Government concealing debt figures: Experts

Kampala, Uganda | THE INDEPENDENT | Experts have faulted the government for using statistics that do not give the real picture of the state of affairs to define the performance of the economy. An example is the Debt-to-GDP ratio that the government uses to determine the safety and strength of the economy in regard to the level of debt.

With the recommendation of the IMF and the World Bank, East African countries including Uganda committed to maintaining the debt stock level below 50 percent of their GDP. However currently, only Tanzania’s official statistics show that the country is within the limit. Uganda’s last financial year was the latest to break the ceiling, while Rwanda and Kenya have debt stocks of more than 60 percent of their economies.

Economics lecturer and analyst Dr. Fred Muhumuza, says countries that are using this ratio to determine the strength of their economies are committing a grave mistake and ‘missing the point. He says that he is petitioning the World Bank to drop it because according to him, the best ratio should be the growth of the national debt to the growth of GDP.

Uganda’s recent sharp rise in the national debt has been largely attributed to the outbreak of COVID-19 and the need to contain it, which necessitated increased borrowing to counter the pandemic. This also saw some planned activities by the government either suspended or cut down as it mobilized and refocused the resources to the new challenge.

The effects of the pandemic, however, according to the government, were made worse by other factors that affected the economy like harsh weather and later the rising costs of imported goods, which have affected domestic revenue mobilization.

By the end of 2021, the official total debt had grown to 20.74 billion dollars (about 73.5 trillion shillings), according to the Ministry of Finance, Planning, and Economic Development. This according to the government is 51.3 percent of the value of the economy (GDP).

This is largely made up of government loans from domestic and foreign sources. Domestically, the government can borrow directly from financial institutions or the public through the issuance of government treasuries (Bills and Bonds).

From external sources, the government borrows from institutions like the World Bank, African Development Bank, and the European Investment Bank among others, as well as bilateral lenders like the governments of China and Japan. The use of the debt to GDP ratio has also been described as inadequate because the government statistics on debt are not comprehensive.

Stephen Birahwa Mukitale says the government should define indebtedness not as directly borrowed funds or loans, but that all financial liability should be taken into account. Birahwa is also concerned that many items are left out, including recoverable costs in the oil and gas industry. He fears that there cannot be transparency in debt management when the statistics are not comprehensive.

Recently, parliament approved the Public Private Partnerships (PPP) to be part of the official national debt because when a private sector partner finances a project in a PPP, the government has an obligation to refund the money.

Some of the government indebtedness not part of loan debt is in the form of arrears that may include government renting of assets from the private sector, compensations for project-affected persons, salary or remuneration arrears, and delayed payment of government suppliers and contractors.

Others are fines and penalties arising from legal action against the state, and indebtedness to international membership organizations like the East African Community, COMESA, UN, the Organisation of Islamic Cooperation, and International Coffee Organisation.

Other indebtedness to the government comes in the form of borrowing from the public through government treasuries and guarantees, which the experts want all to be part of the declared national debt for purposes of transparency.

Mukitale, the former Buliisa County MP, says even the electricity that Uganda is importing from Kenya should be part of official debt until it is paid for. On the transparency required in debt management, Mukitale says debts by contractors of government projects usually refer to the commercial loan that they are using to implement the project like the roads.

But he says before the loan is actually finalized, the government first gets a pre-refinancing. Pre-financing is a part of public financial contribution which is paid in advance of submission of proof of work having been carried out for a specific period of the project either in order to provide advance funds to permit the work on the project to begin or to continue with the next phase.

Mukitale says the government under such situations is actually paying two loans for the same project.

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