Ugandans should not be worried over growing public debt, says government

The Ugandan government has asked its citizens not to be worried over the rate at which it is borrowing.

Uganda’s public debt has increased by 22 per cent from Shs33.99 trillion as of June 30, 2017 to Shs41.51 trillion on June 30, 2018 but according to the Finance Minister, Matiya Kasaija, there is no need to worry over it.

“Government borrowing is sustainable and directed at infrastructure investments which have contributed to sustained growth rates of the economy having achieved 6.1% in  financial year 2017/18 up from about 4% in the previous year and is set to continue in this trajectory over the medium term,”Kasaija told journalists on Tuesday at the Uganda Media Centre.

“The expansion of the economy leads to increased capacity to collect more revenue which improves the country’s ability to service its debt.”

Uncontrolled borrowing

The finance minister dispelled as untrue, the claims that government’s borrowing is uncontrolled and that it would increase the country’s debt burden.

He explained that government’s borrowing is guided by the Public Debt Management Framework (PDMF-2013) whose objectives include meeting government financial requirements at the minimum cost and subject to a prudent degree of risk among others.

Kasaija said that government borrows in a bid to finance its activities and projects in the most effective manner, dispelling worry over an increasing debt burden.

“Multilateral creditors, like the World Bank and African Development Bank (ADB) have provided the largest part of Government’s financing with the most favorable financing terms. In the financial year 2017/18, multilateral creditors accounted for 68% of total outstanding debt while Bilateral creditors accounted for 31% and commercial banks only accounted for 1% of the external debt stock,”Kasaija said.

“I want to inform the country  that Uganda’s Public debt has been provided largely by multilateral creditors who offer concessional terms that include a grant element of more than 50% with an average maturity of over 35 years and a grace period not less than 6 years coupled with relatively low interest rates below 1.5% annually.”

The finance minister added that bilateral creditors on the other hand are dominated by China Exim Bank and Japan International Corporation Agency (JICA) who are the biggest lenders who he said  offer preferential terms with grant element that range between 20% and above 35%.

According to the minister, after implementation of flagship projects including the power generation plants at Isimba & Karuma, the development of Kabale International Airport and the construction of Entebbe Express High Way, among others, government will continue being cautious on taking new projects.