Uganda’s debt is growing faster than its economy, a section of industry experts have warned. According to the Uganda Debt Network (UDN), the East African nation is in a dire situation, despite what a number of government officials have said.
UDN is a non-governmental organization working towards a prosperous Uganda. The group seeks to ensure sustainable, equitable development and a high quality of life for the country’s people.
Speaking at a press conference on Uganda’s debt sustainability and development outcomes at the Uganda Debt Network offices this weekend, UDN officials argued that financing for development has become a critical issue.
The country’s growing debt crisis threatens to hinder or otherwise slow down development.
On the other hand, Uganda’s Finance Minister, Matia Kasiaja says the country’s public debt, which as per government figures currently stands at $ 10.7 billion – or 41.5% of the annual budget – is not yet a threat because it has not reached the 50% threshold.
Meanwhile, UDN statistics put the said various categories of Uganda’s debt situation at excess of $15.2 billion (approximately 52 trillion Ugandan shillings) by the beginning of the 2018/2019 financial year.
UDN contends that the suppression of the debt figures by institutions such as the International Monetary Fund (IMF) and the World Bank Group (WBG) is drawn from their motivation to lend to developing economies such as Uganda and their impartiality to the risks involved.
As such, UDN has recommended that “both government and associate institutions profile the comprehensive sovereign debt portfolio for Uganda, upon which appropriate policy and programming measures are accordingly formulated, updated and implemented.”
The organisation has called for a strategic approach, urging policymakers not to rush when addressing the country’s debt.
In light of these recommendations UDN officials warned that through corruption, there is a linkage of funds being lost instead of being invested.
“Uganda’s Government should progressively fizzle itself out of the domestic money lending market, to allow expansion of the economy and overall GDP through private sector growth,” the group said in a recent statement.
UDN added that the country’s government should adequately build the capacity of Ugandan loan negotiators with skills to analyze future repercussions of conditions attached to a loan without focusing on the need to acquire borrowed finances as a priority.
The group has been vocal against growing debt amidst inequitable growth and increasing poverty. UDN also noted that economists have commended the government for its efforts in pursuing economic growth and supporting poverty reduction policies.
Studies by some global level and national level actors including the Uganda Bureau of Statistics (UBOS) affirm that an economy where the richest 10% of the population enjoy 35.7% of the national income is not ideal.
The Bureau stated that this has been happening even while the poorest 10% claim a meagre 2.5% and the poorest 20% have only 5.8% of the national income.
“Those at the bottom are on a downward poverty spiral while those at the top are on an upward trend,” UDN said in its statement.
As such UDN’s experts have called on the government and other stakeholders to “look more to indigenization of the economy through policy reversals where there is greater and renewed attention to Domestic Direct Investment (DDI) through investment vehicles that allow even the majority Ugandan citizens to be shareholders in selected and key public sector investments such as electricity, railways and others.”
UDN believes that this financing approach will reduce the country’s debt burden by leveraging indigenous resources that are then supplemented by borrowing, rather than the current perception and practice where Government runs to foreign lenders before mobilizing indigenous resources through shareholding investment in public entities
The group has also called on stakeholders and policymakers to align the country’s development or investment budgets with an increased capacity to invest.
UDN concluded that Uganda’s government needs to consciously invest in programs with quick economic returns to boost the East African nation’s economic growth rate.