners whose interest rate is low and the payment agreement are very favourable
“I want to inform the country that Uganda’s Public debt has been provided largely by multilateral creditors who offer concessional terms that include a grant element of more than 50% with an average maturity of over 35 years and a grace period not less than 6 years coupled with relatively low interest rates below 1.5% annually” Kasaija said.
Uganda’s bilateral creditors are dominated by China Exim Bank and Japan International Corporation Agency (JICA) who are the biggest lenders. The bilateral creditors offer preferential terms with grant element that range between 20% and above 35%.
“Moreover, with the investments that our debt is financing, the capacity of our economy to service its debt obligations will significantly increase. In addition, the increase in revenue arising from implementation of the new Domestic Revenue Mobilization Strategy will reduce the country’s borrowing requirements in the future” he stated.
In addition, all debt payments are programmed and prioritized to ensure that debt is paid as and when it falls due. The risk for government defaulting on debt repayment is nonexistent in our budgeting cycle and should not be of concern to anyone,” he adds.
Kasaija further states that government will continue borrowing cautiously and selectively for infrastructure development with intention to grow the economy which in turn boosts domestic revenues, promotes exports to earn foreign exchange which it will use to service the external debt thus enhancing capacity for debt sustainability.