High public Debt Servicing Costs Reducing Funds for Budget financing: CSOs
Our current economic landscape is marked by ominous signs; a mounting public debt risk, stagnant revenue mobilization, and fiscal indiscipline fueled by corruption
Drake Nyamugabwa
Civil Society organizations (CSOs)have raised concern over the increasing cost of servicing public debt that they say is undermining the availability of funds for allocation to various public projects.
CSOs under their umbrella organization Civil Society Budget advocacy Group (CSBAG) have said that there is need for government and stakeholders to address the public funds leakages and wastful expenditure to allow financing of development projects that will benefit the public.
During the CSBAG End of Year Press conference on Economic Performance and Management Statement held on Friday 22nd December 2023 at their offices in Ntinda, Kampala, The Executive Director CSBAG Julius Mukunda said that throughout the years of 2023, the government of Uganda has displayed fiscal indiscipline in public finance management manifesting through increasing public debt which he saiid is constraining government’s fiscal capacity.
“On public finance leakages and wasteful expenditure, throughout the year, the government of Uganda’s display of fiscal indiscipline in public finance management has been disheartening and must be addressed. The cost of servicing Uganda's public debt continues to burden the government's fiscal capacity. In the next financial year, funds available for allocation have reduced over high debt servicing costs” he said
He said that enforcement mechanisms need to be robustly implemented to curb fiscal indiscipline and ensure the judicious use of public resources.
“Insufficient mechanisms to control domestic arrears pose a significant challenge in Uganda. Despite the Ministry of Finance’s plan to eliminate domestic arrears, they have surged by 62% in a single year from UGX 4.65Trillion to 7.55Trillion” he said
As of June 2023 according to CSOs, The Public debt stood at UGX 86.7Trillion representing an increase from last financial year.
The CSBAG ED added that though there is reduced inflation and improvement in credit extension to private sector players to facilitate economic recovery, there is still a need to address the depreciation of Uganda's shilling compared to other foreign currencies.
“Our inflation has drastically reduced now at 2.4%, we are doing better than anyone in East Africa. This is something we should be proud of. There's an improvement in credit extension meaning the private sector can now access credit and finance their loans. However, the Uganda shillings still weakened more against the dollar, depreciating by 0.7%. This means you need more Ugandan shillings to buy a dollar. The UG shilling is depreciating by 2.8% and 3% against sterling & Euro respectively” he said
