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Funding infrastructure dev’t with loans unsustainable - Lagarde

By Billy Rwothungeyo

Added 28th January 2017 09:12 AM

The IMF projects that Uganda’s debt burden will be half of the country’s GDP by 2020/21

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The IMF projects that Uganda’s debt burden will be half of the country’s GDP by 2020/21

IMF chief Christine Lagarde holds a public lecture on Uganda economy in Kampala Friday. AFP Photo

Uganda’s overreliance on external loans to finance infrastructure development is unsustainable in the long run, the International Monetary Fund (IMF) Managing Director, Christine Lagarde has warned.

“Relying on borrowing alone to finance infrastructure would be unworkable because debt would become too high. More revenue from taxes needs to be mobilized,” she said.

While delivering a lecture today titled: “Becoming the Champion: Uganda’s Development Challenge,” at the Serena Conference Centre in Kampala, Lagarde urged Uganda to mobilize more domestic finances to help finance the infrastructure projects that government is undertaking.

In so doing, Uganda will have to improve her abysmal tax-to-GDP, which is the lowest in the region.

“Here again, there has been some progress, with tax revenue increasing in the past few years. Even so, Uganda is still only halfway to the East African Community’s goal of raising tax revenue equal to 25 percent of GDP,” she said.

The IMF projects that Uganda’s debt burden will be half of the country’s GDP by 2020/21.

For Uganda to achieve transformation on the road to development, Lagarde stressed that focus will have to be put on infrastructure.

“Under-developed infrastructure is a permanent brake on growth. It prevents businesses from connecting to local, regional, and global markets, and limits their willingness to invest. Ultimately, infrastructure bottlenecks will slow the structural transformation and industrialization that Uganda aspires to.”

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