The government of Uganda intends to curb commercial borrowing for the next fiscal year, according to the nation’s finance minister on Thursday. This recent decision comes as a recent report published by the World Bank projected the nation to be the second fastest growing economy in the East African community (EAC) in 2024.
Following the World Bank Global Economic Prospects released on June 11 that indicated Uganda is the second fastest growing economy in the East African community (EAC), the government has plans to limit rising debt by focusing on concessional borrowing and curbing commercial loans next fiscal year, its finance minister announced on Thursday. This comes after a credit rating downgrade last month in the East African nation.
The country’s public debt has been mounting as the government focuses on big infrastructure projects, prompting warnings from its central bank.
In May, a Global rating agency, Moody’s brought down Uganda’s sovereign rating, citing increasingly constrained financing options. Finance Minister Matia Kasaija revealed lately in a budget speech that total public debt stood at $24.7 billion at the end of last year and was seen rising to $25.7 billion by the end of this month.
Debt service costs excluding domestic debt redemptions were projected to swallow 40.3% of domestic revenue in the fiscal year that starts in July, up from 33.4% in the current year. Uganda’s government says borrowing has been used to drive economic growth, which has been faster than many of its African peers since the COVID-19 pandemic.
The economy was expected to grow between 6.4% and 7% next fiscal year, Kasaija said, spurred by oil and gas activities ahead of planned crude oil production starting in 2025/26. The budget deficit has projected to rise to 5.7% of gross domestic product (GDP) next fiscal year, up from 4.5% this year.
