The portion of domestic revenues Uganda is using to service its public debt rose to 30% in the year to October from 24% in the same period two years earlier and is putting undue pressure on public finances, the central bank said.
In a report on the economy’s performance, the Central Bank of Uganda said the rising cost of debt repayments meant there was growing “liquidity pressures on the domestic revenues to finance the domestic debt liabilities at the expense of other priority budgetary items.”
The bank said repayments of external debt, which are projected to hit $1.3 billion annually by the end of this financial year, “remains a major strain on international reserves.”
The country’s total debt stands at about $21 billion, and is projected to hit 53% of gross domestic product before easing by fiscal year 2024/25 (July-June).
In recent years, Uganda has been taking on increasingly large amounts of debt to finance energy, transportation and other infrastructure with officials banking on expected oil revenue to clear the debt.
But opposition critics and even the central bank have previously warned the rising debt is financing profligacy by officials while also diverting an increasing amount of funds to debt servicing instead of critical priorities.
Finance ministry officials though say the government’s debt is still manageable and that the credit is being used to fund essential infrastructure that is needed to drive growth.
The bank maintained its economic growth forecast of between 5%-5.3% in the fiscal year to end-June.
