KIU News

  • Home /
  • KIU News /
  • Uganda's Debt Burden Exceeds 50% of GDP Ceiling

Uganda's Debt Burden Exceeds 50% of GDP Ceiling


By Rogers Wanambwa 

KIU, Main Campus - According to the Ministry of Finance, Uganda's debt burden has exceeded the domestic debt ceiling to a level which it dubbed "unhealthy domestic borrowing".

The government acquired from the domestic market, a debt to the tune of UGX 6.8 trillion which is more than 1 percent of Gross Domestic Product (GDP), initially set as the maximum. 

Consequently, the total debt, foreign and domestic will grow to 52 percent by the end of the financial year, which is also above the 50 percent ceiling that Uganda agreed on with the other East African Community (EAC) countries with the support of the International Monetary Fund (IMF). 

The Ministry of Finance, Planning and Economic Development says domestic borrowing has gone up to 1.1 percent of GDP and will go further up to 1.6 percent next financial year. Samson Muwanguzi Joash, the Ag Assistant Commissioner in the domestic debt office, says domestic debt cannot be avoided because of its benefits over foreign debt. 

Even still, the region’s debt stock has risen to $112 billion or 58 percent of the GDP (2019) with Kenya and Rwanda having the highest ratios.

COVID-19 and the resulting economic effects have been majorly blamed by the government. To this effect, economic growth has seen a sharp decline and in some cases to negative rates. There are now calls for the governments to go for credit relief and other measures. 

Besides, there are increasing calls for the IMF to approve the issuance of special drawing rights (SDRs) to assist developing countries in their economic recovery. The SDR is an international reserve asset, created by the IMF to supplement its member countries' official reserves. 

So far, UGX 204.2 billion (approximately $281 billion) SDR has been allocated to members according to the IMF. According to the United Nations Conference on Trade and Development (UNCTAD), Africa will require $200 billion to address the financial and socio-economic impacts of the global pandemic. 

At a dialogue between government and the civil society, the Uganda Debt Network (UDN), SEATINI Uganda, Civil Society Budget Advocacy Group (CSBAG), Transparency International, and the African Forum and Network of Debt and Development urged other countries to press the IMF to release up to $3 trillion.

The organizations were also keen on calling out the excessive, and sometimes unnecessary, expenditures of government that contribute to driving up the debt burden. SEATINI Uganda Executive Director Jane Nalunga gave the example of the high cost of administration, saying the many administrative units are created without putting in mind the cost of maintaining them.