Minister Kasaija says Uganda’s Debt is manageable

Minister Kasaija says Uganda’s Debt is manageable
Photo: Unknown 2019-01-08T10:08:42Z

The minister for finance Hon. Matia Kasaija has denied media reports of government’s uncontrolled borrowing which weekend newspapers argued would increase Uganda’s debt burden. 

The minister clarified Tuesday, that this information was wrong, indicating that government borrowing is controlled and guided by the Public Debt Management Framework (PDMF-2013) whose objectives are to meet Government financing requirements at the minimum cost, subject to a prudent degree of risk, ensure that the level of public debt remains sustainable, over the medium-term and long-term horizon while being mindful of the future generations, and promote the development of the domestic financial markets.

On the issue of debt, the minister said Uganda’s Public debt has been provided largely by multilateral creditors who offer concessional terms that include a grant element of more than 50% with an average maturity of over 35 years and a grace period not less than 6 years coupled with relatively low interest rates below 1.5% annually. 

“Bilateral creditors on the other hand are dominated by China Exim Bank and Japan International Corporation Agency (JICA) who are the biggest lenders. The bilateral creditors offer preferential terms with grant element that range between 20% and above 35%” he added.

Speaking about debt Sustainability Kasaija said Uganda’s debt remains sustainable with nominal debt to GDP of 41.5% which is consistent with the findings in the Auditor General’s report. He argues that this performance includes the financing of the flagship projects like the power generation plants at Isimba & Karuma, the development of Kabaale International Airport and the construction of Entebbe Express High Way, among others. 

The minister promises that Government will continue to be cautious on taking on new projects after the implementation of the above-mentioned flagship projects. 

He adds that to ensure debt sustainability, the Government is implementing strategies like; Prioritizing borrowing for mainly infrastructure projects to address current infrastructure gap (Transport, Energy, Industrial Infrastructure and Water for Production), continue to invest in export-oriented areas to boost exports in order to increase foreign exchange inflows and also enable servicing of external debt, ensure improved loan absorption by strictly adhering to the loan approval processes i.e. project preparation, negotiation and approval, taking selective and strategic financing options to minimize financing risks with preference given to concessional financing, and commercial borrowing with low interest rates and enhancing domestic revenue efforts. Government starting next financial year will start implementing the new comprehensive Domestic Revenue Mobilization Strategy (DRMS), which aims to raise the revenue to GDP ratio to at least 16% in the next 5 years.

This increase in domestic revenue will provide Government with the additional resources for financing development projects and service its debt obligations annually.

Furthermore, the development agenda will be guided by high National priorities with expected high economic return as identified in National Development Plan.

“I would like to assure the Country at large, that our debt is sustainable, and is projected to remain sustainable in the medium to long term. The debt levels are comfortably below the international sustainability thresholds (e.g below 50% debt to GDP ratio) beyond which debt starts getting unsustainable, and are significantly below the sub-Saharan average (45.4% debt to GDP)” minister Kasaija noted.

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