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Rising National Debt Minimises Government’s Service Delivery

On June 14, 2022, the year's National Budget Address given by Finance Minister Matia Kasaija took place at Kololo Independence grounds.

The 48.13 trillion shillings budget increased by 3.317 trillion from the one of last year. Out of the 48.13 trillion shillings, the country will be borrowing 20 trillion which 12.973 trillion will be from domestic financial institutions such as NSSF and other local banks, while 7.165 trillion will be from China and other foreign financial institutions.

Speaking of the increasing public debt every financial year, Executive Director of the Centre for Budget and Tax Policy Patrick Kicoonco Katabazi said that although borrowing is not precarious, if excessively done, it throws the country into a debt trap.

“As a country, Uganda’s debt has now surpassed 50 percent of GDP, but that was our benchmark in regards to the Charter of physical responsibility and, under the East African community Commitments convergence Criteria. The assumption under those instruments is that if the debt is going beyond 50 percent then we are entering into unsustainable levels as a country,” Mr. Kicoonco said.

He explained that in the 2022/2023 budget, about 15 percent was allocated to interest payments, monetization, and debt repayments are higher than any other program on the budget. He said this makes the government unable to fund human capital development such as health, education, and social development, as well as security and governance.

“As our debt rises, we have fewer monies available for the government to implement critical service delivery initiatives, yet Uganda Revenue is not collecting as much. Because even if the government collects 25 trillion shillings in the next financial year, our revenue still won't be able to finance all of the programs. Therefore we will need to borrow again, and it is apparent that part of the debts is to pay the debts and interests that we owe thereon,” he explained.

Asked whether the budget will not have any significant impact on the common Ugandan, Mr.Kicoonco said that the country’s development model is private sector-focused, meaning that most shares finance the administrative costs and expenses of the government.

Nonetheless, he noted that the budget has some strengths such as the money that went to the salary increment of science teachers and medical professionals. The Parish Development model will see every parish receive 100 million shillings to enhance financial development, road construction, and renovation of some health facilities.

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