Gov’t Debt: Shs14.3 Trillion Unused Despite Spending

Summary:

• Government borrowed $3.78 billion (Shs14.3 trillion) remains unused, despite continuous spending on commitment fees. Efforts to reduce undisbursed debt are underway. External funding challenges persist, with only Shs1.4 trillion secured against a target of Shs3.8 trillion. Despite this, the Finance Ministry projects a lower fiscal deficit for 2023/24.

KAMPALA, (Examiner) – As of December 2023, a staggering $3.78 billion (equivalent to Shs14.3 trillion) of borrowed public funds remained untouched, yet the government continued to incur expenses in the form of commitment fees payments, according to the latest report on Public Debt, Grants, Guarantees, and other Financial Liabilities.

This figure marks a slight decrease from the $3.83 billion (Shs14.5 trillion) that remained unused during the same period in 2022. The report, recently presented by the Finance Ministry to Parliament, highlights a 1.32 percent reduction in the stock of undisbursed debt, attributed to intensified project implementation efforts.

Finance Minister Matia Kasaija emphasized the government’s commitment to further decreasing undisbursed debt through enhanced project supervision and quarterly portfolio reviews. Notably, the International Development Association (IDA), the World Bank’s lending arm, holds the largest share of undisbursed debt at 25 percent, followed by the African Development Bank and International Development Bank (IDB) at 16 percent and 10 percent, respectively.

Despite Parliament’s allocation of Shs52.7 trillion for various activities in the 2023/24 financial year, the government faced challenges in securing external funding. By December 2023, only Shs1.4 trillion had been secured from external sources against a target of Shs3.8 trillion, primarily due to lower-than-anticipated disbursements under projects and delayed commencement of major infrastructure initiatives.

Furthermore, half-year external debt repayments totaled Shs1.2 trillion, surpassing external financing of Shs1.4 trillion, resulting in a net external financing of Shs192.33 billion. Meanwhile, net domestic financing reached Shs3.161 trillion, surpassing the Shs1.3 trillion target, as the government addressed financing gaps caused by delayed external budget support mobilization and weak domestic revenue performance.

Despite these challenges, the Finance Ministry remains optimistic, projecting a fiscal deficit for 2023/24 lower than the target of 4.6 percent of gross domestic product, with further reductions anticipated over the medium term.