KAMPALA (Reuters) – Uganda’s national debt has nearly trebled in the last three years to more than 50 percent of GDP, posing a default risk since nearly two thirds of that borrowing was external, the central bank said.
In a report titled “State of the Economy” published late on Thursday, the Bank of Uganda (BoU) said the rising costs of servicing the landlocked East African nation’s $15.1 billion debt pile could hit economic growth because of reduced public investment.
Over the last decade the government of long-ruling President Yoweri Museveni has ramped up borrowing, mostly from China, to fund infrastructure projects including roads, power plants, fibre cable networks and an airport expansion.
Three years ago, Uganda’s debt was just $6 billion.
The BoU said the current levels of debt posed “a risk of higher exposure or failure to meet external debt obligations in case of exchange rate volatility and slow growth in exports.”
According to finance ministry papers, interest repayments in the 2018/19 year will eat up 17.3 percent of state spending, the largest chunk of the budget.
Economic growth has been slowing in recent years, due to poor agricultural output, weak exports and corruption.
Reporting by Elias Biryabarema; Editing by Ed Cropley and James Macharia