Govt urged to tame its appetite for borrowing
Due to the fact that loan interest payments currently account for a sizable amount of the budget and domestic earnings, Uganda confronts a serious financial difficulty.
According to the December 2023 report from the Bank of Uganda, escalating debt servicing costs are straining tax revenue collection, with UGX 32 out of every shs100 collected going towards debt service.
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The Bank of Uganda projects that external debt servicing will account for 35 percent of GDP in 2024/2025.
However, this is not unique to Uganda.
While appearing before Parliament’s Finance Committee on January 8, 2024 to present the 2024/25 National Budget Framework Paper, the Ministry of Finance revealed that government will spend up to shs24.9 trillion on servicing Uganda’s public debt.
This comes months after the Bank of Uganda reported that Uganda’s public debt as of August 2023 stood at shs 88.807 trillion.
The August debt figures do not include the shs7 trillion worth of loans Parliament approved in December.
Rising public debt coupled with borrowing to service a loan has led to the growing anxieties and has sparked concerns from the public.
On a phone interview, Dr John Sseruyange from Makerere school of economics said that it’s time government strengthen its expenditure models and put emphasis on the effects of climate change to alleviate Public Debt Dilemma.
‘’In 2009 to 10, our public debt was about 13% now is about 50%, we need to put in much emphasis on the effects of climate which have not ended, we are seeing roads being washed away, otherwise, Government will keep borrowing to construct roads that have been washed away,’’ said Sseruyange.
"If we are to change the system we are in, we need to re-focus as a country on our expenditure side of our economy, if u look at the trend and what is happening in Uganda, much attention is put on taxation than how we spend our resources, Government should spend on investments where a return on investment is expected.’’
Parliament has passed the national budget for the Financial Year 2024/2025, approving a total expenditure of shs72.136 trillion following the passing of the Appropriations Bill 2024 on Thursday, 16 May 2024, reflecting a significant increase of Shs14.050 trillion from the initial budget proposal of shs58.34 trillion.
From the above resource envelope, shs3.1 trillion is allocated for external debt repayment and shs9.1 trillion for domestic debt repayment under Bank of Uganda.
According to Christine Byiringiro, Program Manager- Uganda Debt Network, government divert crucial resources away from delivering social services, resulting in disproportionate spending on debt at the expense of vital sectors such as infrastructure, labor productivity, human capital, and public health.
"Government spent at least shs8.3 trillion on debt servicing in the financial year ended June 2023, according to data from the Uganda Revenue Authority (URA). This, was an increase from shs6. 7 trillion spent in the financial year ended June 2022, this will not stop if we don’t work well with the private sector to generate more revenues and minding about where you’re allocating funds.’’
