UGANDA, Kampala | Real Muloodi News | According to the Debt Sustainability Analysis Report for the 2021/22 fiscal year, the Ministry of Finance, Planning and Economic Development believes that the outlook for Uganda’s national debt is faced with moderate risk.
The main vulnerabilities are attributed to the slow growth of exports and the increasing debt service burden.
The report, released on Wednesday 1st February, stated that debt service as a percentage of revenue rose to over 30% in the 2021/22 fiscal year and is projected to continue to increase in the 2022/23 fiscal year, largely due to higher domestic interest rates as a result of recent high levels of inflation and the growing cost of external debt as global financing conditions become tighter.
The analysis also shows that Uganda has a limited capacity to absorb shocks, which means that a severe economic shock could result in a decline in the rating and a high risk of debt distress.
The Ministry of Finance, Planning and Economic Development plans to maintain debt at sustainable levels over the medium term by increasing domestic revenue collection through the full implementation of the Domestic Revenue Mobilisation Strategy (DRMS), improving the efficiency of government spending, and allocating more resources to sectors with a higher growth multiplier effect.
The report reads in part, “The findings of this DSA indicate that public debt is projected to remain sustainable over the medium to long-term.”
The Ministry explained that debt sustainability will be supported by a recovery in GDP growth as the economy returns to its pre-COVID potential, a reduction in borrowing as some major infrastructure projects are completed in the medium term, and strong revenue growth following the implementation of the Domestic Revenue Mobilisation Strategy.
Additionally, the realisation of oil revenues in the medium to long term will also contribute to debt sustainability.
According to the DSA, Uganda’s public debt stock rose from $19.54 billion in the 2020/21 fiscal year to $20.99 billion in the 2021/22 fiscal year. This represents a much smaller increase in public debt compared to the previous two years.
External public debt increased from $12.39 billion to $12.82 billion between June 2021 and June 2022, while domestic public debt increased from $7.16 billion to $8.16 billion over the same period.
As a share of GDP, public debt rose to 48.4% in June 2022, up from 47.0% in June 2021. Measured in present value terms, the stock of public debt equated to 39.5% of GDP, up from 37.5% the previous year.
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