Uganda to curb commercial borrowing to limit debt build-up

Following a reduction of its credit rating last month, Uganda’s finance minister stated on Thursday that the country aims to contain growing debt by concentrating on concessional borrowing and reducing commercial loans in the upcoming fiscal year.

President Yoweri Museveni’s government has been splurging on large-scale infrastructure projects, which has led to an increase in the nation’s public debt and warnings from the central bank.

Moody’s downgraded Uganda’s sovereign rating in May, citing progressively limited funding alternatives.

During a budget speech, Finance Minister Matia Kasaija stated that the overall public debt was $24.7 billion at the end of the previous year and was expected to reach $25.7 billion by the end of this month.

In the upcoming fiscal year beginning in July, it is anticipated that debt servicing costs, exclusive of domestic debt redemptions, will account for 40.3% of domestic income, an increase from 33.4% in the current fiscal year.

According to the government, borrowing has fueled Uganda’s economy, which has grown more quickly than that of many of its African counterparts since the COVID-19 pandemic.

According to Kasaija, the economy would likely expand by 6.4% to 7% in the upcoming fiscal year due to the production of gas and oil, which is anticipated to begin in 2025–2026.

It was predicted that the budget deficit will increase from 4.5% of GDP this year to 5.7% of GDP in the upcoming fiscal year.

“Uganda’s economy has fully recovered from the various external and internal shocks that impacted performance in the past four years,” stated Kasaija.

For the upcoming fiscal year, the government intends to spend 72.1 trillion Ugandan shillings, or $19.4 billion.

It will begin building a $2.2 billion standard gauge railway with the goal of bringing down the cost of trading internationally.

One of the nation’s other major projects is the $5 billion East African Crude Oil Pipeline, which is being built to enable oil exports via Tanzania.

($1 equals 3,725.0000 shillings in Uganda)