By Melodie Mukansonera
Days after Fitch ratings singled out Uganda as one of the countries likely to slide into debt distress because of its excessive borrowing, the country’s central bank has now announced that the country is not in position to pay its debts “unless a miracle happens”.
“This has thrown businessmen, investors, and other stakeholders in the Ugandan economy into consternation; uncertain what the future brings,” said Makumbi Mukasa, a Kyambogo graduate and business expert.
In a recent interview with the media, Bank of Uganda Executive Director for Research Dr. Adam Mugume revealed that Uganda has no money to pay its public debt. Mugume, quoted in WatchdoUg, a Kampala website, was very categorical in his remarks, saying: “We are only assuming now that either we have the oil revenue coming on board or we go and ask for debt forgiveness or we default,” he said.
“Apart from these three options, I don’t see how we shall repay our debts.”
Uganda has been mortgaging its oil for these loans. However, informed commentators aren’t sure it is still even owned by Uganda. “They have already been ferrying away the oil, clandestinely and in trucks; the regime of “untouchables” already received and ate the money,” said political commentator Joseph Kabuleta in a video widely shared on YouTube. “So, you cannot rely on that oil to pay off the nation’s debts,” Kabuleta added.
Mugume’s comments followed the recent Fitch Ratings’ downgrade of Uganda’s economic prospects, as a result of excessive borrowing. Fitch indicated that there is a higher chance that the country may default on the loans that are being acquired.
In a related development, the June 2020 Monetary Policy Report that was released early this week by BoU indicates that “external debt continues to be the dominant component of public debt, accounting for 68.4 percent, while domestic debt accounts for 31.6 percent. Although most of the external debt is from multilateral creditors, there has been a significant increase in semi-and non-concessional borrowing, in part reflecting increased borrowing from bilateral lenders.”
The report, which was posted on BoU’s website, also indicates that; “Given the rise in debt levels, there is a growing concern of risk to debt distress”
Further, Uganda’s recent monitory policy framework paper indicates that, “debt service as a share of government tax revenue has risen drastically in the recent past. Indeed, Uganda’s debt service has surpassed the threshold level in in the financial year 2019/20 and it is projected to remain high in the financial year 2020/21. This could be an early indication for fiscal risk that could lead to high levels of debt distress.” Uganda’s Ministry of Finance recently announced that the external debt was $ 8.59 billion, which translates into Ushs 31.53 trillion, while domestic debt was $ 4.73 billion, which is about Shs17.38 trillion.
“Uganda’s problem is that ‘the eaters’ are eating recklessly like there is no tomorrow,” Kabuleta, who has recently announced he is contesting the 2021 presidential elections, said. “The eaters’ are old now, but they show zero concern for the young of today,” he added. “Their only concern is to keep amassing personal wealth, and when they borrow more so as to have more to steal, they are looting the future of the children!”