State Minister for Planning Amos Lugoloobi has said Covid-19 related borrowing resulted into higher debt levels with the current debt ratio to gross domestic product (GDP) growing to at least 54%.
Speaking at the launch of the National Development Plan III Mid-Term Review in Kampala on Thursday, Mr Lugoloobi, said public debt was now above the 50 percent threshold due to increased borrowing to mitigate challenges resulting from Covid-19 and other disasters such as locusts.
“Today, debt to GDP is 54%. So, we have already gone beyond the threshold of 50%,” he said, noting that debt levels have increased sharply in the last three years. However, Mr Lugoloobi did not reveal the value of Uganda’s current public debt.
As of October 2021, according to data from the Central Bank, Uganda’s public debt had risen to Shs73.8 trillion up from Shs69 trillion in June 2021.The increase was mainly attributed to a Shs5.9 trillion debt that government had acquired from the domestic market.
Therefore, Mr Lugoloobi said, there was need for government to rethink the financing architecture of the National Budget with the view of increasing tax ratio to GDP.
Whereas past NDPs, he said, had focused on increasing production and infrastructure, it was time to create markets and promote trade, which, for a long time, have been ignored.
“Trade is [one of the least] funded sectors … we need to begin planning for trade and market,” he said, urging National Planning Authority to assimilate integration at both regional and continental level into the NDP III Mid-Term Review to promote intra-trade.
Therefore, Mr Lugoloobi also said, the midterm review of NDPIII presents an opportunity to redirect the country through a reprioritization process towards recovery as well as cover progress on cross cutting issues that will lead to sustainable development.
Dr Joseph Muvawala, the National Planning Authority executive director, said NDP III has not performed well in the first two years due to Covid-19 disruptions that have adversely affected the economy.
As a result, he said, most of the projects are behind scheduled as it had planned yet the country is struggling with high debt burden that has been exacerbated by growing inflation and rising commodity prices.
“We will have to tighten our belts by reducing expenditures on certain things. We will have to suspend some projects as stipulated in NDP III and to reprioritize projects that are most critical,” he said, noting that the reprioritization will mean that government might have to reduce construction of new roads to instead concentrate on maintenance.
Going forward, he said the new plan will emphasize green financing to see to it that the government looks for some cheaper resources that are always tagged to climatic changes,” he added.
Dr Muvawala also said that the only way for Uganda to do away with inflationary pressures is to get oil out of the ground, increase production in the economy, especially the food items through expansion of irrigation for farming and creating sufficient storage facilities.