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Uganda’s unending appetite for debt: Shouldn’t we be worried?
Cissy Kagaba
What you need to know:
- Diversion of funds. The possibility that much of the money that Uganda will borrow from Stanbic Bank will be diverted to other uses other than those for which it was borrowed is high since the details of this loan are not likely to become public despite this being a public burden.
- Therefore, the ultimate misuse of these funds cannot be ruled out. About a decade ago, a number of development partners wrote off huge amounts of money owed to some of the most impoverished countries of the world and Uganda was a beneficiary of such write-offs.
Some time back, a story on international news agency Reuters revealed that Uganda sought to locally borrow some $661 million from the domestic-based Stanbic Bank, a subsidiary of the Standard Bank of South Africa, to fund a shortfall in the Financial Year 2019/2020 Budget.
This comes at a time when a few months ago, the Secretary to the Treasury, revealed that plans were underway to take out Shs445 billion from the Petroleum Fund of the Central Bank to support the same FY2019/2020 Budget, of which this was not the first time that the Petroleum Fund would be raided to support a Budget for a financial year, despite the terms and conditions for which taking money from the Fund being very clear, but unfortunately not followed.
We may not be opposed to Uganda borrowing from whoever they want to, especially if it is done in a transparent and legally streamlined process, after-all, every country does borrow at one time or another to meet funding shortfalls of their own.
What is of concern is the reason for which sums as huge as Shs2.43 trillion ($661 million) are being borrowed to fund short-term needs as supporting the Budget of a financial year that is yet to reach its half way mark.
Over the last several years, Uganda has taken on so much external debt, especially from China, for the development of infrastructural projects with the hope that once the oil starts flowing, there will be more than enough money to pay off these loans.
Unfortunately, the timelines on which the first barrel of oil will be extracted are extended every year and now the latest prospecting firm, Total, is not certain if they can do business here anymore.
A number of players in this sector, including the World Bank and the IMF, have warned of Uganda’s unending appetite for debt and this unending appetite has led the country, close to the 50 per cent debt threshold in regards to the gross domestic product, which at this rate, may surpass that mark in the Financial Year 2021/2022.
The possibility that much of the money that Uganda will borrow from Stanbic Bank will be diverted to other uses other than those for which it was borrowed is high since the details of this loan are not likely to become public despite this being a public burden. Therefore, the ultimate misuse of these funds cannot be ruled out.
About a decade ago, a number of development partners wrote off huge amounts of money owed to them some of the most impoverished countries of the world and Uganda was a beneficiary of such write-offs. I fear Uganda is going to find herself in a similar position soon, the only difference now is China, especially, is not a benevolent as the others have been in the past.
Ms Kagaba is from the Anti-Corruption Coalition Uganda. [email protected]
