Experts tip on how Uganda can mitigate the risks of debt distress.

Experts tip on how Uganda can mitigate the risks of debt distress.
DST Mr. Patrick Ocailap during an interview

Various experts have raised concerns about the rising debt, especially in Sub-Sahara countries including Uganda which they say has been rapidly accumulating amid an increase in interest rates.

According to economics experts in a debt sustainability report, In measures to mitigate the risks to the sustainability of our debt, the Government can continue to prioritize borrowing for growth-generating and welfare-enhancing sectors of the economy which they say will help foster higher and inclusive growth. This will contribute to increased domestic revenue mobilization, reducing our reliance on debt in the foreseeable future.

On Thursday 13th June 2024 during an interview with The Deputy Secretary to the Treasury, Mr. Patrick Ocailap said that following the realization of the high interest rate, especially foreign debt, Uganda has minimized borrowing external loans of high-interest rates and the accumulating debt.

“The rest of the assumptions underlying debt, we all know have been a result of our realization that we cannot continue postponing the payment to Bank of Uganda anymore, because of two things; every day we incur an interest of about 1 billion shillings, in a year that 360 billion. That cannot continue. The amount of money we expected to borrow from abroad -the 450 billion this fin year, could not come because according to our assessment, the interest rates out there remained sticky upwards on account of monetary adjustments those countries took to contain inflation in those countries” he said.

He added that “if we are to borrow for example this year's budget approved by parliament, we would pay an interest of up to 10% on the US dollar, that would be unrealistic”

The DST said that with the input of robust technical support and the wide stakeholder consultation in the formulation of the budget for next year, the government is optimistic will raise the required trillions for next year's budget.

“On account of plugging loopholes, we are confident that we are going to raise the 32 trillion from URA next financial year. The government of Uganda owes BOU, bank of Uganda is our banker, is our issuer on our behalf of the instruments for financing the budget, and custodian of our banks for our resources, and resources of other projects waiting for disbursement, so in the course of budget execution, if URA is not forthcoming and if external resources are not forthcoming, what we do is that the bank of Uganda pays on behalf of the treasury” he said

Recently while leading the delegation to attend the 2024 Annual Meetings organized by The African Development Bank Group at the Kenyatta International Conference Center in Nairobi, from 27 to 31 May, the Deputy to the Secretary of Treasury Mr. Patrick Ocailap while focusing on the issue of mitigating debt distress, said that debt accumulation has been very rapid across sub-Sahara Africa, amid an increase in interest rates, which he said had placed a huge debt and servicing burden on AfDB member states.

“Uganda inclusive can avoid tendencies of debt distress because, after Covid-19, Ebola, and then the vast impacts of climatic change, various economies have borrowed massively amid an increase in interest rates, which is bringing problems for some countries,” he said