Uganda’s debt situation dates back to 1950s, where it had major debt relationships with the western world institutions, especially the World Bank (WB) over construction of railways and Owen Falls Dam– Jinja. As such, Debt acquisition processes and transparency thereof, coupled with absorption and outcomes remain serious issues. Moreover, the global financial crisis of 2008 that triggered a near economic crisis and the effects thereof, imply more serious issues and repayment challenges amongst both the Creditors and Lenders.
Memories of previous economic crises like the Mexican crisis of 1994 and the Asian crisis of 1997 remain apparent. More lately the Chinese economic is on a draw down, while there are also emerging Lenders beyond the historical WB and IMF. For such creditors are EAC nations, including Uganda, the need to continuously review the global Debt dynamics is inevitable. Such review must anchor their policy options on public transparency, wider stakeholder participation and Government accountability on the desirable Debt Outcomes, for Debt to remain relevant in the lives of the final intended recipients.
Rate of debt acquisition and outcomes;
Beyond the crises in 1980s and 1990s, additional concerns by Uganda debt Network (UDN) relate to the speed at which the debt is rising, absorption capacities, poorly/ non-performing loans, corruption/ transparency and sustainability issues amongst Government systems and institutions not only in Uganda and EAC but also Sub Saharan Africa (SSA). This is, particularly, in respect to Grants, Domestic debt, Loans and Government Guarantees.
While borrowing is not the problem per se, what do we say of the Ugandan case, for instance, where external borrowing increased by 82% between FY 2014/15 and FY 2013/14? Over a longer horizon, total external debt for Uganda was said to be USD 6.27 billion end of February 2015, compared to about USD 0.99 billion in 2006. This represents an increase of 500% over a period of 9 years. In June 2006, the total outstanding debt was USD 2.3 billion given the additional amount of domestic treasury securities of USD 1.0 billion and domestic non-security arrears of USD 0.3 billion. As of December 2015 according to Ministry of Finance Planning and Economic development (MoFPED), domestic debt estimates stand at $2.92bn with external debt at $4.88bn. The estimated total public debt as of December 2016 is estimated to be at $7.8bn. In the FY 2016/17, Government plans to pay UGX 2,014bn to the local market interest from domestic borrowing up from UGX 1,656.2bn that was planned for the FY 2015/16. Even then, in the FY 2013/14 the planned non-bank financing was over shot by UGX 675bn to be at UGX 1,715bn. Public Debt is projected to increase to $8.3bn by end of June 2016. Moreover new debt proposals have come forth in the FY 2016/17.
External and Domestic Debt Estimates as of December 2015 ($). Estimated Total Public Debt as of December 2015 ($ Billion)
There are generally impressive policies through respective Debt Sustainability Frameworks. Even so, it’s up to Ugandans and African citizens at large to keep their Governments on tenterhooks to account for every outcome of Debt acquired. So far EAC and selected African countries have registered fairly stable macroeconomic frameworks for prudent debt management, poverty reduction, economic growth and development.