Africa-Press – Uganda. Government borrowing has been heightened by Covid-19 related disruptions, forcing public debt to grow from Shs57.4 trillion as of June 2020 to Shs71.6 trillion by June 2021.
Government borrowed Shs14.2 trillion in the year ended June 2021, according to Bank of Uganda.
In details contained in both the Bank of Uganda June 2021 annual report and the September Monetary Policy Report, the Shs14.2 trillion was a sharp increase from the Shs10.8 trillion that government had borrowed during the same period ended June 2020.
According to the September Monetary Policy Report, public debt stock stood at Shs71.6 trillion as of June 2021, comprising of Shs44.9 trillion and Shs26.7 trillion of external and domestic debt, respectively.
The Shs71.6 trillion was an increase of 22.8 per cent compared to Shs57.4 trillion that had been recorded for the period ended June 2020.
However, the Central Bank noted in the report that at 48.3 per cent of debt to gross domestic product ration, up from 41 for the period ended June 2020, Uganda’s public debt was still within sustainable levels.
Public borrowing has been growing, heightened by Covid-19 disruptions in the last two years as government attempts to cover revenue shortfalls in both taxes and grants.
According to details contained in the June 2021 Bank of Uganda annual report, during the period ended June 2018, government had borrowed Shs7.7 trillion, before slowing to Shs4.2 trillion in the period ended June 2019.
However, borrowing has since experienced a sharp increase, averaging at Shs12 trillion in the last two financial years.
The increase has largely been blamed on shortfalls in government revenue, which has warranted an upsurge in borrowing to close funding gaps.
According to Bank of Uganda, during the period ended June 2021, public debt increased to Shs71.6 trillion due to a 35.2 per cent growth in domestic debt. Government has in the last two years borrowed heavily internally including from commercial banks, necessitating a sharp increase in the share of domestic debt.
During the period the ratio of debt service to domestic revenue increased to 25.6 per cent in June 2021 up from 10.12 in June 2010, reflecting high debt service costs that may crowd out spending to priority sectors in the economy.
The Central Bank also noted that execution of the budget was hindered by lower than projected domestic revenue, which slowed to Shs20.2 trillion compared to Shs22.2 trillion in approved budget.
The under-performance, the report noted, was on account of lower domestic revenue receipts and project grants, which stood at Shs1.9 trillion and Shs283.2b, respectively.
Public debt continues to be a concern with a number of government officials, among them Finance Minister Matia Kasaija, cautioning against continued borrowing, especially for non-essential services.
In its September Monetary Policy Report, the Central Bank said Uganda’s debt exposure had increased due to significant spending pressures and related loan disbursements to counter Covid-19 disruptions.
The Central Bank also reported that Uganda’s debt-carrying capacity had declined with stress tests indicating breaches of thresholds and the benchmark, which points to a moderate risk of overall and external debt distress.
Caution
Recently, while releasing funds for the second qaurter of the 2021/22 financial year, Finance Parment Sectretary and Sectretary to the Treasury Ramathan Ggoobi said government would exercise caution, noting that there will be no more wholesome borrowing for projects that do not fall under priority sectors.
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