The Debt Sustainability Analysis (DSA) update indicated that Uganda remains at low risk of debt distress. The Ugandan authorities are in a phase of scaling up public investment in infrastructure to support high and sustainable growth over the medium- and long-term. As a result, debt is projected to continue increasing until these projects are completed and the expected growth dividend kicks in. Strong project selection and implementation frameworks will be key to the success of the authorities’ strategy, as well as fiscal consolidation once large infrastructure projects are completed, including by boosting domestic revenue mobilization. Weak exports, exposure to exchange rate depreciation, and low revenues as well as the short maturity of domestic debt pose risks to debt prospects.
SYNOPSIS OF IMF DEBT SUSTAINABILITYANALYSIS REPORT OF December 16, 2017
- Uganda is in a phase of scaled up public investment to lay the foundation for future growth.
- Uganda’s economic performance remains strong, but has moderated in recent years
- Government finances remain on a sound footing, though expenditure composition can be of concern
External Debt Sustainability
- Nevertheless, risks to debt sustainability have increased.
- Risks stemming from the uncertainty about oil production remain limited (customized scenario)
- PPG external debt is assessed to be sustainable over the projection period
- Only under the most extreme stress scenario, an exports shock, the PV of debt-to-exports ratio, shows a temporary breach of the threshold during FY2019–FY2021
Public Debt Sustainability
- Total public debt (external and domestic) is also assessed to be sustainable over the projection period
- Deviations from fiscal objectives are the main risks to debt sustainability
- Uganda’s risk of external debt distress remains low. Uganda’s debt levels remain low, and the temporary increase in borrowing is intended to finance growth-enhancing scaled-up public investment.
- The authorities concurred with staff’s views. They remain committed to ensuring debt sustainability through long-term prudent debt management, as outlined in their Medium Term Debt Management Framework, which aims at minimizing costs and risks associated with public investment project financing
- The authorities acknowledged the risks, in particular from weak exports, and intend to closely monitor developments, and stand ready to adjust policies as needed to safeguard debt sustainability. They also commit to continue to engage with IDA/IMF staff on debt management issues and to address the short maturity of domestic debt by building policy credibility and deepening the markets.
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