Ramathan Ggoobi, the Permanent Secretary and Secretary to Treasury (PSST), has assured Ugandans that Uganda’s public debt is still sustainable and is projected to decrease to 47.6 percent by the end of June 2023 and continue on a downward trend over the medium term.
Ggoobi, who was speaking to journalists at Kampala Serena Hotel during the Inaugural Debt and Development Policy Dialogue, Thursday 23 March 2023, said Uganda is now in the mode of fiscal consolidation to support growth of the economy with focus on effective tax revenue mobilization as well as caution on the expenditure side-spending on things that will transform the country.
“Economic growth will be driven by a number of targeted government initiatives, including the Parish Development Model (PDM),” he said.
He added that growth will be driven primarily by activities in oil and gas sector, and GDP growth projected to increase to over 7% at start of commercial oil production.
He stated that unprecedented challenges, such as Covid-19 pandemic that needed government to respond on both the economic and health fronts in an urgent effort to save lives and livelihoods, increased its borrowing levels during the period.
“We therefore saw an increase in public debt, from 41% of Gross Domestic Product (GDP) in June 2020 to 48.4% in June 2022,” he said.
However, he noted that despite this increase, the country’s debt levels remain below those in peer countries, including Rwanda and Kenya, whose debt to GDP ratios are beyond 60%.
“Furthermore, our Debt Sustainability Analysis Report, which we publish every year, shows that debt is sustainable and is projected to reduce in the medium term,” he said.
He further revealed that the finding is mirrored by the Debt Sustainability Analysis Report jointly published by the IMF and the World Bank.
He also said that the Economic growth will be driven by a number of targeted Government initiatives, including the Parish Development Model (PDM), which is a multi-sectoral strategy that aims at reaching Ugandan households still in the substance economy and supporting them to join the money economy.
He added that the economic growth will be driven primarily by activities in the oil and gas sector, which are already taking off in preparation for the first oil in 2025.
“We project that real GDP growth will increase to over 7% at the start of commercial oil production,” he projected.
He further revealed that they are currently implementing flagship Domestic Revenue Mobilization Strategy (DRMS), aimed at increasing the tax to GDP ratio by 0.5% every year.
“The main thrust of this DRMS is to improve efficiency in collection of existing taxes, rather than the introduction of new ones,” he added.
Debt in present value terms, debt is projected to follow a similar trend, decreasing to 38.4 percent of GDP in FY2022/23, which is below the ceiling of 50 percent stipulated by the convergence criteria under the East African Monetary Union protocol.
