A report released by PricewaterhouseCoopers limited has delivered this month is clearly seeing what others has seen with the economic situation and the use of funds by the National Resistance Movement (NRM) and their regime. This report by a company which is an international company who works with other businesses and civil society organizations who needs economic advice and advisory services for taxes and such; therefore the report from PwC on economic situation is telling. Their speciality on their outlook will be saying with auditors and financial analyst whose words means a lot. They are professional analysts in this field are writing and saying this on the economic climate. The Economic climate is worrying and that has been visible. The liability of the growing debt in the republic has been a hazard together with the lacking internal revenue for the state as well. Just take a look!
Sluggish economy with higher debt:
“This bulletin comes at a very crucial time for the Uganda economy when growth is slowing down, private sector credit is on a decline, consumer demand is low, implementation and execution of critical public infrastructure projects is very sluggish, and the public sector debt burden on the economy is at the highest it has ever been” (PwC, P: 3, 2017). “If the domestic revenues collections continue to underperform, the government will be forced to borrow more from the domestic market. The increase in government borrowing may result in a substantial increase in yields on government securities, which may result in an increase in borrowing rates, which may constrain the private sector credit growth even further” (PwC, P: 7, 2017).
“The Uganda’s public debt burden has risen by 12.7% in the past four years from 25.9% of GDP in FY 2012/13, to 38.6% of GDP in FY 2016/17. The debt burden is projected to continue rising to 45% of GDP by 2020. Debt as a percentage of revenues has risen by 54% since 2012 and is expected to exceed 250% by 2018. The country’s ever increasing debt burden has resulted in a deterioration of the debt affordability situation” (PwC, P: 8, 2017). “Uganda’s capital expenditures are still too reliant on external finance. Currently debt servicing constitutes 11% of the total government expenditure, one of the highest debt burdens in sub-Saharan Africa. This is expected to increase to 16% of the total government expenditure by 2018. Uganda’s debt burden has risen faster than the government’s own resources, resulting in a debt-to-revenue ratio of 236%, one of the highest amongst B-rated countries. This has prompted Moody’s recent down grade of Uganda’s long-term bond rating by one notch to B2 from B1” (PwC, P: 8, 2017).
An Economy with challenges:
“2016 was an economically difficult year for Uganda. The economy faced numerous challenges due to the continued uncertainty surrounding the recovery in global economic growth, weak commodity prices and geopolitical events in our key trading partners. As a result, of these numerous challenges, our export earnings, FDI flows and remittances to Uganda all went down. These developments, together with a slowdown in the execution of public investment projects and weaker than expected private sector demand, had a major effect on the economy” (…) “Other internal risks include delays in the implementation of public infrastructure projects such as the Standard Gauge Railway (SGR) linking Uganda to its East African neighbours, and the key infrastructure projects critical for the commencement of oil production” (PwC, P: 4-5, 2017).
If you are worried by the Republic and their economy after this, than you haven’t followed the class since this signs have been there for while! The state of the economy is fragile and the debt rise should concern all the ones inside the Republic and also outside. However, this could change, but that has to be done by the government and steer in another direction as today. The greed and the common sense of developing the economy is forgotten, as they are fixated on infrastructure projects and oil developments, while borrowing to fill the losses of donor-aid and internal revenue. This could be done in many ways, but that would not be easy. Peace.
PricewaterhouseCoopers Limited (PwC) – ‘Uganda Economic Outlook 2017’ (February 2017)
Well, an election year and campaigning as a tyrant and dictator cost, the fortunes splashed on fellow peers and citizens to buy goodwill costs. The price usually happens after the splash funds on villages and on buses. The estimated exhaust of funds and State House can strain the economy. Therefore after elections in the past there been rising food-prices, more expensive oil and gas and other needed imported goods for the average citizen.
