External debt is payable, finance minister

By David Mugabe

The finance ministry has reassured the country that its external debt portfolio is manageable and that the country has the ability to pay back.

Responding to the question of the country’s growing external debt portfolio even with continued borrowing, Kiwanuka said international credit rating agencies had given Uganda a big vote of confidence of a B+ that only five countries in sub Saharan Africa hold. These ratings illustrate how good a country is to lend money.

“Our debt is mostly concessional like from the World Bank with interest rate at 1% fixed,” said Kiwanuka.

The minister said decisions are mostly on the ability to pay back, not how big the debt is. Kiwanuka said the country has avoided commercial loans and that borrowings are mainly for infrastructure and not consumption.

The external and domestic debt is growing by close to 2% and is today about sh15 trillion. The World Bank is calling for more savings to spur investments.

Makhtar Diop, the World Bank vice-president for Africa, said currently Africa faces low levels of savings compared to other parts of the world yet the continent needs more investments to spur growth.

Some of the proposals being fronted are special purpose vehicles with legal and political guarantee that can attract more capital into the continent. The capital markets have been identified as a platform for mobilising savings and money for investments.

Diop also cautioned against consumption spending, saying the available resources should be invested in the productive sectors and improving competitiveness.

Pension reforms and the unleashing of the huge cash troughs have been highlighted as a possible avenue to generate capital for investments. The pensions sector is under reform. A Bill, the Retirement Benefits Sector Liberalisation Bill, is currently before Parliament.