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Public debt: CSOs urges on transparency, accountability

They want government to create centralized data system on debt

| THE INDEPENDENT | Uganda government should enhance transparency during the acquisition of loans so as to improve accountability for the acquired loans according to civil society organizations.

Jane Nalunga, the executive director SEATINI Uganda, Patrick Tumwebaze, the executive director, Uganda Debt Network, and Peter Wandera, the executive director of Transparency International Uganda said in a joint statement that there is also a need to eliminate opaqueness in tax expenditures and incentives by sharing information publicly and reduce tax holidays.

The CSOs also say, the government should minimize confidentiality clauses and where permissible publish contracts.

“Confidentiality clauses preserve not only market-sensitive information, but also prevent the publication of key terms and conditions of loans – the latter limits the completeness of the debt reports and affects their credibility,” they argued.

One possibility, the group says, is to include exceptions to non-disclosure provisions in debt contracts, allowing the parties to comply with them by disclosing key terms and conditions irrespective of confidentiality clauses. This could be enhanced by the addition of a disclosure annex.

The group also wants the government to publish a section on collateralised debt in the annual debt reports. The reporting on collateralized loans would further benefit from including a section on collateralized debt, which would enable a better understanding of fiscal risks.

Considering Uganda’s push in oil production and exports, CSOs say, the possible existence of collateralised debt represents a significant uncertainty for the audience of the debt reports.

CSOs also want the government to create a centralized data system on debt – like a debt register – in addition to new sources of financing, debt management is further complicated by contingent liabilities.

Across the world, the latter has turned increasingly into explicit budget obligations due to the impact of a pandemic-induced shock on past State-Owned Enterprise (SOE) borrowing and public private partnerships (PPPs).

The group also says, government should channel information to the citizens on debt. They observe that there is still a limited appreciation of citizens’ understanding on debt matters as well as the reporting by media on debt is limited. There is a need to bring more awareness and understanding on debt matters. They also said, Parliament should ensure value for money for the loans borrowed so as to avoid wasteful expenditure.

Uganda has put in place debt management policies and frameworks such as; the Public Debt & financial liabilities Framework FY2018/19 –FY2022/23, Public Debt Management Framework FY2018/19 –FY2022/23, Charter of Fiscal Responsibility FY2021/22-FY2025/26, Medium Term Debt Management Strategy FY2022/23, Public Finance Management Act (2015) as well as statistical bulletins that have been shared on the Ministry’s website.

CSOs also say that debt is eating a huge pie of the country’s revenue. The adverse effect of this level of borrowing is felt through interest payments of over Shs5.5trillion in FY2022/23 rising from Shs2.4trillion in FY2017/18.

This is coupled with external debt repayments that are projected at Shs2.4trillion in FY2022/23 rising from Shs589bn in FY2017/18.

This takes a first call on the revenue collection and as such reduces funds available for service delivery. Uganda’s tax to GDP ratio of 13% and huge tax expenditures have resulted in foregone revenue of Shs5trillion in only five years from FY2016/17 – FY2020/21.

BoU had earlier anticipated the nominal debt to GDP ratio to exceed the 50% threshold (at 52.8 percent) in FY 2021/22.

“The heightened liquidity pressures experienced in Uganda from external public debt are aggravated by heavier reliance on domestic debt, more semi and non-concessional borrowing which has led to heightened liquidity vulnerabilities in Uganda,” reads the CSOs statement in part.

There is a need for government to ensure investment in projects with high returns especially publishing mid-term review reports of loans to avoid the accumulation of non-performing loans.

According to the Office of the Auditor General’s report (2021), specifically regarding the cash inflows and expenditures of externally funded projects revealed poor absorption and performance of the projects. Out of Shs9.5tn that was appropriated by Parliament, only Shs4.5tn (47%) was released. Relatedly, absorption of externally funded projects further declined in the year under audit. Out of the Shs4.5tn disbursed for donor-funded projects, only Shs2.9tn was spent, representing 65.0% as compared to the 71% observed in FY2019/20.

CSOs noted that high commitment fees are generated from undisbursed loans due to the low levels of absorption of borrowed funds which have resulted in the cost of debt rising. This has further eroded resources available to undertake critical socio-economic programs envisaged under the National Development Plan III. The government needs to reverse this trend, CSOs say.

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