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Archive for the tag “External Debt”

Uganda: Civil Society Position on Tax Revenue Measures for FY 2017/18 (21.04.2017)

Rwanda 1994: Gen. Paul Kagame letter of 10. August 1994 (Confidentiel)

Report from the MoFPED shows the growing Ugandan debt by June 2016!

Again, the Ministry of Finance, Planning and Economic Development (MoFPED) dropped another report on the fiscal policies and the fiscal health of the economy in Uganda. The National Resistance Movement (NRM) have created this environment as the growing debt and growing interest payment comes with their planned debt rise. Still, the PriceWaterhouseCoopers spelled gloom earlier in the year, as this report was dropped on the MoFPED web page today. Even if the Report was spelled out in December 2016. It is if like the NRM didn’t want this to spelled out early. Since the numbers aren’t compelling of an arts piece, more issues… just take a look!

The stock of total public debt grew from US$ 7.2 billion at the end of June 2015 to US$ 8.4 billion in June 2016. This represents an increase from 30.6% of GDP to 33.8% over the two periods. The increase was largely on account of external debt, which grew from US$ 4.4 billion to US$ 5.2 billion over the period. Domestic debt increased from US$ 2.8 billion to US$ 3.2 billion” (MoFPED, P:V, 2016).

That the debt are growing quick, as the public debt grew with US$ 1.2 billion, that the percentage of GDP went up with 3,2%, the external debt rose with US$ 0.8 billion and the Domestic debt went up US$ 0.4 billion. All of these numbers show the amount of monies that the Government are adding on their debt, as the UNRA and the development projects are suspended by World Bank. So the Infrastructure development can be questioned as the growing debt, as the government must have other uses of the growing and scaled up debt. Since the transparency of the economy isn’t there and that the sanctioned bills comes from the State House. Just look at the growing interest rates as well.

Interest Payment as a percentage of GDP stood at 2.2% as at end June 2016, up from 1.9% as at June 2015. The increase is largely explained by interest payments on domestic debt, which grew from Shs 1,077 billion in FY2014/15 to 1,470 billion in FY2015/16. There was a significant increase in the weighted average interest rate of Government debt; from 5.9% to 6.5% in June 2015/16. This followed increases in the weighted interest rates for both domestic and external debt, from 13.6% to 15.3% for domestic debt and from 0.9% to 1.2% external debt. As interest rates increase, so do the debt service obligations of Government” (MoFPED, P: 4, 2016).

The difference between June 2015 and June 2016 the percentage has grown with 0.3%, the domestic interest rate grew with Shs. 0.393 billion. The Interest rate alone went up by percentage 0.6%, as the weighted interest rates went up 1.7%. The key sentence that the report wrote and I repeat: “As interest rates increase, so do the debt service obligations of Government”.

That idea isn’t only on the interest payment percentages are running higher, but as the debt goes up, the interests goes up. So the Debt Service Obligations are going up for the Government. This is a natural outcome, that the obligations for the state goes up with the amount of debt it rises. So the government can try to portray this is controlled, and to one extent it is under control. Still, the growth in this regard proves that the NRM regime are pilling up debt and increasing their debt, as well as interests. In the end this will make the state worse. Especially knowing that the energy dams have been built poorly and many of the expensive roads haven been fruitful. This is development that the growing debt is being used to…

So the NRM regime and the Ugandan government isn’t believable… the rise of debt and interests show’s the current state of affairs. Even if the percentage is after plan, the government still has to take charge and make sure they can pay back both the debt and interests. Peace.

Reference:

Ministry of Finance, Planning and Economic Development (MoFPED) – ‘DEBT SUSTAINABILITY

ANALYSIS REPORT 2015/16’

Uganda: UPC Calls for Economic Reforms (05.04.2017)

Opinion: Suddenly President Kagame doesn’t want Rwanda to be dependent on the West!

For Africa as we wait to see what unfolds and adjust, we should be learning the lesson that we should not be entirely dependent. We will wake up to the reality there are things we should be doing for ourselves. You have made it appear that your situations are perfect and you want others to emulate you. Then you are surprised by what unfolds. It is what you have been hitting us with that is coming back to bite you. I did not change the constitution. If you want to know the truth you will find it is the people who did, not me. My satisfaction lies in the truth that we have not been involved in harming our people. What we are doing is to develop our country. If we don’t take care of ourselves, no one else will. As long as Rwandans are happy, we will keep doing what needs to be done. We will be listening to what others say but we will not be distracted from what needs to be done.”

