…but says it will bor­row cau­tiously

Daily Nation Newspaper - - Home News -

- Uganda said on Tues­day its bal­loon­ing pub­lic debt was sus­tain­able and it would bor­row with care in the fu­ture, dis­miss­ing con­cerns from the cen­tral bank and the gov­ern­ment’s au­di­tor that grow­ing in­debt­ed­ness posed risks to the econ­omy.

The coun­try’s ap­petite for credit has ac­cel­er­ated over the last decade, fu­elled by leader Yow­eri Mu­sev­eni’s plans to ex­pand trans­port and en­ergy in­fra­struc­ture.

But crit­ics say the es­ca­lat­ing bor­row­ing could spark a cri­sis along the lines of those the coun­try ex­pe­ri­enced in the 1990s and early 2000s be­fore the World Bank for­gave loans.

“The risk for gov­ern­ment de­fault­ing on debt re­pay­ment is non-ex­is­tent,” Fi­nance Min­is­ter Ma­tia Ka­saija told a news con­fer­ence in the cap­i­tal Kam­pala. How­ever, fu­ture bor­row­ing would be done “cau­tiously and se­lec­tively” to avoid po­ten­tial risks.

As of June, Uganda’s to­tal pub­lic debt stood at 41.5 per­cent of GDP, Ka­saija said. The cen­tral Bank of Uganda (BoU), how­ever, said last year the debt stock in­clud­ing credit agreed but not yet dis­bursed topped 50 per­cent of GDP.

A se­nior BoU of­fi­cial has said that un­less eco­nomic growth reached 7 per­cent, debt ser­vic­ing would be­come a prob­lem. The bank ex­pects the econ­omy is to grow 6 pct in the year to June 2019.

Au­di­tor gen­eral, John Muwanga, said in a re­port last month that Uganda’s pub­lic debt sus­tain­abil­ity “fares poorly” be­cause its tax-to-GDP ra­tio was low.

Much of the credit ac­quired in re­cent years was sourced from China, stok­ing crit­i­cism from the op­po­si­tion which ac­cuses Bei­jing of front-load­ing Uganda with un­sus­tain­able debt on the ex­pec­ta­tion of tap­ping oil rev­enues.

Uganda ex­pects to start pump­ing crude by 2021 from fields in the western part of the coun­try, near the bor­der with Demo­cratic Repub­lic of Congo.

China’s China Na­tional Off­shore Oil Cor­po­ra­tion CNOOC co-owns the fields along­side France’s To­tal and UK’s Tul­low Oil.

China is also ex­pected to of­fer land­locked Uganda an­other credit line worth about $3.5 bil­lion to fund con­struc­tion of a rail­way from Kam­pala to the bor­der with Kenya, its neigh­bour and gate­way to the sea.


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