The Governor Bank of Uganda (BoU) Emmanuel Mutebile has revealed that the Central Bank, the ratio of debt as percentage of GDP stood at 13.9% in nominal value terms as at end April 2020 and 29.7% percent in present value terms as at the end of March 2020.
Mutebile made remarks while appearing before Parliament’s National Economy where the Central Bank officials had appeared to discuss the impact of COVID-19 on the economy.
“The recent loans acquired during the COVID-19 pandemic could possibly push the ratios up in part also due the weaker fundamentals including slow growth, exchange rate depreciation, weaker exports and a fragile domestic revenue base,” Mutebile said.
He added that Uganda is faced with unprecedented challenges from the health, macroeconomics and social effects of the pandemic and in order to limit the harm of the pandemic on the economy, it is important to maintain macroeconomic stability, secure core public services, maintain a private sector saying it will allow a quicker return to business creation and sustainable development after the pandemic passed.
“Given the rise in debt, there is a growing concern of risk to debt distress. Indeed, Uganda’s debt service has surpassed the threshold level in FY2019/2020 and it is projected to remain high in FY2020/2021. This could be an early indication for fiscal risk could lead to high levels of debt distress,” Mutebile said.
Aston Kajara (Mwenge South) asked whether it was possible for Uganda to seek debt relief from its lenders or postpone debt servicing for a period of 2years.
“We have in the pipeline a number of loans, we are borrowing up to our bone marrow and this is against falling domestic revenue, slow execution of infrastructure projects. The debt stock which we have could take 94years with each person paying Shs1M,” Kajara said.
“With this situation where we have exorbitant public expenditure, I want to know to comment on public expenditure management especially post COVID-19. Do you advise we seek debt relief or postponement of debt service for at least 2years,” he added.
Credit: Business Focus