-President Paul Kagame speaks to Gerard Baker, editor in chief of the Wall Street Journal, at the closing session of Invest in Africa conference.

President Paul Kagame of Rwanda, the long lingering Executive of Rwanda has compelled his words against dependency of the West. Surely, he has had this in mind for while in his own haven, as the Rwandan government has been a donor friendly. Therefore, that he claims now to take a stand against them shows the sudden change of attitude. However, it is sudden donors and programs that have stopped coming Kagame’s way, therefore the Rwandan government have started to run a giant tab of external debt instead of donor aid grants. Like look at some quotes from companies that establish the economic output and the financial flow of nations, like Deloitte and KPMG!

Rising debt:

“According to BMI, total external debt levels in the country have been rising steadily in recent years, from 16.1% of GDP in 2010 to an estimated 30.5% of GDP in 2015. Debt levels for 2016 and total external debt are forecast to amount to 35.2% of GDP and will be composed mostly of government debt” (Deloitte, P: 4, 2016).

Failing Foreign Aid, therefore rising debt:

“The primary headwind to the Rwandan economy in the 2016-2025 period will be the impact on debt as a result of falling foreign aid. Despite prudent fiscal policies to date, increases in debt levels will follow from the fall in foreign aid, since Rwanda is now deemed fit to transition from grant-based financing to loan-based financing by the IMF” (Deloitte, P: 5,2016).  “The government has been compelled to adopt a more prudent fiscal policy stance in an attempt to reduce the country’s dependence on donor support and increase fiscal autonomy. Recent external headwinds have encouraged the government to ease demand for imports by reassessing its infrastructure investment programme. This will undoubtedly have a negative impact on economic growth. That being said, the benefits of lower donor dependence and improved macroeconomic stability should outweigh the costs related to lower growth over the short term. Turning to external balances, Rwanda’s wide merchandise trade deficit is expected to maintain a shortfall in the overall current account going forward” (KPMG, P: 4, 2016).

“Aid harmonization has been improved and progress continues to be registered in the implementation of the Paris and Busan commitments especially the use of national budget and procurement systems. The Bank was the 6th largest Official Development Assistance (ODA) provider to Rwanda in 2013/14, accounting for 9.4% of total ODA26. The World Bank and EU invest in agriculture and energy whereas the leading bilateral DPs focus, among other things, on human development and social protection (Annex 8a). Annex 8b summarizes the progress made in implementing selected indicators as captured by the Donor Performance Assessment Framework. Use of the sector budget support (SBS) instrument has increased the share of Bank support disbursed using country systems. Under the DPCG, the Bank actively participates in activities to enhance the implementation of EDPRS II such as the 2014/15 assessment of SWGs” (AfDB, P: 9, 2016).

So if you look at the financial policies of the republic of Rwanda, some of it is not really chosen as the donors funds that has been suspended or stopped might be for several of reasons. That might be that if they accept the funds they have to follow a spectre of policies and interferes with the power that Kagame wish to achieve. The RPF and Kagame has total control of Rwanda, the export and the import, also owns dozens of the businesses. So the Rwandan government had to switch their economy with more loans, instead of donor aid. The loans are coming in through external debt as the external donor funds and grants have dwindled.

Therefore, the excuse of suddenly wanting to be independent is more a need, than a wish. If it was a wish earlier, than the AGOA or USAID to the RPF would have stopped decades ago. That should be common knowledge of the relationship between Paul Kagame and Bill Clinton. It is not that it is positive that the Rwandan Government want’s less aid is a healthy stance. Still, the excuse isn’t eaten by me.

The reality is that the increased debt instead of donor grants will hurt the economy, as the levied interest rates and other cost will hurt the economy. It isn’t healthy to be dependent of the aid either, but the reasons now seem more to reactionary than real intent. I am sure Paul Kagame would love funds from Belgium and France to build hospitals and clinics in rural regions of Rwanda. So, suddenly the West isn’t good enough, especially when they are questioning his reasons for staying in power and not having any successors while his regime is keeping a close lid on the opposition. Therefore, the economy and independent from the world becomes more important because then he needs to less show of transparency and accountability. Peace.

