World Economy

Uganda Warned on Rising Debt

Uganda Warned on Rising Debt Uganda Warned on Rising Debt

The International Monetary Fund managing director, Christine Lagarde, has warned Uganda on debt accumulation.

Lagarde, who held bilateral talks with President Museveni in Entebbe, pitched the discussions on the need for Uganda to scale up its infrastructure in order to boost production that would translate into better economic growth for the country, reported.

But Uganda’s pursuit of infrastructure development is also piling up the country’s debt burden; raising concerns about its sustainability. There has to be a good balance between concessional and non-concessional loans. 

The second point is that macroeconomic stability is a key that is looked at by investors and lenders; be it from private sector, institutions or countries. 

The third point is that there is abundance of financing available and that key financing is looking at bankable projects and those that are disciplined and well-implemented,” Lagarde said at a press conference with Museveni after the talks.

Uganda’s debt is expected to rise once China’s Exim bank approves a Shs8 trillion ($2.2 billion) loan to build the first phase of the Standard Gauge Railways from Malaba to Kampala.

The government is also planning to borrow from the PTA Bank in order to revive the national airline. Uganda’s debt burden has been of concern because its financing has been inclined towards the non-concessional segment.

In November, Uganda’s credit rating was downgraded by credit rating agency Moody’s in part because of concerns on debt affordability that had been a persistent vulnerability for Uganda.

Lagarde also said the best way for Uganda to finance its projects was to widen its tax base by removing VAT and income tax exemptions.

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