Uganda is experiencing unprecedented levels of debt, with the amounts growing at a pace that government had not anticipated. The ministry of Finance, Planning and Economic Development says public debt stood at Shs 93.38 trillion at the end of December 2023, up from Shs 80.77 trillion a year earlier, making it the highest amount ever.
In its earlier debt management strategy, Uganda government officials at the ministry of Finance, had set benchmarks for the level of interest payments it needed to pay, and which loans were maturing within a year. These benchmarks were meant to guide government on the solutions it needed in order to pay off its debt. It has emerged, however, that the government underestimated the gravity of the problem, and that the ceilings it set were easily breached.
When it came to debt that was to mature within a year, government had projected that that figure would not surpass 3.17 per cent of the national budget. But in the year to December 2023, that amount was 3.63 per cent. Top USA-based credit rating agency Moody's, which guides investors on the health and credit profile of economies, says Uganda's overreliance on the domestic financial market and non-concession sources of financing - both of which come with high interest rates on credit - have raised the country's level of debt to unprecedented levels.
Moody's, therefore, downgraded Uganda's rating to B3 from B2 recently, further raising fears among international lenders on the country's ability to pay back its loans. In downgrading Uganda's credit rating, Moody's has made it harder for Uganda to access cheaper credit. The country, together with three other shareholders, is constructing a crude oil pipeline to a port in eastern Tanzania from where the oil will be loaded onto tanks and shipped to the international market.