By Melodie Mukansonera
The international credit ratings agency, Fitch, has downgraded the economic prospects of Uganda as a result of excessive borrowing and indicated that there is a higher chance that the country may default on the loans that are being acquired. “Such reckless borrowing is why Uganda will keep slipping down the international economic ladder,” fumed a Kampala economist, Tom Muhangi.
According to a report posted on the Fitch Ratings website, some of the key rating drivers that led to its downgrading, from a “B+” to a “B” with a negative outlook included risks to public finances, and the coronavirus shock amid a build-up of government debt and persistent twin deficits. “In layman language when ratings agencies say ‘risks to public finances’, that is their way of saying Ugandan rulers and officials are expected to corruptly mismanage funds!” said a financial writer on condition of anonymity.
The downgrading of Uganda’s economic outlook comes after Uganda’s Ministry of Finance announced during the recent budget reading that the fiscal deficit which was projected to be 6.6% of has turned out to be 7.5% of GDP.
In his reaction to Fitch Ratings revision of Uganda’s outlook, the Director of Programmes at the Uganda Debt Network, Julius Kampwepwe said: “there have been tendencies of using the Covid-19 situations to pick unprecedented budgets.” In Uganda’s case, citizens have watched in horror as the government has borrowed trillions on pretext of “fighting Covid-19”. Yet a lot of the money has gone to places like defense, State House, government propaganda budgets (in the guise of media), and you can be sure a lot of these monies will not be accounted for,” said Muhangi, an economist.
Others can see a situation where the government of Uganda will just leave crippling debt to coming generations of Ugandans. “There is no way on earth they will be able to pay these debts, and no wonder Fitch ratings has downgraded the country!” he added.
Fitch Rating noted: “We expect a further widening gap in financial year ending 2021…There is a risk that the government might have to provide more extensive support to the economy, particularly in a pre-election year. We expect the government to cover the fiscal deficit primarily through foreign borrowing mostly on concessional terms, although it is also increasingly pursuing commercial loans.”
In past elections, the Uganda Government has been known to resort to printing currency “to dish to NRM supporters; as well as to fund election campaigns that are an exercise in gross waste,” said Makumbi Mukasa a resident of Kasangati. “In 2021 people should expect much, much worse. Having done away with age limit, the next thing will be to dish out money that only God knows who will ever pay it back; Uganda could have a worthless currency in coming years,” said Makumbi, a graduate of Kyambogo.
All this, according to financial pundits, implies that Uganda is at high risk of defaulting on loans, further sinking to “a debt-distressed economy.”