Free Access | 2024-04-12

SUSTAINABLE, INCLUSIVE AND ENVIRONMENTALLY RESPONSIVE DEBT IN UGANDA: IMPLICATION OF COVID-19

Authors/Editors: Corti Paul Lakuma ,  Brian Sserunjogi (PhD) ,  Rehema Kahunde ,  Smartson Ainomugisha ,  Ambrose Ogwang

Abstract:

Uganda’s debt has been rising since 2010, when the country changed its focus from poverty reduction to development. This paradigm shift saw a frontloading of infrastructure projects to address deficits in the road and energy sectors. This trend has continued with disbursements from the multilateral and bilateral creditors to finance COVID-19 mitigating measures. Indeed, COVID-19 has re-emphasised the importance of debt management. Uganda’s debt stock has increased significantly to 47 percent of Gross Domestic Product (GDP) in 2020/2021 from 41 percent in 2019/20. This debt is primarily nonconcessional, with an average weighted interest rate of 14 percent, no grace period, and primarily less than 10 years of maturity. This implies high debt service costs, which may crowd out many drivers of economic growth. There are also concerns about the social implications of the growing debt, especially on the vulnerable groups such as women and youth – who may disproportionately bear the consequence of reduced expenditure and debt-servicing. Moreover, Uganda has experienced a shift from traditional creditors, for example, Paris Club creditors, to new bilateral creditors such as China, India and Gulf States (United Arab Emirates, Qatar, and the Kingdom of Saudi Arabia, among others). There is a scope for more information on the size, structure, and terms of debt from the latter group.