The Permanent Secretary of the Ministry of Finance, Planning and Economic Development, and Secretary to the Treasury, Ramathan Ggoobi, has assured Ugandans that the country’s debt is sustainable.
“The debt of Uganda is sustainable because it’s not by chance, it’s deliberate. In the region, we are among the most comfortable and the best as far as debt management is concerned,” Ggoobi said.
He noted that by the end of the month, the country’s debt-to-GDP ratio is expected to be 47.9%. This is below the 52.4% threshold provided in the Charter for Fiscal Responsibility for the financial year 2023/24 and less than the 50% government policy target for debt sustainability.
“We have discussed this debt extensively. When will the trouble come? We are improving. I urge Ugandans to trust ourselves. International forums and organizations like the World Bank and the International Monetary Fund (IMF) consider Uganda among the most credible,” Ggoobi added.
He made the remarks at a post-budget dialogue organized by Absa Bank Uganda, where he dismissed fears of the country being plunged into a debt trap.
By the end of December 2023, Uganda’s total public debt stood at Shs93.38 trillion. External debt was Shs55.37 trillion, while domestic debt was Shs38.01 trillion. Public debt is projected to grow to Shs97.638 trillion by June 30.
Ggoobi emphasized that the government has invested borrowed funds in projects with a return on investment.
“The question is, where have we spent the money we have borrowed? Borrowed money is strictly for projects that have a return on investment,” he explained.
He noted that about 29% of Uganda’s debt has been spent on infrastructure development, such as oil roads, tourism roads in parks, the Kampala-Entebbe Expressway, the ongoing Kampala Flyover, and the expansion of Entebbe International Airport, which are considered good investments that will yield returns.
“Additionally, 28% of the money has gone into electricity projects like the Karuma and Isimba dams and rural electrification,” he added.
Ggoobi said the government’s strategy is to keep the debt sustainable while leveraging concessional debt, budget re-purposing, local revenue collection, and boosting exports. He revealed that Uganda’s creditors are content with the country’s payments and that the cost of borrowing has been relatively lowered.
“We are the second-best debtors to creditors in the region,” he stated.
The government recently passed the budget for the 2024/25 financial year, increasing it from Shs52.7 trillion to Shs72 trillion.
In his remarks, Mumba Kalifungwa, the MD of Absa Bank Uganda, noted that the Financial Year 2024/25 National Budget represents a crucial milestone in Uganda’s economic development. He highlighted that it sets the tone for fiscal policy and outlines the government’s revenue and expenditure priorities for the coming year. Kalifungwa commended the government for its commitment to driving economic growth and fostering an environment that supports sustainable development.
“One of the central themes of this budget is the emphasis on agro-industrialization. Agriculture remains the backbone of our economy, providing livelihoods for millions of Ugandans. The budget’s allocation towards modernizing agriculture, improving access to markets, and enhancing value addition is commendable. We are mindful of the role of both government and private sector collaboration towards enhancing productivity and commercialization of agriculture to improve livelihoods,” he said.
Meanwhile, Sarah Kagingo, the Vice Chair of the Board of the Private Sector Foundation of Uganda (PSFU) Board, stressed the need for more patient capital with a short turnover period. She also called for strict and stringent measures against officials who embezzle and waste public funds at the taxpayer’s expense.
Debt Stock
As of the end of December 2023, Uganda’s total public debt stood at Shs93.38 trillion, equivalent to USD 24.69 billion. Of this amount, external debt was Shs55.37 trillion, equivalent to USD 14.64 billion, while domestic debt was Shs38.01 trillion, equivalent to USD 10.05 billion. The public debt is projected to reach Shs97.638 trillion, equivalent to USD 25.716 billion by June 30, 2024.
In nominal terms, Uganda’s public debt-to-GDP ratio was estimated at 46.9% in June 2023 and is projected to end at 47.9% for the financial year ending June 2024. This is below the 52.4% threshold provided in the Charter for Fiscal Responsibility for the financial year 2023/24 and less than the 50% government policy target for debt sustainability.