Uganda’s growing mountain of debt: how long will the crisis be postponed?


Uganda’s parliamentary committee on the economy released a chilling report on the country’s debt situation last week. Now at $21 billion, the public debt is about three times the government’s total annual revenue. Even politicians are worried.

As with some of our neighbours, debt has exceeded 50% of gross domestic product (GDP), raising questions about our ability to pay.

Due to the high cost of doing business, the return on investment is low, and many bank loans do not perform well. Thus, commercial banks hate lending to customers and prefer to buy government papers with long-term bonds yielding 17% profit.

The banks apparently discourage customers from borrowing by charging them a whopping 20% ​​annual interest, which is two or three times the rate of inflation, plus the loan arrangement fee, plus the accountant’s fee acceptable to the bank for compiling your cash flow, plus paying bank fees. insuring the risk they’re taking despite holding your security hostage, plus the lawyer’s mortgage servicing fee or whatever your bank calls it, plus other fees they don’t charge for. there is no space here to list them.

The central bank has tried for a few years to limit the treasury bills and bonds available to commercial banks, but the government is addicted to domestic borrowing like a narcotic-addicted juvenile who sells all movable family valuables at low prices for buy his dose at the moment. He continues to issue these papers to repay the loans – digging a hole to fill another and let the future take care of itself.

It works for America; it doesn’t work for africa


We hate Western lenders who lecture us on “unrelated” issues like democracy and human rights while lending us their money. We commend the Chinese for “respecting” us and not preaching to us.

But the Peking comrades do not lend us Treasury otherwise we would invoke our solidarity and our default. They ask their banks to lend us at commercial rates and shorter grace periods, unlike the World Bank “professors” who charge less than 1% interest and give long grace periods. There is no free lunch in the borrower’s life.

While a lot of the borrowing is for infrastructure development, which is a good thing, the debt is also increasing because of this vague thing called fiscal support.

The Inspector General of Government soon loses his voice for endlessly telling us about billions of dollars stolen from public coffers, and “budget aid” loans are also in the kitty from which the theft is made, because it is not assigned to any project and therefore is not subject to the control of the lenders.

The sums stolen exceed the sums borrowed for development. So if theft can be limited, the need for borrowing would decrease.

We could choose to live with growing public debt and let our grandchildren suffer the consequences, but it doesn’t stop at the government level. Ugandans can be reckless borrowers.

Maybe other countries are borrowing too, especially those with credit cards and mortgage cultures. But their interest rates aren’t as crazy as ours.

We blame our government for its reckless borrowing, but the individuals who make up the nation are no different. When banks charge high interest, our employees run to loan sharks who charge 10% per month!

Their best ally is the Uganda Prison Services, because when you fail, they send you to prison for six months. If there’s a wannabe big spender you haven’t seen in Kampala for a while, check Luzira Prisons – another one might be there.

Prison management complains of congestion, thanks to defaulters filling civilian prisons. Nowadays, some people borrow without any intention of paying. When the lender fails to collect and calls law enforcement, the borrower goes to jail laughing secretly.

Apparently, there is a peace like that of the dead in prison. There, creditors cannot bother you with phone calls and threats. And apparently, after serving your six months, being forced to pay becomes very difficult, especially if you have hidden the loan proceeds well.

So here we are, and how we got here is not the question, but how we got out. The government, the banks, the lenders and the people are all addicted to gambling.

Will something give way? How long can the crisis be postponed?

Joachim Buwembo is a journalist based in Kampala. E-mail:[email protected]

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John A. Bogar