The Deputy Governor Bank of Uganda, Michael Atingi-Ego has revealed that Uganda’s public debt has hit Shs 80 trillion which is 50% of the Gross Domestic Product (GDP).
In a meeting with MPs, he cautioned them against approving loans that do not to spur the growth of the economy.
The revelation raises concerns on whether Uganda is able to meet its debt repayment obligations.
IMF and World Bank urge countries to ensure that their national debt never exceeds 50% of their GDP.
Adam Mugume, executive director Research and Policy at Bank of Uganda explained that the public debt contains external debt that stands at Shs47 trillion and domestic debt of Shs 33 trillion.
“The only challenge we have are indicators to assess whether we are able to pay,” Ating-Ego said.
The deputy governor revealed that although the debt is still sustainable, the central bank has cautioned the Ministry of Finance to ensure that going forward, all commercial loans obtained by government have a grace period of at least five years because there are a number of loans in the pipeline whose payment dates have matured, putting pressure on Uganda’s foreign reserves.
“We have a challenge that the debt service in the next two years is quite big. In the year 2022/23 we are spending close to $ 1.8 billion for government imports and debt service,” he said.
However Muwanga Kivumbi, the MP from Butambala questioned the figures given by the central bank arguing that the figures don’t contain the domestic arrears government owes to its suppliers and the Shs 4trillion.
MPs also questioned the sustainability of the current public debt, claiming the government is not sure of the source of funds to repay back the loan
The central bank noted that the overall inflation has spiked from 2.7% in January 2022 to 10.7% in October 2022. The figure is expected to go down to 5% in 2024.