DEBT RELIEF
…Hard-pressed Uganda seeks suspension of debt repayment
KAMPALA
- Uganda said on Monday it may approach its major creditors including China and the World Bank to negotiate a possible suspension of loan repayments amid a growing default risk after its debt load ballooned 35 percent in a single year.
The country gobbled up large credit lines from the World Bank, the International Monetary (IMF) and
other lenders in 2020 to meet funding pressures triggered by the economic crisis induced by the Covid-19 pandemic.
The loans swelled an already fast-rising debt pile for the country that had long worried some, including the central bank and the IMF.
Uganda's total public debt surged to US$18 billion as at December 2020, a 35 percent rise from a year earlier, fuelled by fresh borrowing to cover revenue shortfalls as measures taken to combat Covid-19 hit the economy hard and stifled tax collections.
External creditors hold two thirds of the country's debt, finance ministry data shows.
The country's debt load is seen surging past 50 percent of Gross Domestic Product (GDP) by the end of the current financial year in June, according to Finance Minister Matia Kasaija.
"I will approach them," Kasaija said in an interview, referring to Uganda's biggest creditors such as China, World Bank, IMF and others.
"I will not hesitate to approach them and say, 'you guys can we suspend servicing these loans for, say, maybe two years?'"
Uganda is joining other nations including Ethiopia, Zambia, Chad and others that are facing debt pressures either triggered or exacerbated by the effects of Covid-19.
In the fiscal year beginning July, the country will use up 20 percent of all its planned domestic tax revenues to repay interest rates on public debt, Kasaija said.