Uganda’s public debt outlook faces moderate risk of distress – report
The ministry said in the DSA that Uganda’s public debt stock increased from $19.54 billion (Shs69.512 trillion) in FY2020/21 to $20.99 billion (Shs78.833 trillion) in FY 2021/22. Photo | File
What you need to know:
- The analysis also indicates that Uganda has limited space to absorb shocks, meaning that an extreme economic shock could potentially lead to a deterioration in the rating and a high risk of debt distress.
The Ministry of Finance, Planning and Economic Development has expressed confidence in the Debt Sustainability Analysis Report FY 2021/22 that the debt outlook is faced with a moderate risk of debt distress, with the major vulnerabilities relating to the slow growth of exports and the increasing debt service burden.
The report released Wednesday states that debt service as a percentage of revenue increased to over 30 per cent in FY 2021/22 and is projected to rise further in FY 2022/23, especially due to heightened domestic interest rates following the recent high level of domestic inflation, as well as the increasing cost of external debt as global financing conditions tighten.
The analysis also indicates that Uganda has limited space to absorb shocks, meaning that an extreme economic shock could potentially lead to a deterioration in the rating and a high risk of debt distress.
The Ministry of Finance Planning and Economic Development anticipates that measures to maintain debt at sustainable levels over the medium term will include among others; increasing domestic revenue collections through the full operationalization of the Domestic Revenue Mobilization Strategy, and increasing the efficiency and effectiveness of government expenditure, particularly by allocating more resources to sectors that generate a higher multiplier effect on growth.
“The findings of this DSA indicate that public debt is projected to remain sustainable over the medium to long-term,” the report reads in part.
The ministry in the report further explains that debt sustainability will majorly 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 come to a completion in the medium term, alongside strong revenue growth following the implementation of the Domestic Revenue Mobilisation Strategy; and realisation of oil revenues in the medium to long term.
The ministry said in the DSA that Uganda’s public debt stock increased from $19.54 billion (Shs69.512 trillion) in FY2020/21 to $20.99 billion (Shs78.833 trillion) in FY 2021/22
This represents a much smaller increase in public debt compared to the previous two financial years. External public debt increased from $12.39 billion (Shs44.061 trillion) to $12.82 billion (Shs48.171 trillion) between June 2021 and June 2022, while domestic public debt increased from $7.16 billion (Shs25.451 trillion) to $8.16 billion (Shs30.661 trillion) over the same period.
As a share of GDP, public debt increased to 48.4 per cent in June 2022 from 47.0 in June 2021. Measured in present value terms, the stock of public debt amounted to 39.5 per cent of GDP up from 37.5 per cent the previous financial year.
