Kampala seeks funds for roads, climate projects
Saturday October 14 2023
Uganda’s Finance Minister Matia Kasaija. PHOTO | NMG
Uganda is seeking funds for roads and a climate-smart agriculture programme, raising questions about its debt sustainability.
On Wednesday, Minister of Finance, Planning and Economic Development, Matia Kasaija, tabled a request before parliament to borrow $650 million from different financial institutions.
“These loans are not new. They were earlier considered and budgeted for, for this financial year,” Mr Kasaija said.
If parliament approves the said loan, Kampala’s public debt will increase to about $24 billion. Currently, the country owes more than $22.1 billion to both external and domestic creditors.
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The loan proposal comes months after the World Bank suspended new lending to Uganda after the country passed an anti-gay law.
In response, the government resolved to instead scale down on public expenditure so as to save its already meagre resources.
Uganda’s Public debt has been increasing, reaching 50.6 percent of GDP in nominal terms by the end of financial year 2021/22.
This increase of almost nine percentage points over the past two years was primarily driven by external borrowing, with almost two-thirds of outstanding public debt owed to external creditors, according to the International Monetary Fund.
By the time of the previous budget reading for the financial year 2023/2024, Uganda owed lenders about $23.6 billion which was almost twice the $14 billion announced for this financial year.
Although loan repayment is spread over many years, fears about debt sustainability remain amongst watchers since government‘s appetite to borrow never seems to stop.
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According to the Ministry of Finance, the government is still within manageable limits with the country’s debt to GDP ratio standing at about 48.8 percent compared to the policy target of 50 percent of the GDP.