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Wednesday,August 21,2019 12:59 PM

BoU cautions govt over debt use and pay

By John Odyek

Added 26th May 2019 07:39 AM

Failure to pay off these debts has put the assets of these countries at risk of being taken over by the lenders.

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File photo

Failure to pay off these debts has put the assets of these countries at risk of being taken over by the lenders.

FINANCE
 
KAMPALA-Many African countries such as Uganda have taken generous debts from China and other lenders but have often not been disciplined to pay off the debt.
 
Failure to pay off these debts has put the assets of these countries at risk of being taken over by the lenders. While debt is good, it must be used to promote economic growth, development and job creation and not mismanaged.
 
The deputy Bank of Uganda governor Dr Louis Kasekende has said although Ugandan remains at low risk of debt stress: “revenue effort is not yet at a level that allows much room to take on much higher debt, especially commercial debt, given its implications on debt servicing costs”.
 
 eputy overnor of ank of ganda r ouis asekende ile photo Deputy Governor of Bank of Uganda, Dr. Louis Kasekende (File photo)

 

 
Kasekende said this during the discussion of IMF’s April 2019 Regional Economic Outlook for Sub-Saharan Africa. The function took place at the Sheraton Kampala Hotel recently.
According to the report the debt levels of 16 countries is worrying which are categorized in high risk and seven of these are in debt distress.
 
“It is worrying because debt restructuring through debt relief is unlikely more so, because we have now a substantial portion of the debt being contracted from private sector lenders and not the multilateral lenders that offer highly concessional terms and a longer payment horizon."
 
There is therefore a major risk of debt default which could undermine stability, future access to international financial markets and growth objectives,” states the report.
 
The report notes that large economies in Sub Saharan Africa (SSA) such as Angola, Nigeria & South Africa are expected to be more sophisticated and growth supportive of their relatively smaller neighbors.

 

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