Civil Society Organisations under the Civil Society Budget Advocacy Group (CSBAG) have raised concerns over the rising national debt and its sustainability ahead of the forthcoming budget for FY 2023/24, calling on the government to cut down the appetite for debt and financing non-core projects.
Uganda’s National Debt has significantly increased from Shs 30.9 trillion in FY 2018/29 to UGX 86.6 trillion and in FY 2023/24 representing a 180% growth, of which domestic debt is Shs 38.1 trillion and external debt Shs 48.5 trillion.
These say a re-computation of Uganda’s debt to GDP has revealed a consistent growth over the period of five years from 31% in June 2017 to 52% in June 2022.
Speaking at a Joint CSO press conference, Julius Mukunda, the Executive Director of CSBAG, said 75% of the current external debt is concessional and the balance is non-concessional although, by the end of December 2022, the non-concessional debt had increased from 21% recorded in June 2022 to 25% by the end of December 2022.
He explains that the proportion of domestic revenue that goes into servicing debt has been overwhelmingly breached. Mukunda noted that 24.1% of the revenue being collected is going into servicing debt against a benchmark of less than 12.5%.
It should be noted that the government in the last Financial Year, used commercial loans to the tune of Shs 4.5 trillion for recurrent expenditure (wage and Administration), He explained that this cripples the government’s capacity to deliver services such as the worsening state of roads in Kampala and other parts of the country.
Currently, Uganda’s Domestic arrears have increased from Shs 4.65 trillion in 2021 to Shs 7.55 trillion in 2022 (62% increase) despite the existence of the strategy to clear and prevent Domestic arrears by June.
For the Next FY, the government has allocated only Shs 205 billion for the domestic arrears, which Mukunda argues has not only suffocated the private sector and shows that the government’s inability to pay debt, shows its control systems have failed.
Mukunda asked the government to enforce fiscal discipline by reprimanding errant accounting officers and at the same time set aside adequate resources in the budget to clear the current stock of domestic arrears over the medium term.
He further questioned the unending supplementary budgets, saying their continued approvals without a corresponding increase in Revenue and financing leads to increased gaps in funding that affect the earlier budget objectives and plans.
He says increased supplementary budgets can have negative consequences such as an increased public debt burden, and fiscal imbalances resulting from inadequate revenue, among others.
The government through Parliament, has approved the national budget for the FY 2023/24 amounting to a total of Shs 52.73 trillion representing a 16% increase in the last three years from Shs 45.59 trillion in 2020/21.
According to the government, the increase is a result of a projected increase in domestic resource mobilization from Shs 25.5 trillion in FY 2022/23 to Shs 29.67 trillion (URA 27.42 trillion and Non-Tax Revenue of 2.24 trillion) coupled with an increase in external borrowing from Shs 6.72 trillion this FY to Shs 8.25 trillion next FY, among others.
However, Mukunda noted that despite an increase in tax revenue collections of Shs21 trillion in FY 2021/22 from Shs 14.4 trillion in FY 2020/18, a 46% growth, URA has consistently not met its Tax Revenue collection targets.
Adding, “The cumulative collections for the first half of the year 2022/23 amounted to Shs 11.67 trillion against a projection of Shs 11.74 trillion registering a deficit of Shs 94.8 billion, however, the successful implementation of FY 2023/24 budget, requires that every shilling is collected.”
He said for the government to sustainably meet its target, it needs to balance its budget by increasing its own domestic resources, cutting down the appetite for debt to finance non-core projects as well as closing the gaps that lead to a haemorrhage of public resources, among others.
