MINISTERIAL STATEMENT ON THE STATUS OF UGANDA S INDEBTEDNESS Rt Honourable Speaker, as requested by this house, the following is the status of Uganda s indebtedness Public Debt Position 1. As at end June 2018, Uganda s total Public debt stock (domestic and external) amounted to USD10.7 billion equivalents to UGX 41, 326.1 billion. 2. Out of this, external debt Disbursed and Outstanding (DOD) accounts for 67.2% (USD 7.2 billion or UGX 27,939.9 billion) while domestic debt contributes 32.4% (USD 3.5 billion or UGX 13,386.2 billion). 3. The Present Value (PV) of public debt to GDP increased from 27.4% as at end June, 2017 to 30.8% in June 2018. (Net Present Value (NPV) of Debt: The nominal amount debt outstanding minus the sum of all future debt service obligations (interest and principal) on existing debt) Creditor composition 4. A greater share of Uganda s debt disbursed and outstanding is sourced from multilateral creditors like World Bank, African Development Bank, Islamic Development Bank and it accounts for 68.2% whereas bilateral creditors Japan, France, etc accounts for 31.1% and commercial banks contributes 0.7% of the total external debt portfolio at the end of June 2018. 1
5. The share of T-Bills to T-Bonds has improved to a ratio of 26:74 in June 2018 from a ratio of 31:69 in June 2016, achieving the target share of T-Bills to T-Bonds of 30:70 under the 2013-18 Public Debt Management Framework. The larger the share of long term instruments the less the strain on the budget. Currency composition 6. 92% of Uganda s stock of external debt is in four major currencies i.e. USD, Chinese Yuan, and Japanese Yen, and Euros. Domestic debt on the other hand is all in denominated in Uganda Shillings. Composition off Debt disbursements by Sector 7. Hon. Speaker, The the four largest biggest beneficiaries of debt financing by sector are, Energy, Works, Agriculture, which is consistent the government strategy to reduce the cost of doing business, develop infrastructure to boost growth, energy for support industrial development Interest rate type for External Debt 8. A bigger proportion of the Uganda s debt disbursed and outstanding (92%) as at end June 2018 was contracted at fixed interest rates. While; 9. The variable interest rates and no interest rates constitute 7% and 1% respectively of the total external debt disbursed and outstanding at the end of June 2018. 10. Most of the variable rate debt from bilateral creditors is from China while African Development Bank dominates the variable rate debt from multilateral creditors. 2
Contingent Liabilities 11. Government of Uganda s major explicit contingent liabilities arise from Loan guarantees, whose exposure stood at USD 53 million as at end June 2018, representing 0.19% of GDP. 12. This indicates a 33.5% increase in exposure from USD 39.6 million in June 2017. The increase is attributed to the recently issued guarantee to Islamic University in Uganda of USD 13.79 million. 13. State Owned Enterprises constitutes the larger share of the guarantee exposure, amounting to 68% (USD 36.00Million) of the total exposure while the private institutions constituted the remaining 32% (USD 16.85Million). The largest beneficiary of this guarantee is Uganda Development Bank. Public Debt Trends and Debt Sustainability 14. Over the last ten years the stock of public debt has steadily grown from USD 2.9 billion in 2006/7 when the country benefited from the Multilateral Debt Relief Initiative (MDRI), to USD 10.7 billion as at June 2018. This accounts for a nominal increase of USD 7.8 billion since then. Over the last 10 years, the government budget priorities have grown, which has necessitated an increase in the level of government debt since the our tax revenue effort has remained stagnate, it has left no option for government to finance its programme in order to achieve its objectives as set out in the national development plans and the NRM manifesto other than by debt. The increase in external 3
borrowing has been mainly to fund infrastructure projects in Energy, and Transport sectors as presented in the figure below. Debt Composition by Sector 0.2% 2% 2% Energy 10% Financial Sector Water & Environment 86% Public sector Infrastructure and Construction 15. Rt Honorable Speaker, our public debt stood at 38.6% of GDP in March 2018, and its likely to raise slightly as we incur more debt to finance government infrastructure priorities. We are committed to ensuring that debt does not exceed the 50% threshold that we agreed under the East African Monetary Union convergence criteria.. 4
Comparisons in the East Africa Region Conclusion. I have attached the detailed report on Loans and Grants and other financial liabilities that I presented five months ago to this House for your consideration. I request that at an optune time, Hon Speaker, you will invite the respective sector Ministers to update this House on the performance of their respective loan funded projects in their sectors. MINISTER OF FINANCE PLANNING AND ECONOMIC DEVELOPMENT October 2018 5