KAMPALA, Uganda
It is a misconception to assume that Uganda’s public debt is unsustainable, according to the International Monetary Fund (IMF), one of the country’s leading creditors.
The IMF Resident Representative for Uganda, Ms Izabela
Karpowicz (pictured), whose institution has so far lent Uganda about $491.5 million
(Shs1.7 trillion), noted that the country’s public debt levels are still within
a manageable threshold in the long term.
She said: “We used to rate Uganda at low risk and now it
will be moving to a medium risk and this is due to Covid-19…”
She added: “…It is not correct to say the debt is not
sustainable over the medium and long term.”
Ms Karpowicz was speaking last Thursday on the sidelines of
a policy dialogue on Uganda’s economy, which was organised by the Advocates
Coalition for Development and Environment (ACODE) and the Civil Society Budget
Advocacy Group (CSBAG).
According to Ms Karpowicz, what should cause Ugandans
sleepless nights is how “resources that are being borrowed now and in the
future” will be deployed productively and not the “debt level issues.”
As long as the borrowed funds can spur growth, the IMF
Representative in Uganda believes, “Uganda will naturally grow out of the
debt.”
To navigate through the tough economic situation occasioned
by the Covid-19 pandemic, the IMF chief in Uganda said: “We would like to see
strong budget allocation in social sector going forward.”
She says spending in the social sector has decreased,
asking government to spend more on education and health, saying investment in
these segments of the economy will not only trigger but drive the recovery
processes.
Speaking as a panelist at the policy dialogue whose theme
was ‘Economic Recovery and Re-engineering Economic Growth’ , Ms Karpowicz
called for a balance between infrastructure and social development, saying this
has a potential to put back the economy on a sustainable growth path.
There are varied opinions regarding the magnitude of the
country’s public debt.
While some believe that the country is already in debt
distress, others such as Mr Stephen Kaboyo, the chief executive officer of
Alpha Capital Partners and a former central bank technocrat, is convinced that
government is playing with fire as it is quickly sliding into debt
distress. Ugandan women boarding a plane to Arab countries in search for domestic jobs
Officially, Uganda’s stock of public debt grew by 21 per
cent to $15.27 billion over one year (June 2019 to June 2020). This is
equivalent to 41 per cent of the annual GDP and 31.8 per cent in present value
terms.
The external debt constitutes $10.45 billion (68.4 per
cent) while domestic debt is $4.82 billion (31.6 per cent).
Critics using government official figures say the public
debt is expected to rise to 49.9 per cent of GDP by the end of 2021 and 54.1
per cent in 2022.
The key driver for the projected increase in debt is the
need for extra borrowing to cover revenue short falls, Covid-19 related
expenditure as well as support for economic recovery.
However, late last month, Finance minister Matia Kasaija
disclosed that government would seek to reschedule payments, 24 hours after
this newspaper revealed each Ugandan now owed Shs1.5 million in debt contracted
by the government.
In an interview with Reuters news agency, Mr Kasaija
revealed that repayments of the debt, now at $17.96 billion (Shs66 trillion) if
domestic debt is included, might have to be renegotiated with major creditors,
including China, the World Bank and IMF. – Daily Monitor
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