Bank of Uganda (BoU) Governor Prof Emmanuel Tumusiime Mutebile has warned that Uganda’s national debt could soon become unsustainable.
On June 18, Prof Mutebile appeared before Parliament’s National Economy Committee to offer his expert views on the impact of Covid19 on the economy and what should be done to mitigate the negative effects of the pandemic.
According to the Governor, Uganda’s provisional total debt stock stands at Shs53.697tn as at the end of April 2020. This amount is almost Shs9tn above Uganda’s 2020/21 national budget.
It is also a 13.7 per cent increment compared to the figures as at July 2019.
Mutebile further explained that the ratio of debt to GDP is at 13.9 per cent in nominal value terms as at the end of April 2020 and 29.7 per cent in present value terms as at the end of March 2020.
“Indeed, Uganda’s debt service has surpassed the threshold level in FY2019/2020 and it is projected to remain high in FY2020/2021. This could be an early indication fiscal risk could lead to high levels of debt distress,” Mutebile told the MPs.
The debt distress could come as a result of the billions of dollars borrowed by government during the Covid19 crisis because they will send the ratio of debt to GDP through the roof.
Slow economic growth, exchange rate depreciation, reduction in exports and a fragile domestic revenue base could also make matters worse, especially if the crisis persists.
To help save the economy, Mutebile suggested that government focuses on efforts meant to maintain macroeconomic stability, secure core public services and sustain a vibrant private sector.
It is such measures that the Governor hopes will help the country return to economic normalcy following the partial easing of Covid19 lock-down.