Uganda’s national debt has nearly trebled in the last three years to more than 50 percent of gross domestic product, creating a risk of default risk, since nearly two-thirds of that borrowing is external, the central bank said.
In a report titled “State of the Economy” published late on Thursday, the Bank of Uganda said the rising costs of servicing the country’s $15.1 billion of debt could hit economic growth because of reduced public investment.
Over the last decade, the government of long-term President Yoweri Museveni has ramped up borrowing, mostly from China, to fund infrastructure projects including roads, power plants, fibre cable networks and an airport expansion.
We are servicing our debt, but it is coming at the expense of basic things that government must do.
Three years ago, Uganda’s debt was just $6 billion.
The central said the debt posed “a risk of higher exposure or failure to meet external debt obligations in case of exchange rate volatility and slow growth in exports.”
According to finance ministry papers, interest repayments in the 2018/19 fiscal year will eat up 17.3 percent of state spending, the largest chunk of the budget.
Uganda is not alone. Many African countries loaded up on cheap credit during the quantitative-easing era and now face elevated interest costs as developed-market rates creep up.
Ghana, Mozambique, Angola, Chad and Gabon are saddled with the highest debt repayment costs, according to the London-based Jubilee Debt Campaign, which advocates for more responsible lending to poor countries.
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