Moody's downgrades Uganda's rating to B2, outlook stable

Moody's Investors Service has downgraded Uganda's long-term issuer rating to B2 from B1 and has changed the outlook to stable from negative. The key driver behind this rating action, according to Rita Babihuga, Assistant Vice President at Moody's, is the sustained erosion of Uganda's fiscal strength. In a recent interview with CNBC Africa, Babihuga discussed the reasons behind the downgrade and highlighted the concerning trends in Uganda's debt metrics. Over the past four years, Uganda's debt has risen by 9 percentage points to 33 percent, raising questions about the country's ability to service its debt obligations. Despite these challenges, Babihuga emphasized that Moody's is not predicting a default by Uganda at this time. However, she underscored the need for the government to address the rapid increase in debt levels and the potential risks associated with a significant portion of the debt being denominated in foreign currency. The interview also touched upon the reliance of the Ugandan government on the domestic banking system for financing needs, with Moody's expressing concerns about the sustainability of this approach in the long term. As Uganda grapples with these fiscal challenges, it will be essential for policymakers to implement effective strategies to strengthen the country's fiscal position and ensure economic stability in the face of ongoing uncertainties.