Matia Kasaija, the Finance Minister said the rise in debt could mainly be associated to the need to support the economy and preserve the welfare of households as a result of COVID-19.
He also indicated that some other external and domestic shocks contributed to the rise.
Some of the debt also went towards financing shortfalls in domestic revenues according to Kasaija. He made these revelations to the Members of Parliament on Tuesday as he read the budget speech at Kololo Independence grounds.
“Madam Speaker, as at the end of December 2021, Uganda’s total public debt stock stood at Shs. 73.5 trillion (equivalent to USD 20.7 Billion), of which External Debt amounted to Shs. 45.72 trillion (equivalent to US Dollars 12.9 billion). Domestic Debt amounted to Shs. 27.77 trillion (equivalent to US Dollars 7.84 billion),” Kasaija revealed.
According to him, that represents nominal Debt to GDP ratio of 49.7 percent.
He said the Government is implementing the following measures to ensure long-term public debt sustainability:-
- Reduce the level of domestic borrowing over the medium term to an average of 2.2 percent of GDP per year. This ratio will be reduced further to a policy target of 1.0 percent of GDP over the long term;
- Implement the Public Investment Financing Strategy. This strategy will also ensure the alignment of suitable financing modalities with the nature of Government programmes and projects;
- Implement the Financial Year 2022/23 borrowing strategy which is consistent with our Medium-Term Debt Management Strategy, to avoid risks associated with unsustainable debt;
- Borrow largely on favorable terms and for projects that enhance the productivity of the economy;
- Sequencing new projects in a manner that makes the Government service its debt obligations without the risk of default. This means the Government will only mobilize debt financing for ready projects and will cancel projects with poor performance; and
- Lastly, increase domestic revenue by implementing the Domestic Revenue Mobilisation Strategy.
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