Higher Uganda Budget Gap to Dent 2018-19 Fiscal Plan, IMF Says

KAMPALA (Capital Markets in Africa) – Uganda’s policy of keeping debt at “safe levels” will be “challenging” in the coming fiscal year because of a higher-than-envisaged budget deficit, the International Monetary Fund said.

East Africa’s third-biggest economy will need to “scrutinize very carefully new borrowing initiatives” in the 12 months through June next year in the wake of an expanded deficit, Clara Mira, the IMF resident representative in Uganda, said in a text message. Prudent borrowing will help debt levels to remain within the nation’s charter of fiscal responsibility, she said.

The budget deficit for Africa’s biggest coffee exporter may rise to 6.7 percent of gross domestic product in 2018-19 from an estimated 6.2 percent in this fiscal year, Julius Mukunda, an executive director at the Kampala-based Civil Society Budget Advocacy Group, said by phone. His figures compare with the Finance Ministry’s 6.2 percent estimate for next year, contained in a pre-budget document.

Uganda, which unveils its budget on Thursday, should enhance “the quality of the public-investment processes to ensure projects are implemented on time, on budget, and with impact and generate the expected growth dividend to help repay the debt,” Mira said.
The nation’s public debt was 37.9 trillion shillings ($9.9 billion) at the end of 2017, the central bank said in March, with external loans at 25.1 trillion shillings.

Debt probably increased to 40.2 percent of GDP in the year that ends June 30, the Finance Ministry said in February.

Uganda’s lenders include the World Bank, the African Development Bank, the Export-Import Bank of China and the Islamic Development Bank, while China is the biggest multilateral lender.

Uganda’s debt increased because of investing in infrastructure projects to spur growth and the deficit is expected to drop to 3 percent and the debt level will be under 50 percent of GDP by 2020-21, Mira said.

Source: Bloomberg Business News