By Jim Mugunga
At the beginning of the year, precisely on January 8, 2016, Standard and Poor affirmed its B/B long and short-term foreign and local currency rating of Uganda. The respected agency predicted a stable outlook over the next six months. Factually, well past the elections period and into the next government.
Core to the stable prediction, in accordance to Standard and Poor, is a statement to the effect that “public works will boost Ugandan’s growth and improve the country’s fiscal and external metrics over time.” The infrastructure projects in reference are such as roads and rail. They are credited for supporting high real GDP growth alongside other investments in agriculture and energy.
So, when recently at a pre-election debate and thereafter during several mini-others that followed on our FM stations; barazaars and in trading centres our politicians took it upon themselves to volunteer “ways of ensuring Uganda gets out of chocking debt”, I was taken aback just as were many privy to the facts. Matters worsened when the politicians’ line of attack in “responding” to the question was to hit out at “those who have mortgaged our country”. It is the Government so they claimed; it is corruption, privatisation, “useless” bureaucrats and in addition the “killing” of co-operative unions all blamed in equal measure depending on the candidate.
Of course closer scrutiny of the question reveals that the issue here is not a direct claim to the effect that Uganda is crippled by debt. No, it is the painting of a deliberate picture that Uganda is increasingly becoming the Greece of Africa. It is the unsupported claim of an abnormal debt portfolio that beseeches the responses so far recorded.
To the audience, the question is rather catchy. To the moderators it is easier to put across. To the average politician, its fodder--- an opportunity to “politically respond” without the fear of being faulted for telling a lie or being non-factual. So on the day, it was no surprise that most candidates adopted quick kimeeza-like responses. The trick worked on the evening and for the average audiences it has been sustained all through the road campaigns.
The facts and figures, however, point to a completely different picture. According to Standard and Poor; Uganda’s net general debt in 2015 stood at 27% of GDP. This year, it is expected to rise to about 33% and may pick at 36% by 2018. Figures available at the Ministry of Finance indicate a much lower percentage at 24.1% in 2014/15 and 33.9% in 2018/19.
Suffice to add that the above percentages took on board current commitments to infrastructure projects and those foreseeable in the near to medium future. Whichever way one looks at the percentages, therefore, they remain well below the pre-determined Public Debt Management Framework threshold which is at 50% just the same as that of the East African Monetary Union.
In a nutshell, Uganda is not debt crippled as some of us are being made to believe. However, like any other country responsible to its citizenry well being; our motherland incurs dent to finance critical expenditures and finance social services and infrastructure which cannot be financed using domestic resources. Often this is because some of the infrastructure like roads, rail and dams require huge upfront capital that may not be easily mobilised given competing priorities.
Additionally, our Government borrows to cover the shortfall in revenue collected. So far, according to the Ministry of Finance, the Government is projected to finance 65% of the budget. The implication is that the outstanding 35% may be borrowed though loans and grants, if we are to meet funding needs. The other option may be to summarily cut the expenditure budget hence running the risk of undermining development and growth.
Governments worldwide, therefore, opt to borrow in order to sustain development and growth and this is not unique to Uganda. What is most important is ensuring that clear debt management policies are observed. The United States is widely reported to be indebted to China and so are several European countries which are indebted to either the EU or IMF. Indeed the plight of some of them worsened necessitating bail-out packages. Overall, nevertheless, this is to show that debt is not a taboo and in case of Uganda it is not unsustainable thus far.
As at June last year, the Ministry of Finance put public debt stock at sh24,364.6b out of which sh14,395.8b was on account of external debt. There will potentially be a projected increase due to infrastructure projects being undertaken. The same projects that will definitely spur development and help increase domestic revenues. For example, what would be wrong in getting such key projects as Karuma, Ayago, Isimba dams and transmission lines, industrial substations, Entebbe Airport upgrade or roads and airports around the oil rich Albertine region etc coming on board if indeed as demonstrated above we are still able to afford them?
The attempt by some to desperately “mix and match” national debt with privatisation or the so called collapse of co-operative union is a clear sign of insufficiency in the subject matter. It gets worse when some promise “never to borrow” when elected to the office. Others have undertaken to “return all our things that were sold off” ---a veiled reference to re-nationalisation while some have threatened “to sack and or jail public officers” responsible for “mismanagement” of the country.
In my view and as we politic, we should remain true to Uganda. Statements touching critical national issues from potential leaders of tomorrow should neither be un-researched nor merely populist. We may debate the facts and figures but we need not distort them. The impact of such distortions is the unwarranted dent on Uganda, the very bride the candidates are vying to take over.
“Hopefully during the second round of the televised debate which is due this weekend, the candidates will consciously avoid distortions and offer the real and not raw (kiwani) deal. And, to that the moderators; please delve deeper on matters of national economy to secure value for the discerning voters.”
The writer is a Spokesman and Senior Public Relations Officer at the Ministry of Finance, Planning & Economic Development