Uganda has joined the growing international call for the reform of the global financial architecture, emphasizing the need for changes that would benefit developing nations.

Patrick Ocailap, Deputy Secretary to the Treasury, highlighted the urgency of these reforms, arguing that they are essential for countries like Uganda to leverage their potential and tackle future challenges.

Ocailap pointed out that global crises, including the COVID-19 pandemic, have exacerbated debt servicing challenges in Africa due to external economic shocks. He noted, “These shocks leave very little fiscal space, if any, for investment in sustainable growth.”

Uganda proposes that the global financial architecture should be streamlined to facilitate quicker and more efficient access to climate funds during environmental crises.

Ocailap cited the example of landslides in Eastern Uganda around Mount Elgon, suggesting that financial systems should allow immediate resource allocation in such emergencies.

He also suggested that loans to countries like Uganda should include contingency clauses to free up resources during repayment periods. Ocailap made these remarks at the launch of the African Development Bank’s Uganda country focus report for 2024.

The report, titled “Driving Uganda’s Transformation: The Reform of the Global Financial Architecture,” reveals that public debt payments in Africa have increased significantly, rising from 3.4% of GDP in 2015-2019 to 12.7% in 2020-2022. The African Development Bank Group asserts that funds in Africa are increasingly diverted to debt servicing rather than development financing, slowing growth in countries like Uganda.

The report estimates that African nations will pay approximately $74 billion in debt repayments in 2024, up from $17 billion in 2010, with $40 billion going to private creditors.

Uganda’s Fiscal Status

The report indicates that Uganda’s government is pursuing fiscal consolidation, reducing development spending and slowing growth. The fiscal deficit decreased to 5.1% of GDP in 2022/2023, down from 7.4% in 2021/2022. Fiscal tightening has primarily resulted from reduced government consumption rather than increased domestic revenue, which stood at 13.8% of GDP in 2022/2023.

Uganda’s real GDP growth slowed to 4.6% in 2023, affected by contractions in food crop production and public administration, as well as stagnant manufacturing output. However, the economy is expected to grow by 6.0% in 2024 and 7.0% in 2025, driven by increased investments from oil companies. The fiscal deficit is projected to decrease to 4.2% of GDP in 2023/2024 and further to 3.6% in 2024/2025.

Ocailap emphasized that Uganda’s economy has shown resilience, recovering from both internal and external shocks, with a current GDP growth rate of 6% for the 2023/2024 financial year. He highlighted strategic investments in infrastructure, agriculture, services, and environmental sectors as key contributors to this growth.

Debt Financing Status

The report indicates that debt servicing costs remain high, with interest payments accounting for 3.2% of GDP in 2023. Public borrowing increased significantly during the COVID-19 pandemic, impacting public debt indicators. However, fiscal consolidation measures have helped reduce debt stocks to 47.6% of GDP in 2023.

A notable concern is the shift in Uganda’s external debt mix, with commercial borrowing rising from 0.7% in 2018 to 21.2% in 2023, amid higher international lending rates. The IMF currently rates Uganda’s sovereign debt as a moderate risk of distress.

Calls for global financial architecture reforms are becoming more prominent in economic and political discussions, including in Uganda.

There are demands for increased representation of sub-Saharan countries in global governance, enhanced operational and financial capacity of the World Bank, and prioritization of programs that integrate Africa into the global economy.

Additionally, there are calls for improved infrastructure and trade route connectivity and increased collaboration with bilateral public and private lenders and investors.