Shs 2.7 trillion earmarked for debt interest payment

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The government has earmarked Shs 2.7 trillion for debt interest payment according to the budget framework papers for the financial year 2018/2019.

This portion is equivalent to 12.3 percent of the budget.

Interest payment is the second sector to take a large percentage of the projected budget after Works and Transport sector that is expected to take Shs 4.7 trillion of Shs 29.2-trillion-shilling budget.

Interest payment will be followed by Energy and Mineral Development sector projected to take Shs 2.5 trillion which is equivalent to 11.5 percent of the budget.

"Government's interest payments are projected at Shs 2,701 billion in financial year 2018/19, of which Shs 2,279 billion is interest on domestic securities (Treasury bills and bonds) and the rest is interest on external debt," the budget framework paper reads.

The budget framework paper further explains that the interest payment figure is projected to rise to Shillings 2,788 billion in the financial year 2020/21 and will amount to Shs 3084 billion during financial year 2021/22.

"A great percentage of interest payments about 84 percent is domestic interest payments which partly reflects high cost of domestic borrowing," the framework paper states.

Uganda's public debt stands at $ 8.7 billion (approximately Shs 28 trillion).

This debt accounts to 33.8% of Uganda's Gross Domestic Product (GDP).

In the coming financial year, the government plans to raise Shs 940 billion from the domestic market through issuance of securities.

"This domestic borrowing is in line with government's strategy of maintaining borrowing within one percent of GDP over the medium term in order to support private sector development. Domestic borrowing is projected to decline further to Shs 611 billion in the financial year 2019/20 and reach Shs 409 billion by financial year 2022/2," the budget framework paper notes.

The Civil Society Budget Advocacy Group coordinator, Julius Mukunda, said debt sustainability is becoming a big issue.

He said the high percentage allocation of the budget to debt interest payment is indicative that Uganda is likely to become a poor highly indebted country again as it was 10 years ago.

Mukunda said the government is managing national resources recklessly such as spending money on the presidential age limit removal, continuous creation of districts and government agencies.

If government trims public expenditure, have budget discipline and live within expectations, Mukunda argued, Uganda would not be lacking money for infrastructure development.