Uganda seeks suspension of debt repayment

Uganda President Yoweri Museveni. [Reuters]

Uganda said on Monday it may approach its major creditors including China and the World Bank to negotiate a possible suspension of loan repayments amid a growing default risk after its debt load ballooned 35 per cent in a single year.

The country gobbled up large credit lines from the World Bank, the International Monetary (IMF) and other lenders in 2020 to meet funding pressures triggered by the economic crisis induced by the Covid-19 pandemic.

The loans swelled an already fast-rising debt pile for the country that had long worried some, including the central bank and the IMF.

Uganda's total public debt surged to Sh2 trillion ($18 billion) as at December 2020, a 35 per cent rise from a year earlier, fuelled by fresh borrowing to cover revenue shortfalls as measures taken to combat Covid-19 hit the economy hard and stifled tax collections.

External creditors hold two thirds of the country's debt, finance ministry data shows.

The country's debt load is seen surging past 50 per cent of Gross Domestic Product (GDP) by the end of the current financial year in June, according to Finance Minister Matia Kasaija.

"I will approach them," Kasaija said in an interview yesterday, referring to Uganda's biggest creditors such as China, World Bank, IMF and others. "I will not hesitate to approach them and say, 'you guys can we suspend servicing these loans for, say, maybe two years?'"

Uganda is joining other nations including Ethiopia, Zambia, Chad and others that are facing debt pressures either triggered or exacerbated by the effects of Covid-19. read more

In the fiscal year beginning July, the country will use up 20 per cent of all its planned domestic tax revenues to repay interest rates on public debt, Kasaija said. "It makes me uncomfortable. ..It is not a palatable idea," he said, adding that debt repayments were swallowing up huge chunk of public resources.

Kasaija did not specify whether Uganda would seek relief under the G20's Debt Service Suspension Initiative.