Ugandans Should Be Concerned By Rising Debt Burden As It Makes The Future Bleak
The promise that each generation will be better off than the last is a fundamental tenet of any modern society. By and large, in Uganda, the previous generation has fulfilled this promise, with living standards of their children safeguarded over their previous generations, despite setbacks from wars and financial crises.
So why do the current politicians refuse to respond to the mistreatment of future generations? Why is it so difficult to alter the egregious policies that is going to keep future generations of Ugandans burdened with an obligation to pay government debt they did not incur? Why do we want our children to begin life partially robbed of their birthright and future?
Uganda’s debt is increasing at an alarming rate that surely its burden to future generations must be a legitimate, growing concern to all citizens.
With the increase in government borrowing (in cohort with parliament), leading to increase in both foreign and domestic debts, sustaining an economic environment in which Ugandans of tomorrow can enjoy meaningful livelihoods and receive adequate services, seems so bleak, that they will wonder how heartless the current generation could have been.
Uganda’s total debt – domestic and foreign – has hit $8.7 billion, according to the Ministry of Finance (June 2017). This imposes just over Shs1.5m debt liability on every citizen at birth. The government says that it continues to contract public debt in order to “finance infrastructure gaps specifically in the energy and transportation sector.”
As at the end of 2016, Uganda’s public debt stock amounted to $8.718 billion of which $5.468 billion (62.7 per cent) is foreign and $3.25 billion (37.3 per cent) is domestic debt. Uganda will therefore have to spend a whopping Shs 2.675 trillion [12.16 per cent] in paying interest alone on the loans it has already contracted.
In its recent report on the 2017/18 budget estimates adopted by parliament, the Budget committee noted that the public debt, which is almost a third of Uganda’s Gross Domestic Product [GDP], is no longer sustainable and will result in the collapse of many investments and financial institutions.
And yet we still talk of a growing economy and propelling Uganda into middle income status by 2020. How can we continue this way and how can we continue to burden the generations of tomorrow even before they are born.
Ugandans are very poor students of history, and this generation particularly is one that lives for today and cares less about the future, let alone look learn from our past. The country’s economy already hit a snag in 2011 after the general elections following excessive expenditure. What followed was that inflation short up to 33% and the ordinary Ugandan saw a sharp increase in the price of food and other household commodities. It was an open secret that the Bank of Uganda (BoU), printed money that the NRM party used to finance its campaigns and facilitate candidates.
Then from 2012, we witnessed the collapsed of the National Bank of Commerce (NBC) with Bank of Uganda saying that the continuation of NBC’s activities was detrimental to the interests of its depositors. Then in 2014, Global Trust Bank collapsed and then last year Crane bank, once the largest local bank in terms of assets, whose growth saw it spread to neighboring Rwanda, a first for a Ugandan bank, collapsed and taken over by Bank of Uganda. Ugandan banks are currently riddled with huge non-performing loans.
The following year 2015, we witnessed the collapse of Kenyan supermarket giant UCHUMI, when it closed shop in Uganda. A number of supermarkets are currently performing very poorly. It was also in 2015 that British Airways closed operations in Uganda because it was “no longer commercially viable.”
The government last year spent just over shs1trillion to bail out a number of big companies and top tycoons who had become financially distressed. This was after they failed to service their loan obligations which consequently resulted into banks either attaching their properties or placing their companies under receivership.
These are the kind of threats that the Budget Committee has identified and warns are likely to continue unless we begin to look at the rate the country is borrowing.
According to World Bank, before the NRM came to power, Uganda’s external debt averaged at Shs 1.9 trillion. However, after the implementation of the Structural Adjustment Programme policies, the figure had doubled to $2.2bn and by 2004, the external debt had shot up to $4.7bn.
Uganda was categorised as one of those highly-indebted poor countries with unsustainable debt burden because it could not pay its debt. Uganda became the first eligible country under the World Bank/IMF led Highly-Indebted Poor Countries (HIPC) initiative to reduce the debt burden, to receive a debt relief amounting to $2bn.
Unfortunately, because of corruption, the debt stock again shot up in 2006 to $4.1bn prompting another debt cancellation under the enhanced HIPC initiative. Under the initiative, Uganda’s debt burden was reduced from $4.1bn to $1.6bn.
But within six years, by March 2013, the debt stock was at $5.805bn, surpassing what had been accumulated by the country in 15 years ever since the NRM came to power.
Economically speaking, many sycophants will say that Uganda is “developing” but when one assesses the manner in which greed and want for personal enrichment has grown over the years, and how this has been the driver for government borrowing money; one can clearly see that, our economic suffering is ahead of us.
The unsuspecting Ugandans have been engrossed into this abyss in the name of searching for ways to attain personal development and “wealth creation” yet most of what is borrowed is being swindled by a few individuals who are leaving millions without the much needed services they are entitled to. The future looks bleak.