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Economy

IMF warns Uganda debt metrics are weak, loans seen at 51 per cent of GDP

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The International Monetary Fund (IMF) said that obligations to external lenders may account for more than a third of GDP from 27.7 per cent this year.

Thursday 09, May 2019

(Bloomberg) -- The IMF said that Uganda’s public debt may expand to 50.7 per cent of its gross domestic product (GDP) as the nation borrows for infrastructure investment ahead of planned oil production and in a bid to become a middle-income economy by 2040.

The debt may rise to that level by the end of June 2022 from a projected 42.2 per cent of GDP in this financial year, the Washington-based lender said in an Article IV report on Uganda’s economy.

“While Uganda’s debt level remains at low risk of debt distress, directors cautioned that debt metrics had weakened, some investment projects may not generate the envisaged return, and interest payments are rising,” the IMF said.

Uganda’s debt climbed 22 per cent to UGX 44.7 trillion ($11.9 billion) in the fiscal year to end-June 2018 as the country borrowed to build roads and hydroelectric dams.

Interest payments are projected to take as much as 20 per cent of revenue in 2019-20, a level typically only associated with countries at high risk, or in debt distress, the IMF said. Tax cuts and exemptions would hamper revenue collection, the lender said.

“Uganda’s external position is weaker than the level implied by fundamentals and desirable policies,” added the IMF.

The IMF expects East Africa’s third-biggest economy, whose government projects oil production will begin in 2022, may expand by 6.3 per cent in the 12 months through June 2019 and 6.6 per cent in 2023-24.

 

TAGS : IMF, Infrastructure development , GDP

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