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Uganda’s public debt projected to grow to nearly 50% by June
According to the National Budget Framework Paper 2021/2022 recently approved by parliament, the country’s budget is projected at $12.38 billion, of which $5.66 billion will go to debt servicing. The country's debt is expected to reach 49.9 per cent of GDP by end-June, up from 41 per cent the same month last year. Economic Analyst, Charles Bwogi joins CNBC Africa for more.
Mon, 01 Mar 2021 14:38:43 GMT
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AI Generated Summary
- The National Budget Framework Paper for 2021-2022 outlines Uganda's public debt projected to reach nearly 50% of GDP by June, with a budget of $12.38 billion.
- Despite expectations for significant changes, the budget paper maintains consistency in revenue collection targets and budget size compared to the previous fiscal year.
- Funding sources for the budget include domestic tax revenue, borrowing, and support from development partners, with challenges in meeting revenue mobilization targets post-pandemic.
Uganda is facing a significant challenge as its public debt is projected to grow to nearly 50% of GDP by June, according to the National Budget Framework Paper for 2021-2022 recently approved by the Parliament. The country's budget is expected to reach $12.38 billion, with a substantial portion of $5.66 billion allocated to debt servicing. This increase marks a significant rise from 41% of GDP in the same month the previous year. Economic Analyst, Charles Bwogi, sheds light on the implications of these figures.
In a recent interview with CNBC Africa, Bwogi highlighted the key points of the National Budget Framework Paper for 2021-2022. Despite expectations for addressing various issues affecting the business community, including a stimulus package for small and medium enterprises impacted by the pandemic, the paper did not introduce significant changes in revenue collection targets or budget size when compared to the previous fiscal year.
One of the focal points discussed in the interview was the funding plans for the budget. Bwogi mentioned that domestic tax revenue is anticipated to contribute approximately 47% of the total budget, with the remainder sourced from a combination of domestic and external borrowing, as well as budget support from development partners. However, meeting the revenue mobilization targets, especially in the aftermath of the pandemic's economic disruptions, poses a challenge.
The escalation of the debt deficit in Uganda has been influenced by the need for additional borrowing to bridge revenue shortfalls and address COVID-19 related expenditures. This situation has led to a steady rise in the country's debt to GDP ratio over time. Bwogi acknowledged that Uganda is not alone in grappling with this issue, highlighting similar trends in neighboring countries like Kenya, Tanzania, and Rwanda.
Despite concerns over the growing debt burden, Bwogi emphasized some potential areas of optimism for Uganda's economy. Sectors such as oil and gas, along with a resilient agriculture industry, offer opportunities for revenue generation and economic stability. Positive indicators such as increased coffee production and exports provide some resilience amidst challenging circumstances.
In the face of rising debt levels, the primary risk identified is the possibility of default. However, Bwogi expressed confidence in Uganda's ability to navigate these challenges, citing the country's buoyant economy and promising sectors as key strengths. While acknowledging the risks associated with the escalating debt burden, Bwogi's assessment underscores the importance of leveraging the country's economic potential to mitigate adverse impacts and secure a sustainable financial future.
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