Africa-Press – Uganda. Government insists it need to continue to borrow to finance the budget and other key spending pressures.
Economists and non-governmental policy advocates have called for prudent public finance management, and warned of slow recovery in the coming financial year if government fails to tame appetite to borrow.
Speaking at a high-level policy dialogue on the economy in Kampala yesterday, the experts under the theme, Economic Recovery and Re-igniting Economic Growth, advised government to prioritise debt management and economic recovery.
This came after State Minister for Planning (Finance) David Bahati revealed that even with the rising public debt levels in the country, the government will continue to borrow to finance the budget and other spending pressures that are key to economic recovery.
Mr Bahati reiterated that the nominal debt to GDP will rise from 47.2 per cent to 51.9 per cent because government needs to build infrastructure and provide critical services to the people.
“We have a choice to make, should we only use the Shs22 trillion that is generated from domestic revenue, pick some part to meet loan interests and pay salaries, then remain with around 6 trillion for investment in the infrastructure for 50 years [to complete works]?” Mr Bahati said.
“We have to borrow more money now, finish the infrastructure, generate revenue and build the economy. In the past, moving from Kabale to Kampala would take someone eight hours but these days, it takes four hours or less and this save time to engage in productive activities.”
This means each Ugandan now collectively owes Shs1.5m per person in debt despite reported lack of access to service delivery of roads, medical care and education to a significant number of citizens.
Dr Arthur Bainomugisha, the executive director of Advocacy Coalition for Development and Environment (Acode), asked government to avoid the urge of going past the limit of 50 per cent nominal debt per GDP that would have a significant effect on the economy given the way the country is handling taxes at hand.
“The minister (Mr Bahati) conceded that we have got some loans that are redundant but also procurement take long time, two and half years. This makes the debts unsustainable because the money is redundant and yet generating interests,” Dr Bainomugisha said.
He added: “We have to make sure the loans we get are immediately put to use so that they generate returns, otherwise if you continue to borrow too much, we will go to highly indebted country which is not sustainable and we will leave debts for our children which is not morally right.”
He called for strategies to address insecurities in the region to reduce spending on security, which is costing the country against development needs.
Ms Izabela Karpowicz, the resident representative for International Monetary Fund, asked government to focus the loans on productive sectors and human capital development.
“We need to increase resources on education and health. We also need to widen domestic tax revenue, spend efficiently, improve our tax administration and pursue debt suspension from major creditors,” she said.
Dr Bainomugisha said the high-level dialogue gives people an opportunity to discuss key parameters that are central to re-igniting Uganda’s subdued economy and enhancing socio-economic transformation of the citizens, pointing out that it also creates a platform to discuss measures to cushion the economy from predictable risks likely to derail the country from the projected desirable growth trajectory.
He said prudent public finance management is central if Uganda is to attain its growth and development aspirations in addition to aiding the economy to gradually recover from the devastating Covid-19 shocks.
