Uganda borrows Sh67.7b to plug budget deficit

Uganda plans to borrow 600 million euros (Sh67.7 billion) from international banks to plug a hole in its 2019/2020 budget after domestic revenue collections fell short by nine per cent, amid delays in implementation of some planned tax-generating measures.

The move could heighten concerns about the East African country’s growing debt pile, which the International Monetary Fund has warned would likely surpass 50 per cent of gross domestic product in 2021/2022. Uganda’s financial year starts in July. The Finance Ministry said in documents posted on parliament’s website that the government planned to borrow the money from a local unit of South Africa’s Standard Bank and regional Trade Development Bank. The documents said the government was facing a total shortfall of 2.5 trillion Ugandan shillings ($680 million) and the borrowing would be “to finance part of the budget deficit”.

Various factors, including delayed payment of $100 million in licence fees from a unit of South Africa’s MTN group, have caused the revenue shortfall, according to the finance ministry.

For months MTN, the East African country’s largest telecoms operator, and the government have been in negotiations over renewing the firm’s operating licence. The ministry said the new borrowing would add two percentage points to Uganda’s public debt to GDP ratio, which the central bank says stands at 43 per cent.

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Over the last 10 years, Uganda has rapidly increased its borrowing, mostly secured from China for a range of infrastructure projects in sectors such as transport and energy.

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