Economists have warned the government to reconsider resource guzzlers and clean up inefficiencies as the country approaches a point of no debt return, if it has not already.
This comes as Uganda’s debt reaches 78.8%, with borrowing increasing but not reflecting in revenue and service delivery.
Construction of infrastructure-based facilities, defence, international travel, and surplus in the electricity sector are some of Uganda’s current resource guzzlers that economists say need to be revised as the country’s debt reaches an all-time high.
Is it possible that the country has reached a point of no return, with a staggering 70.4%?
“When you start debt refinancing, which we are, you’ve walked into a point of no return, but you can return if you make drastic decisions,” Senior Economist Fred Muhumuza explained.
Muhumuza added that Uganda can only afford to borrow for unavoidable critical needs, but that this will be a difficult decision.
“To put it simply, there are two things that are concerning about the current situation.”
“The borrowing trend persists, and service delivery does not improve,” he added.
He is not alone; another economist, Mp Otuke county Paul Omara, agrees.
The conundrum is how come after several loans it doesn’t have consequential impact on the gdp and on our tax to gdp ration,” Omara said.
Omara told this website that this clearly shows that the borrowed funds are being invested in the wrong priorities.
As if that wasn’t enough, Omara reveals that the reported debt burden of 70.4% may be lower than the actual figure.
“The actual debt is 78.7% of the total.” This does not take into account contingent liability arising from a guarantee,” he added.
Omara, on the other hand, claims that Uganda’s debt-to-GDP ratio of 48% is not alarming when compared to Kenya’s at 80%.
He is concerned that the current inflation and government response are out of sync.
“Government aggressive monetary and fiscal policy to arrest inflation; you can’t do both.”
But what is at stake, given the current developments, with the IMF, one of Uganda’s largest funders, refusing to lend additional funds until the BOU 8 trillion loan is cleared?
“We are going to default,” Muhumuza said, “and funders will discover the scam of refinancing loans and blacklist Uganda.” Ghana is the most recent victim.
