Government plans to borrow 600 million euros ($661 million) from international banks to plug a hole in its 2019/2020 budget after domestic revenue collections fell short by 9%, amid delays in implementation of some planned tax-generating measures.
The move could heighten concerns about the growing debt pile which the International Monetary Fund has warned would likely surpass 50% of gross domestic product in 2021/2022. The financial year starts in July.
The Finance Ministry said in documents posted on parliament’s website that the government planned to borrow the money from a local unit of South Africa’s Standard Bank and regional Trade Development Bank.
The documents said the government was facing a total shortfall of 2.5 trillion Ugandan shillings ($680 million) and the borrowing would be “to finance part of the budget deficit”.
Various factors, including a delayed payment of $100 million in licence fees from MTN Uganda, have caused the revenue shortfall, according to the finance ministry.
For months MTN, the country’s largest telecoms operator, and government have been in negotiations over renewing the firm’s operating licence.
The ministry said the new borrowing would add 2 percentage points to Uganda’s public debt to GDP ratio, which the central bank says currently stands at 43%.
Over the last 10 years, Uganda has rapidly increased its borrowing, mostly secured from China for a range of infrastructure projects in sectors such as transport and energy.
Opposition critics have said the government is engaging in a reckless borrowing spree ahead of expected oil revenues and accused authorities of mortgaging the country’s future.
Uganda expects commercial oil production to start at the earliest in 2022.
At the beginning of the new financial year in July, government was banking on replenishing the Fund with Capital Gains Tax payment of $167m (Shs610b) off the Anglo-Irish Tullow Oil farm down transaction to French Total E&P and China’s Cnooc. The deal collapsed in late August.