Reference:

AfDB – ‘RWANDA BANK GROUP COUNTRY STRATEGY PAPER 2017 – 2021 (October, 2016).

Deloitte – ‘Rwanda Economic Outlook 2016 The Story Behind the Numbers’ (June 2016)

KPMG – ‘Economic Snapshot H2, 2016 – Rwanda’ (15.10.2016) link:

https://home.kpmg.com/content/dam/kpmg/za/pdf/2016/10/KPMG-Rwanda-2016-Snapshot.pdf

PwC report spells gloom over rising debt in Uganda!

Ugandan shillings

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).

Growing debt:

“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.

Reference:

PricewaterhouseCoopers Limited (PwC) – ‘Uganda Economic Outlook 2017’ (February 2017)

Opinion: Ugandan Government rising debt levels, brings fear of higher inflation, devalued currency and defaulting on the debt!

quote-when-uganda-got-debt-relief-in-1999-the-first-item-president-museveni-bought-was-a-presidential-george-ayittey-74-46-61

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).

Highlights on the 2015/16 budget (New Vision Graphic)

Highlights on the 2015/16 budget (New Vision Graphic)

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.

Reference:

Mwesigwa, Alon – ‘CENTRAL BANK WARNS ABOUT RISING DEBT’ (06.01.2017) link: http://www.observer.ug/business/50631-central-bank-warns-about-rising-debt

UNCTAD Warns on Debt, Says Africa Should Find New Ways to Finance Development

Ghana Currency

This year’s UNCTAD Economic Development in Africa Report 2016 finds that Africa’s external debt ratios appear manageable, but African governments must take action to prevent rapid debt growth from becoming a crisis, as experienced in the late 1980s and 1990s. 

NAIROBI, Kenya, July 21, 2016 – African governments should add new revenue sources to finance their development, such as remittances, public-private partnerships, and a clampdown on illicit financial flows, an UNCTAD report said on Thursday, warning that debt looks unsustainable in some countries.

This year’s UNCTAD Economic Development in Africa Report 2016 finds that Africa’s external debt ratios appear manageable, but African governments must take action to prevent rapid debt growth from becoming a crisis, as experienced in the late 1980s and 1990s.

“Borrowing can be an important part of improving the lives of African citizens,” UNCTAD Secretary-General Mukhisa Kituyi said. “But we must find a balance between the present and the future, because debt is dangerous when unsustainable.”

At least $600 billion will be needed each year to meet the Sustainable Development Goals in Africa, according to the report which is subtitled Debt Dynamics and Development Finance in Africa. This amount equates to roughly a third of countries’ gross national income. Official development aid and external debt are unlikely to cover these needs, the report finds.

A decade or so of strong growth has provided many countries with the opportunity to access international financial markets. Between 2006 and 2009, the average African country saw its external debt stock grow 7.8 percent per year, a figure that accelerates to 10 percent per year in the years 2011–2013 to reach $443 billion or 22 per cent of gross national income by 2013.

Several African countries have also borrowed heavily on domestic markets, the report finds. It provides specific examples and analyses of domestic debt in Ghana, Kenya, Nigeria, Tanzania, and Zambia. In some countries, domestic debt rose from an average 11 percent of GDP in 1995 to around 19 percent at the end of 2013, almost doubling in two decades.

“Many African countries have begun the move away from a dependence on official development aid, looking to achieve the Sustainable Development Goals with new and innovative sources of finance,” Dr. Kituyi said.

The report argues that African countries should look for complementary sources of revenue, including remittances, which have been growing rapidly, reaching $63.8 billion to Africa in 2014. The report discusses how remittances and diaspora savings can contribute to public and development finance.

Together with the global community, Africa must also tackle illicit financial flows; which can be as high as $50 billion per year. Between 1970 and 2008, Africa lost an estimated $854 billion in illicit financial flows, roughly equal to all official development assistance received by the continent in that time.

And while governments should be vigilant of the borrowing risks, public-private partnerships have also started to play a more prominent role in financing development. In Africa, public-private partnerships are being used especially to finance infrastructure. Of the 52 countries considered during the period 1990-2014, Nigeria tops the list with $37.9 billion of investment, followed by Morocco and South Africa.

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