Uganda is going to concentrate on debt management and economic recovery over the next four financial years as the country faces the socio-economic stress of the COVID-19 pandemic.
In its Medium Term Debt Management Strategy Report published late Monday, the finance ministry said that in the financial year 2021/22 starting on July 1, the government will focus on debt management objectives by implementing a macroeconomic framework.
Over the next four financial years, the Ugandan government will strive to keep debt within sustainable levels and minimize refinancing risks and costs, it said.
“External financing will be driven by disbursements and new financing in form of concessional, semi concessional, and non-concessional/commercial sources,” the ministry said in the report.
“Domestic borrowing will majorly be in form of longer dated instruments aimed at reducing the refinancing risk in the public debt portfolio,” it added.
The ratio of Uganda’s nominal debt to gross domestic product (GDP) in December 2020 stood at 47.2 percent, up from 38.0 percent from a year earlier.
Experts said that if a country’s ratio is above 50 percent, then it faces debt distress. Increase in debt stock, according to the ministry, was on account of rise in external borrowing to address among others the socio-economic impact of COVID-19. Uganda’s total debt stock at the end of December 2020 was 17.96 billion U.S. dollars, up by 35.0 percent year on year.
“This increase was on account of a rise in external borrowing and its disbursements to address the socio-economic impact of COVID-19 as well as growth in domestic debt issuances to finance the fiscal deficit,” the ministry said.
COMPOSITION OF UGANDA’S DEBT
In terms of external debt stock by creditor category, multilateral creditors rank highest with 64 percent of the total for Uganda, followed by bilateral creditors with 35 percent and commercial banks with 1 percent.
Among the multilateral creditors, the World Bank ranks first with 58 percent, followed by the African Development Fund with 20 percent.
The report said there has been a 2-3 percent reduction in the share of the World Bank and the African Development Fund respectively last year due to new financing from the International Monetary Fund that has taken up 7 percent of the multilateral creditors’ debt stock.
Undisbursed debt stock stood at 4.55 billion dollars as of Dec. 31, 2020 compared with 4.45 billion dollars as of Dec. 31, 2019, according to the report. The World Bank, China and the Islamic Development Bank hold the largest share of undisbursed stock with 24 percent, 19 percent and 10 percent respectively.
The delay in disbursement, according to the report, was due to slow implementation of projects caused by the COVID-19 pandemic which also impacted the supply of goods and services needed.
Newly signed loan financing agreements with conditions for disbursement were also another reason for delayed disbursement.