Africa-Press – Uganda. KAMPALA
– Uganda’s debt servicing obligations will in the next financial year take nearly 80 per cent of the country’s total tax revenue, according to the National Budget Framework Paper approved by Parliament.
The total resource envelope is projected at Shs45.65t for the 2021/2022 budget, of which Shs20.9 trillion will go to debt servicing, against total domestic revenue that is projected at only Shs21.69t. The paper says debt servicing includes debt and interest repayment, with the latter projected to amount to Shs4.96t in the next financial year, of which Shs3.85trillion is expected to cover domestic interest payments which Shs1.11 trillion will cater for foreign interest payments and commitment fees.
It adds: “The ratio of interest payments to GDP is projected to peak at 3 per cent in Financial Year 2021/2022, and will decline thereafter, to an average of 2.6 per cent per annum over the medium term.”
The debt servicing burden continues to rise on the back of Uganda’s appetite for loans, which have seen the stock of total public debt rose to$15.27b at end June 2020, up from $12.55b at the end June 2019. Of this, $10.45b (approximately Shs38.97 trillion) was external debt, while domestic debt was $4.82 billion or Shs17.98 trillion.
Government officials say extra borrowing was necessitated by the need to cover for revenue shortfalls and Covid-related expenditure needs.
“The budget for Financial Year 2021/2022 aims at sustaining economic recovery from the impact of Covid-19 while maintaining impetus on driving progress towards achieving Vision 2040,” Mr Gabriel Ajedra, the junior minister for Finance, said.
Mr Ajedra said this would be achieved through the budget strategy of expanding economic base through productivity enhancement in agriculture and minerals, prudent macroeconomic management and enhancing local enterprise competitiveness through public investment in production, trade and social infrastructure.
This, government hopes will recover from the slowdown to 2.9 per cent growth in 2019/2020 and 3 per cent in 2020/2021 to 5 per cent in 2021/2022.
Domestic revenues are projected to amount to Shs21.6t in 2021/2022 and will grow at an average of 0.5 per cent of GDP per annum over the medium term.
A total of Shs10.3 trillion is projected as external financing in the next financial year, of which Shs6.7t is in form of project loans, while Ush3.58 trillion is expected as budget support loans.
The government will borrow Shs2.48t from the domestic market for fiscal purposes, which translates into 1.5 per cent of GDP, but gradually, borrowing from domestic sources will decline to an average of 1.1 per cent per annum over the medium-term, to maintain debt sustainability and promote increased private sector lending.
