• Authored By: Alon Mwesigwa
22 Jul 2023

Uganda has begun the implementation of tough measures to keep its public debt in check to prevent future crises, according to the Secretary to the Treasury Mr. Ramathan Ggoobi has said.

Mr. Ggoobi was speaking at public dialogue to disseminate an Economic Policy Research Centre study on Uganda’s public debt sustainability at Sheraton in Kampal on July 18, 2023.

The dialogue was organised under the theme, Sustainable, Inclusive, and Environmentally Responsible Debt: Implications of Covid-19. The research received generous support from International Research Development Centre (IDRC) Canada.

 Mr. Ggoobi said: “Uganda is still among the few countries with sustainable debt, but we are not comfortable. We do not want to first get into a crisis [to react].

“We are cutting expenditure in areas with low multiplier effect such as buying new vehicles except for ambulances, extension services, revenue mobilization, and security.”

He added that among other measures, they have cut travel abroad which will cut public officials’ travel expenditure from Shs 240bn to Shs 90bn this budget year 2023/24.

PSST Mr. Ramathan Ggoobi

The EPRC debt study, presented by Paul Lakuma, a research fellow, showed that the country’s debt had jumped from 41% of GDP prior to COVID-19 to more than 48% of GDP in 2023 – even though the pandemic cannot be blamed entirely for the jump.

Lakuma said debt service stood at 35% of total government spending while spending on human capital development programmes (education, health, and social development) is estimated at only 18% of the budget. Spending more on debt service than social services deny the most vulnerable much needed services.

See report here: Sustainable, inclusive, and environmentally responsive debt in Uganda: Implication of COVID-19

Dr. Sarah Ssewanyana, EPRC Executive Director, said the country should be cognizant of climate change impacts such as extreme flooding, prolonged drought which means Uganda must spend more resources to address the aftereffects. She said financing sustainable infrastructure is vital.

She urged government to strengthen her institutional capacities to choose right projects that address our value addition gaps.

Dr. Paul Okwi, the senior programme specialist at IDRC, said Uganda was not alone in having to make tough decisions to ensure debt remains sustainable. In the region, he said, several countries including Kenya are going through that. He noted that Uganda’s debt situation has been made worse by covid-19 impacts that still linger and climate change disruptions.

He noted: “We also still have huge knowledge gaps on how growing debt is impacting policy choices of different countries. And how the sovereign debt can be swapped for climate commitments and how such swaps can be implemented.”

Uganda’s debt growth is driven by the shift of development focus from spending on social services to infrastructure projects. However, COVID-19 has partly contributed to the upsurge in debt. The upsurge in debt has, however, not been matched capacity in institutions that improve accountability, transparency, and inclusivity, the study report says.

 

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