BY NICHOLAS OPOLOT
The 2017/18 Budget Speech of Uganda read on 8 June indicated that our country’s debt burden now stands
at US$8.7 billion (Shs28 trillion)! For the coming financial year alone, about Shs14 trillion (12 percent of the budget) has been earmarked for debt financing, which obviously sounds alien to many Ugandans. It is absurd to note that most of us are not bothered by such statistics and even the dignitaries that attended the event found comfort in napping through the entire budget reading process. However, whether we nap in oblivion or not, a bad economy affects everyone.
The taxpayer is usually the one who suffers most when it comes to debt financing. So the cost of doing business is going to increase. Translation: we are going to pay more taxes. That is why as citizens it is our constitutional right to demand accountability and transparency in debt management from the Government. As citizens we need to have public dialogue which can contribute to meaningful solutions that will help manage public debt. As a country, is it sustainable for us to keep borrowing?
In Uganda, public debt is managed by the Ministry of Finance, Planning and Economic Development in liaison with the Bank of Uganda. According to the 2015 Audit Report by the Ministry of Finance, it was stated that public debt is basically incurred primarily for financing budget deficits and development of domestic financial markets, among other priorities.
Uganda once had an unsustainable external debt burden of US$5.5 billion (Shs14.257 trillion) in the early and mid-2000s, which led to the outflow of foreign exchange. Currently, over 60 percent of the public debt is external debt and 40 percent is domestic debt. Mr Martin Nsubuga, a senior economist in the macro-economic policy department in the Ministry of Finance, told the Sunday Monitor recently that Uganda’s public debt is spiralling at close to two percentage points every year.
That is detrimental to our domestic growth as an economy. Therefore, the Government must address the high cost of domestic borrowing, and reduce domestic bond rates if we are to reduce the tax burden on all Ugandans, and if our economy is to grow to a sustainable level.
The writer is a third-year Law student