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Uganda
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Uganda plans to pull back from variable interest-rate loans after government debt has more than doubled in almost five years because of obtaining costly commercial credit, the East African nation’s Finance Ministry said, Bloomberg News reported. The stock of public debt jumped to 93.4 trillion shillings ($24.7 billion) at the end of last year from 42.2 trillion shillings in June 2019, according to the ministry’s medium-term debt management report. It was up 13.6% year-on-year in 2023 in dollar terms, partly due to Stanbic Bank budget financing.
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Uganda’s chief legal officer urged the Finance Ministry to refrain from renegotiating the terms of a $200 million Chinese loan as it is able to meet its debt obligations, Bloomberg News reported. The agreement signed in 2015 with the Export-Import Bank of China to fund the expansion of the Entebbe Airport came with several contentious clauses, including one that could see the lender take ownership of the facility in the event of a default.
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The Ugandan High Court on Wednesday ruled that a syndicated loan granted to a local company was illegal in a shock judgment that banks warned could lead to a spike in defaults on $1.5 billion of debt, Bloomberg News reported. The case relates to a loan Diamond Trust Bank Kenya Ltd. provided to a Kampala-based firm with interests spanning real estate to agriculture, using its Ugandan subsidiary as the agent.
Uganda’s central bank cut its benchmark interest rate for a second time this year to a new low as risks to inflation remain benign and the outlook for economic growth is tilted toward the downside, Bloomberg News reported. The monetary policy committee reduced the rate to 7% from 8%, Governor Emmanuel Tumusiime-Mutebile said Monday in a speech broadcast online. That is the lowest level since the central bank introduced the policy rate in 2011 at 13%. Returning to pre-pandemic levels of economic activity will be gradual, partly due to weak external demand, Tumusiime-Mutebile said.
Uganda would prefer debt cancellation to help rebuild its economy after the fallout from the coronavirus pandemic, rather than rescheduling of payments, Bloomberg News reported. The government of Africa’s second-biggest coffee grower is considering offers from various creditors, Finance Minister Matia Kasaija said by phone Thursday and declined to identify the lenders. “There is an argument with creditors,” Kasaija said, without elaborating. “Most of those who have written” to the ministry suggest the nation reschedule payments, he said from the capital, Kampala.