Kampala, Uganda | THE INDEPENDENT | Civil Society Organizations (CSO) under the Umbrella Civil Society Budget Advocacy Group have expressed fears that impact of the highly shooting public debt is going to be much felt by Ugandans in the next financial year as government plans to spend more on debt servicing at the expense of service delivery.
The recently released Auditor General’s report indicates that Uganda’s public debt has increased by 22 percent, rising from shillings 33.99 trillion as at June 30, 2017, to 41.51 trillion as at June 30, 2018.
However, according to the Budget Framework Paper, whereas the budget has increased by 4.9 percent from 32.7 trillion shillings to 34.3 trillion shillings, a lion’s share of the resources in the envelop are for debt repayment, interest payment and non-resource funds for domestic debt refinancing with Interest payment allocated 2.9 trillion which the second largest share standing at 11.4 percent of the entire budget.
The Chief Executive Director of the Civil Society Budget Advocacy Group (CSBAG) Julius Mukunda says it is important that Ugandans don’t get excited of the 34 trillion budget since almost half of the items that comprise it are of no direct benefit. He said this during a function at the CSBAG headquarters in Ntinda.
Mukunda referred to the budget framework paper which indicates that there will be a deduction of almost 12 percent on the total allocation to social sectors of education, health, social development water and environment and agriculture.
He adds that although the debt stock to Gross Domestic Product-GDP is still below the 50 percent regional threshold, there are worrying trends that it can exceed the limit if government implements other debt financing heavy projects such as the standard gauge railway.
Uganda Debt Network Projects director, Julius Kapwepwe says that the biggest fear is that as the debt burden continues to accumulate, Uganda might end up caught up in a mass debt trap.
Kapwepwe shares that it a public secret that some of creditors like the Chinese government who Uganda owes over six trillion shillings has been confiscating resources of nations who fail to payback giving an example of Siri Lanka.
He notes that they are not saying that the government should stop borrowing funds, there are however concerned that it is high time government ensured strict compliance with the project timeliness and ensuring pricing and unit costs are competitive.
Meanwhile, government plans to acquire loans worth USD 1.6billion increasing non-concessional loans from USD 712 million to USD 885.4million in financial year 2018/2019 and 2019/2020 respectively. Concessional loans will reduce from USD 916.6 million to USD 724.9 million.
On domestic debt front, Mukunda says as they commend government for reducing borrowing from the domestic market by a reduction of nearly 70 percent adding that this has been crowding out the private sector players I the credit sector. However, he added that concerns on the domestic debt refinancing risk and the very high and growing loan guarantees remain unattended too.