This is happening as the donor-community doesn’t have the same faith in the Movement or the President that been there since 1986. His longevity is now hurting him, as his tricks of trade isn’t building steady progress, instead he is using up every single allocation to make sure the loyal servants and movement peers are paid-in-full, even as his own party haven’t paid salaries for months. There are rumours of how the Special Force Command with Maj. Gen. Muhoozi Kainerugaba has gotten their salaries received as much there are questions of the government bailouts of the friends and business-mates of Gen. Salim Selah.
Still, the economic problems continue to arise, the ill-minded would say there hope of wealth, but the lack of transparency, misused funds as the Uganda Revenue Authority – Oil Money scheme and other’s prove there are lacking accountability for how the government funds are spent. This with the knowledge of the lacking salaries to teachers and even Local Government funds that are spent without concern of showing where it got spent; all these activities doesn’t give confidence and trust between the stakeholders and citizens.
With all of this in mind the revelation that the growing debt are now eating too much of government spending, as the arising splashing of funds to civil servants are happening; the reports from Bank of Uganda (BoU) isn’t a beautiful fairy-tale, instead it is doom.
“In its state-of-the-economy report for December 2016, BOU said: “There are also perceptions in the market that Uganda may not be able to service its rising debt levels.” (…) “The central bank said external debt has grown rapidly and, on a commitment basis, is now estimated at $10.7bn as at end of October 2016. BOU said: “A lump up [in] infrastructure investment has contributed to a rise in our debt portfolio in recent years.” (…) “Uganda’s public debt burden has risen by 12.7 per cent to 38.6 per cent of GDP in 2016/17 from 25.9 per cent of GDP in 2012/13. BOU says it is projected to continue rising towards 45 per cent of GDP by 2020” (Mwesigwa, 2017).
That the Movement and the NRM are not able to service their debt, is an indication and will also create a problem with the banks and multi-national financial institutions that has offered these loans to help the government with the day-to-day operations of a sufficient government, as well as offering loans to promising infrastructure projects. These all are now in danger of defaulting loans. These levels are estimated to become 45% of the income of the Republic, which is not the sign of riches; more of poverty and mismanagement. The Executive that has been leading the nations for the decades have seen the signs of the wall, but instead of telling the truth; he has promised industrial revolution and amazing progress that would be bigger than when the United Kingdom found out how to earn money on the Steam-Engine. The same kind of promises to become a middle income nation, when your debt burden is arising as rapidly as it is doing now.
This should be worrying as the Movement has revealed and gotten released plans for own total production and releasing own notes, that could also increase possibilities of devaluing the currency, this with growing debt can create a hyper-inflation that only his fellow comrade has been able to create in Zimbabwe. That is the worst case scenario if the bank-notes production gets out of bond to sort of make quick fortunes for the Movement.
The Movement has all their days used any kind of acts to get monies for themselves and hide it away, only when gotten public they needed to have inquiries and detain the ones that not kingpins, but the low-level employees that doesn’t hurt the leadership. Therefore the concern of not a fiscal well-thought monetary policy, as the Movement are more settled on building projects without having to have giant loans from Multi-National Monetary lenders like IMF; AfDB and others. These loans has to be paid back and also with interest. As the Government bonds has also lost their track compared to the need of sufficient funding. These institutional defaults and as well with the lack of clear conscience of the use of funds, shows the Movement has to step up their game if they don’t want their currency and their budget to lack funds for the coming budget year.
The growing loans will also stop the amount of absorbed funds in the republic goes down as the government has to use bigger parts of the resources on loans, as the extended collected funds from URA might have grown, but they are not collecting enough to keep up with the debt. If so they wouldn’t have defaulted and probably would have paid their interest and debt rate as promised when they we’re accepting taking on the debt.
Time for the Movement and their regime to charge, change patterns, their eating as much as they can, but they will leave the next one with a huge bill of no-confidence, while their short-term riches will be spoiled and devalued as the coming depressing economic stability will not give the market and the currency the needed trust as it should has a tool for exchange values between two parties. Peace.
Mwesigwa, Alon – ‘CENTRAL BANK WARNS ABOUT RISING DEBT’ (06.01.2017) link: http://www.observer.ug/business/50631-central-bank-warns-about-rising-debt