Why Uganda Debt Network wants government to stop domestic borrowing

Domestic/ Internal Borrowing is the part of the total government debt in a country that is owed to lenders within the country. In most cases, internal borrowing is done through the issuance of securities like treasury bills.

Such bills are short-term debt instruments and they are supposed to be paid within periods ranging from 91, 182 and 364 days while treasury bonds with a maturity period of more than a year.

Although such investments are considered advantageous because they consider the guaranteed rate of return and have no value loss, according to Uganda Debt Network (UDN), they are making Uganda’s investors lazy.

Currently, Uganda’s total domestic debt stands at Shs17.98 trillion.

Julius Kapwepwe, the Executive Director UDN says the persistent domestic borrowing from commercial banks by the government is simply creating lazy investors who will go for the guaranteed profits from the government securities at the expense of other productive sectors of the economy.

He also noted that unless fiscal discipline is exercised, the new tax measures introduced by the government every year will not lessen the appetite for domestic and external borrowing. Kapwepwe added that currently, Uganda is suffering because of the escalating culture of impunity and fiscal indiscipline.

Such indiscipline includes failure to collect all taxes and provide full disclosure on the utilization of taxes.

“There is a need to increase sanctions through the office of the Accountant General so that accounting officers can reduce the leakage of public resources. This should be complemented by strengthening anti-corruption agencies. Currently, Uganda cannot clear the heavy loan burden it has now, That is why Uganda Debt Network and other African organizations have appealed to bilateral and other lenders like the IMF and World Bank for total debt cancellation,” he said.

Kapwepwe advised that the government can reducing indebtedness can be done by investing the borrowed funds into projects that can be integrated into the rest of the economy. “This will provide maximum utility from each program invested in and will improve Uganda’s ability to pay back the loans.”