Uganda’s public debt hits $24.69bn

Uganda's public debt has surged by 3.5 per cent, hitting a new high of $24.69 billion by the end of December 2023. The increase in debt is attributed to a mix of external and domestic obligations that Uganda is grappling with. This escalating debt situation not only impacts Uganda but also reverberates across other East African nations. However, amidst the looming debt crisis, several positive economic developments have been instrumental in shaping the economic landscape of East Africa. To shed light on this complex economic scenario, Carol Nampurira, Corporate Sales Manager for Energy and Infrastructure in Global Markets at Stanbic Bank Uganda, joined CNBC Africa for an insightful discussion regarding the economic dynamics in the region. During the interview, Carol delved into the intricacies of Uganda's burgeoning debt and its impact on the national budget. She highlighted the composition of the debt, pointing out that commercial banks account for approximately 38.97 per cent, followed by pension funds at 29.7 per cent, offshore entities at 7.4 per cent, and other financial institutions at 4 per cent. Notably, the external debt surged from $12.82 billion to $14.23 billion between June 2022 and June 2023, while the domestic debt rose from $8.16 billion to around $9.4 billion during the same period. Despite these concerning figures, Uganda's debt-to-GDP ratio remains at 50 per cent in 2023, well within acceptable levels compared to other sub-Saharan countries. Discussing strategies to mitigate the debt burden, Carol outlined the government's initiatives to manage the debt situation. Uganda recently engaged with the International Monetary Fund (IMF) to leverage the Extended Credit Facility, facilitating access to the Special Drawing Rights Programme. The fruitful discussions resulted in Uganda being granted access to draw funds amounting to approximately $120 million. However, this access is contingent upon the government demonstrating clear plans to settle outstanding overdraft obligations with the Bank of Uganda, totaling about $5.7 trillion. As Uganda focuses on reducing these overdraft borrowings, it will lean on domestic borrowing while exploring concessional options to bolster the budget between 2020 and 2024. Moreover, Uganda anticipates that its public debt will remain sustainable in the medium to long term, primarily supported by enhancements in GDP growth. The government has set ambitious targets to amplify the economy tenfold over the next decade, bolstered by oil production and associated revenue streams. Concurrently, efforts in domestic revenue mobilization and fiscal consolidation are imperative to curtail borrowing, especially as key infrastructure projects near completion. Transitioning to Kenya, Carol addressed the positive shift in the Kenyan financial landscape, marked by a bullish stock market, successful Eurobond refinancing, and a stable Kenyan shilling. Despite initial concerns earlier in the year, Kenya has managed to boost investor confidence, partly due to the infrastructure bond issuance which bolstered the currency. The Kenyan shilling has appreciated by 11 percent year-to-date, showcasing resilience against cyclical pressures. Noteworthy factors such as remittances and curtailed importer demand have further buoyed the Kenyan currency. Furthermore, Carol touched upon the robust performance of banks across the region, highlighting their ability to adapt credit strategies effectively amidst challenging macroeconomic conditions. Despite a weaker shilling, banks have recorded positive earnings, driven by sustained private sector credit demand, government borrowing, and prudent non-performing loan management. The recent private sector growth rate of around 13 percent underscores the latent opportunities within various sectors like manufacturing, retail, and agriculture. In conclusion, the East African economic landscape presents a mix of challenges and triumphs, with debt concerns coexisting alongside positive economic indicators. As countries navigate through these headwinds, proactive strategies, prudent fiscal policies, and a diversified revenue base will be instrumental in steering the region towards sustained economic growth and stability.