Fiscal policy and public debt sustainability in Uganda

Abstract

The level of Uganda’s public debt has created doubts regarding the government’s sustained ability to repay. This is because of both the rapidly increasing debt accumulation as well as share of interest payments in the national budget. The brief examines the sustainability of Uganda’s public debt during the period 1981/82 to 2016/17. The results show that in the long run, government has been able to respond to past debt build up in a sustainable way. However, in the short run, government has not been responsive to the debt bulge which poses risks to debt sustainability. To guarantee future debt sustainability, the government needs to: (i) strengthen the primary balance by reducing wasteful expenditures and strengthening domestic revenue mobilisation (ii) borrow smartly and invest in projects that are productive (iii) focus on effective planning and implementation of the budget.