The general tenor of an October 20 statement, issued by Uganda’s Secretary to the Treasury after the 2025 International Monetary Fund/World Bank Annual Meetings cleared the country to partake of the lenders’ concessional financing, tells its own story.
Ramathan Ggoobi, who is also the Finance ministry’s Permanent Secretary, purred over the World Bank’s disbursement of up to $2 billion in concessional loans across the next three financial years. The money, he added, will be used ‘to finance our development.’ As will the patient capital that the International Finance Corporation (IFC) extend to, among others, ‘private sector investors in the minerals, renewable energy and agro-industrialisation.’
There are also strong indications that should Uganda come through the 2026 General Election without running into difficulties, negotiations with the International Monetary Fund (IMF) for a new Extended Credit Facility (ECF) will be met with a certain degree of acceptance. We do not intend to rain on the parade of the policy wonks at our Finance ministry.
It would, however, be very remiss of us not to underscore the fact that unsustainable debts are driving a development crisis across the global south. It is not lost upon us that most global south countries in debt distress have run into a brick wall, thanks to non-concessional loans. While this explains the tone of glee in Mr Ggoobi’s October 20 statement, it is also becoming increasingly clear that only with great difficulty will Uganda be able to extricate itself from non-concessional loans.
The government is, for instance, currently desirous of getting parliamentary approval to borrow from commercial lenders. It wants to get pound 342.5m (Shs1.4 trillion) from Standard Chartered Bank to finance the construction of the 400kV Karuma-Tororo double circuit transmission line, associated substations, and the 132/33kV Ntinda substation.
With the House’s clearance, another pound 192.9m (Shs779b) will be taken out from Citi Bank to finance the first phase of the Enhancing Agricultural Production, Quality, and Standards for Market Access Project. Not to mention another pound 115.8m (Shs468b) from Standard Chartered Bank intended to bankroll construction of the so-called oil roads.
The high interest rates that such non-concessional loans attract have left the government spending, studies show, up to three times as much on servicing its debts. The advocacy group Development Finance International (DFI), says debt servicing costs gobble up 45 percent of government revenues. That number shoots up to 70 percent for low-income countries.
At any rate, this is troubling. Whereas access to concessional loans will, in a sense, ease the pain for Uganda, we cannot stress enough the importance of shedding superfluous expenditures. This continues to be a clear and present danger even as the country operates within straitened circumstances.
The policy wonks at the Finance ministry might thin the fog of rage if they devote considerable energy and time to ensuring the public administration budget does not remain huge. Promises that money-moreover borrowed money-will not be spent on consumptive activities have to be kept. Short of that, Uganda will be strangled by debt.