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Growth And Foreign Debt: The Ugandan Experience
(AERC, 1997-11) Mbire, Barbara; Atingi, Michael
This paper analyses Uganda’s external debt problem. Like many other countries in the sub-Saharan Africa, Uganda is a severely indebted low-income country. Uganda’s total debt stock at end June 1993 was estimated at US$2.64 billion, with a debt service ratio of nearly 80%. A look at Uganda’s debt profile since the 1970s reveals a composition of debt mainly from multilateral creditors. The study particularly links debt to economic growth. A major observation is the acute debt servicing obligation of the country, and the fact that a large proportion of Uganda’s debt is not eligible for rescheduling. Debt payments have been a fundamental cause of low economic growth. Of great concern is whether the economy can sustain its current growth rate of 5% per annum and at the same time maintain adequate domestic investment, given the heavy reliance on foreign import capital flows. Debt relief is not enough; continued government commitment to structural reforms and sound debt management are essential. The need to continue the ongoing restructuring of the economy and promote further growth is apparent. But how sustainable and possible is this challenging path without accumulating more debt?