Uganda’s Public debt is growing at a higher rate than the Gross Domestic Product –GDP, according to the latest Auditor General’s report for financial year ended 30th June 2023.
The audit report was on Tuesday presented to the Speaker of Parliament, Anita Among by the Auditor General John Muwanga. The Debt to GDP ratio is a measure comparing what the country owes in terms of total debt and what it produces. This ratio indicates a country’s ability to pay back the debt and a high debt-to GDP ratio may make it difficult for the country to pay back the debt.
As at 30th June 2023, the total public debt stood at 96.16 trillion Shillings, comprising of 43.69 trillion domestic debt and 52.47 trillion external debt.
The figures indicate an increase of 9.3 trillion, compared to the 86.83 trillion public debt recorded as at 30th June 2022.
Also previous figures of the public debt recorded in past years indicate a consistent increase in the total debt as evidenced by an increase of 107 percent in five years from 46 trillion in financial year 2018/2019 to 96.16 trillion as at 30th June, 2023.
“Relatedly, the GDP grew from 132.09 trillion in financial year 2018/2019 to 184.89 trillion in financial year 2022/2023 representing an increase of 52.8 trillion. This implies that the public debt is growing at a higher rate than GDP,” reads part of the audit report.
The Auditor General says that a re-computation of Uganda’s Debt to GDP reveals a consistent linear growth over five years and that in the year under review, it was noted that the debt to GDP decreased by 0.7 percent from 53.4 percent to 52.7 percent in the financial years 2021/2022 and 2022/2023 respectively.
For a debt to be sustainable, particularly for developing countries of which Uganda is part, the International Monetary Fund-IMF says it must not exceed 50 percent of the country’s Gross Domestic Product-GDP.
Edward Akol, the Assistant Auditor General in charge of Audit says that the increase in debt is due to increased government expenditure compared to the domestic revenue to finance the fiscal deficit.
“The major driver of the external debt growth is to finance the budget (Budget Support). Under the circumstances, the servicing of public debt may not be sustainable in the short and medium term, if not checked,” said Akol.
On domestic debt, the audit attributes the rise to the need to increase borrowing mainly to support the economy through the Covid-19 pandemic, and mitigate the negative social and economic impacts, and also to support the economy, amidst increasing global conflicts like the Russia –Ukraine war.
According to the audit report, this increasing trend in government debt position without matching domestic revenue increase, strains the government’s ability to repay the debt and deliver services to the citizens.
Akol advised the government to review and strengthen its interventions to move towards self-sustainability.
Speaker of Parliament, Anita Among welcomed the review of the public debt saying that it will help the country in reducing the appetite.