BY BANKERS REPORTER
The Ugandan government has little time to pay some of the loans it contracted from several lenders to support the economy recover from the effects of the coronavirus pandemic, the World Bank has said.
“In term of the debt, Uganda has to pay much faster because we are borrowing at shorter term and at higher interest. In terms of percentages of revenues, this debt and interest payments are now taking up a much higher payment of close to 60% of the revenues which is not good,” said Rachel Sebudde, World Bank Senior Economist during the 17th Uganda Economic Update.
With 60% of revenues going in debt and interest payment, this means that in every 10 shillings that Uganda Revenue Authority collects, close to four shillings goes into debt repayment.
“But the bottom line is, domestic policies seem to have worked in terms of supporting the economy in spite of all the challenges that have been highlighted. Investments and consumption have started picking up. We see a flicker of hope in these developments,” Sebudde added.
Uganda’s total public debt surged to $18 billion as at December 2020, a 35% rise from a year earlier, fuelled by fresh borrowing to cover revenue shortfalls as measures taken to combat the coronavirus hit the economy hard and stifled tax collections.
The World Bank however noted that the Ugandan economy is emerging from the devastating impact of the COVID-19 pandemic, but prospects for growth are undermined by increasing pressure on its natural resources.
“Following the job losses and closure of small businesses, many people returned to agriculture and other natural resources dependent activities to manage and survive the crisis,” said Tony Thompson, World Bank Country Manager for Uganda.
“This further strains natural resources, which were already under pressure from rapid population growth, urbanization, a refugee influx and the country’s drive for industrialization.”
The COVID-19 shock caused a sharp contraction of the economy to its slowest pace in three decades. Household incomes fell when firms closed and jobs were lost, particularly in the urban informal sector. The country’s Gross Domestic Product contracted by 1.1 percent in 2020, and is estimated to have recovered to 3.3 percent during the 2021 fiscal year.