Uganda plans to revise its borrowing model to manage its debt


Uganda is considering modifying its future borrowing in light of rising debt, with finance ministry officials saying such a move is aimed at managing debt and reducing the burden of repayments.

Maris Wanyera, director of cash and debt policy at the finance ministry, said one solution would be to re-examine the ratios of interest payments to tax revenue, as well as interest payments to government revenue. export, in addition to the debt/economy ratio. growth balances.

“Future borrowing will be directed to concessional loans and the domestic debt market for budget support purposes, but we will not acquire commercial loans for project implementation,” Ms. Wanyera said. East Africa.

Uganda’s debt-to-gross domestic product (GDP) ratio, generally measured as the level of indebtedness based on national wealth, rose to 54% in June from 49.1% at the end of May based on cumulative debt statistics entered between July 2021 and June 2022 .

Economical relining

This means Uganda owes Ush 73.5 trillion ($19.2 billion), with external debt valued at over Ush 40 trillion ($10.5 billion), according to recent government data.


Member states of the East African Community bloc are required to maintain a maximum debt-to-GDP ratio of 50%, in line with monetary union convergence targets approved in 2013.

This is a benchmark also adopted by the International Monetary Fund.

The latest increase in public debt also points to short-lived opportunities realized in previous economic rebasing exercises – a commitment to reassess the size of an economy, growth benchmarks as well as adjustments to key economic performance indicators such as debt-to-GDP and tax-to-GDP ratios.

Uganda’s pioneering economic rebasing exercise was carried out in 2012 and was followed by another in 2019. The results of the 2019 economic rebasing showed that the value of the Ugandan economy had risen to $137 trillion. ‘Ush ($35.8 billion) while its tax-to-GDP ratio fell from 13 percent to around 12 percent.

The size of Uganda’s economy has grown from Ush 148 trillion ($38.7 billion) in the financial year 2020/21 to Ush 162 trillion ($42.4 billion) in 2021/22.

Return on investment

The results of the two economic rebasing exercises yielded a debt-to-GDP ratio of 40-50% – a scenario that offered technocrats limited breathing space for future borrowing activities, thus necessitating a closer look at borrowing plans.

The latest economic data shows that headline inflation averaged below 5% in fiscal year 2021/22, while economic growth stood at 4.6% in the same period.

The country’s savings-to-GDP ratio hit 17% at the end of 2021/22 while youth unemployment – a leading indicator of poverty, was 13% over the same period, but economists say thresholds debt accumulation are difficult to meet, even in large economies.

“How much of the public debt is used for productive purposes and what is its return on investment? Uganda’s economy looks less bankable to credible lenders because the rate of debt accumulation is outpacing the pace of development in this country,” said Madina Guloba, senior researcher at the Economic Policy Research Center based in India. Makerere University.

Analysts say holding debt isn’t a bad thing, as long as the money is put to good use.

“Debt levels are rising in various economies, but no country is ready to stop borrowing just yet. What matters is the reason for borrowing. For example, is the government borrowing? to invest in a new power dam when another that has been under construction for a long time has yet to produce electricity?” asked Mubbale Kabandamawa-Mugalya, Investment Manager at Sanlam Investments Uganda Ltd.

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