By Frank Kamuntu
Lawmakers on Parliament’s Public Accounts Committee (PAC) have called on the government to restructure its debt after the Auditor General revealed that Uganda’s debt had surged to UGX97.499 trillion as of June 2023, marking a 111.7% increase over five years.
PAC Chairperson, Muwanga Kivumbi, made the appeal while presenting the committee’s report on the Auditor General’s findings regarding the Treasury’s operations and the government’s Consolidated Financial Statement during a recent plenary session. The report highlights significant concerns about Uganda’s growing public debt portfolio.
“The committee recommends that the government restructure its debt to secure cheaper loans and reduce obligations. Measures should be initiated to reverse this debt trend, enforce fiscal discipline, and ensure timely servicing of domestic obligations, including interest payments,” Kivumbi urged.
The Auditor General’s report showed that by June 2023, Uganda’s public debt had reached UGX97.499 trillion, with UGX44.673 trillion in domestic debt and UGX52.826 trillion in external debt. This represents a UGX9.329 trillion (10.74%) increase from the previous year’s debt of UGX86.839 trillion.
A major concern raised was the escalating cost of debt service payments, which continue to rise due to the government’s inability to draw down and utilize contracted loans. This led to UGX112 billion in commitment fees by June 2023, exceeding the approved budget.
Kivumbi criticized the government’s reliance on supplementary budgets and its “insatiable appetite for borrowing,” which has contributed to the increase in public debt, mainly due to budget deficits, bond switches, new borrowings for development projects, and foreign exchange losses.
Additionally, the committee rejected government complaints about the UGX405 billion in penalty fees imposed by the Bank of Uganda for failing to settle domestic debt obligations on time. Kivumbi emphasized that the government must honor its commitments to avoid unnecessary penalties, which strain public finances and hinder the central bank’s ability to manage monetary policy effectively.
The Ministry of Finance informed the committee that discussions were ongoing with the Bank of Uganda to reduce these penalties, with proposals to cap the charges.
The Auditor General’s report also raised alarms over Uganda’s continued borrowing from bilateral countries and commercial banks using floating interest rates. The absence of a policy to manage debt swaps has left the country vulnerable to market fluctuations.
In response, the Ministry of Finance said it is updating the Public Debt Management Framework, expected to be ready by December 2024, to include safeguards such as financial derivatives and debt swap guidelines.
Speaker Anita Among deferred further debate on the report until the Ministry of Finance addresses the issues raised.
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