Uganda to reduce external borrowing by 98 percent to control increasing debt
Date
11/14/2024 2:14:54 AM
(MENAFN) The Ugandan government has decided to significantly reduce its external borrowing by 98 percent in an effort to control the country’s escalating debt, according to a statement from the Finance Ministry. This drastic reduction in borrowing is part of a broader strategy to address the rising debt burden, which has become a growing concern for the country. Alongside this, the government will also cut overall spending by more than 20 percent for the financial year 2025-26 and reduce domestic borrowing through Treasury bonds by 54 percent in an attempt to alleviate the pressure from mounting debt.
The government's decision comes in response to a sharp increase in public debt, which surged to USD25.6 billion in June 2023, up from USD23.7 billion the previous year, as reported by the Finance Ministry. This growing debt now accounts for 52 percent of Uganda's GDP, an unprecedented level that has raised concerns about the country’s financial stability. The mounting debt has sparked fears of a full-blown debt crisis unless swift action is taken to reverse the current trajectory.
Despite the concerns, the government argues that the borrowed funds have been used to stimulate economic growth. However, the rapid accumulation of public debt has led to credit rating downgrades, highlighting the risks associated with the country's fiscal policies. The rising debt levels have created a challenging situation that has prompted urgent measures to prevent further economic destabilization.
Ramathan Ggoobi, the permanent secretary of the Ministry of Finance and Treasury Secretary, emphasized that Uganda has managed to navigate several economic shocks, including high inflation and rising interest rates. He reassured the public that the country's fiscal and monetary policymakers are working diligently to prevent the debt from negatively impacting economic growth. Ggoobi highlighted that the economy has grown to approximately USD53 billion, with foreign direct investments increasing due to effective economic management. Ensuring that the large public debt does not hinder economic progress remains one of the government's top priorities.
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