Government to spend Shs2 trillion on debt servicing - minister

Kampala. Government will in the financial year 2017/2018 spend Shs2 trillion towards servicing the national debt in loans and interest, Finance minister Matia Kasaija has revealed.
Pursuant to the development objectives, Uganda has mobilised financial resources from different sources both internal and external.
While speaking at a one-day workshop organised by the Uganda Debt Network in Kampala, Mr Kasaija said the need by the government to provide services such as health and education amid limited resources has led to increase in non-concessional and domestic loans, worsening the debt burden.
“The effectiveness of borrowing depends on how you use the money so that you remain able to service the debt. As government we are working hard to ensure that our loan remains sustainable,” Mr Kasaija said.
He added that the budget for loan servicing is big but necessary as long as money is being put to good use such as infrastructure that will lead to national development.
The workshop was held under the theme; Development aid: Lessons for Uganda’s external debt performance.
To achieve this Mr Kasaija said the government has put in place initiatives such as the debt management unit at the ministry of Finance to keep track of the national debt burden.
He also cautioned the public against getting involved in corruption and fraud as this will make the Ugandan debt unsustainable, saying that it is becoming bigger and requires prudence to sustain it.
“We have to keep borrowing like any other country or business since our taxes are not enough to sustain the economy. However some government officials misuse the money which hinders our development. I call upon every responsible citizen to desist from corruption for the good of the country because if the country is rich every citizen enjoys better services,” he said.

Over-reliance on foreigners
Dr Ezra Suruma, the board chairman-Uganda Debt Network, said the increasing national debt is due to over reliance on foreign expatriates and individuals to supervise government projects.
He attributes this to failure by government to develop capacity of local supervisors to do the work of expatriates.
“Our project supervisors are not empowered to take on construction projects because first of all they usually do not know much about them and there is no way you can supervise a project you have less knowledge about,” Dr Suruma said.
He said the national debt will keep growing if we do not stop over relying on expatriates because economic development should depend on people’s ability to build and supervise infrastructure development by themselves instead of foreigners like it is today.
“We need to develop our local capacity so that we do not depend on expatriates and improve on our integrity in managing projects,” he added.
The increase in the debt burden, according to Dr Suruma can also be attributed to the procurement delays caused by the procurement laws.
He said despite the amendments in the law, the fights in procurement through objections whether fair or unfair, lead to delays which affects the entire procurement process.
Dr Adam Mugume, the director of research at Bank of Uganda, said foreign borrowing should only be done to generate an economic activity that can lead to earning in dollars.
He said the issue of exchange rate has been among the causes for the rise in national debt because government usually borrows in dollars but earns in shillings which makes it hard to pay back the loans.
“If you borrow on commercial terms where you are supposed to start paying back after one year yet you are not going to generate revenue, you must find it hard to pay back. As a country, we should improve on our project selection so that we put money for projects that generate economic activity,” Dr Mugume explained.