In a recent revelation, Uganda's public debt is outpacing the country's Gross Domestic Product (GDP), posing potential challenges for its financial stability. The latest Auditor General's report for the financial year ending on June 30, 2023, highlights a concerning trend as the debt-to-GDP ratio climbs beyond sustainable levels.
Presented to the Speaker of Parliament, Anita Among, by the Auditor General, John Muwanga, the report indicates that as of June 30, 2023, Uganda's total public debt reached a staggering 96.16 trillion Shillings. This comprises 43.69 trillion in domestic debt and 52.47 trillion in external debt, marking an increase of 9.3 trillion compared to the 86.83 trillion recorded as of June 30, 2022.
The figures from past years reveal a consistent rise in the total public debt, showcasing a 107 percent increase in five years, from 46 trillion in the financial year 2018/2019 to 96.16 trillion as of June 30, 2023.
The audit report highlights that the country's GDP experienced growth, moving from 132.09 trillion in the financial year 2018/2019 to 184.89 trillion in the financial year 2022/2023, indicating an increase of 52.8 trillion. However, the concerning factor is that the public debt is growing at a faster rate than the GDP.
To gauge the sustainability of debt, the Debt to GDP ratio is a crucial measure. The report reveals that the debt to GDP decreased slightly by 0.7 percent from 53.4 percent to 52.7 percent in the financial years 2021/2022 and 2022/2023, respectively. Despite this marginal decrease, the ratio still surpasses the International Monetary Fund's (IMF) recommended threshold for developing countries, which suggests that debt should not exceed 50 percent of the country's GDP.
Edward Akol, the Assistant Auditor General in charge of Audit, attributes the increasing debt to heightened government expenditure compared to domestic revenue to finance fiscal deficits. He emphasizes that the servicing of public debt may become unsustainable in the short and medium term if not addressed.
The external debt growth is primarily attributed to budget support, while the rise in domestic debt is linked to increased borrowing to support the economy amid the challenges posed by the COVID-19 pandemic and global conflicts, such as the Russia-Ukraine war.
The audit report underscores that this escalating trend in government debt without a corresponding increase in domestic revenue puts strain on the government's ability to repay debts and deliver essential services to citizens. Akol advises the government to review and strengthen its interventions to move towards self-sustainability.
In response to the report, Speaker of Parliament Anita Among welcomed the review of the public debt, acknowledging its importance in curbing the country's debt appetite. As Uganda grapples with the implications of a growing debt burden, stakeholders are urged to explore sustainable solutions to ensure the nation's long-term economic stability.
