Uganda’s Composite Indicator, which is estimated at 2.99, signals a medium debt-carrying capacity based on the October 2021 WEO and CPIA 2020.
The arrears to Tanzania date back to the Uganda-Tanzania War in 1978-79, with an alleged lack of documentation of the debt, therefore the validity of these arrears is disputed and not included in officially reported total external debt. In contrast, arrears to Iraq (US$1,581) and Nigeria (US$19.3 million) are recorded in the official debt statistics. The Iraq and Nigeria arrears are pre-HIPC Initiative arrears to non-Paris Club creditors, which continue to be deemed away under the revised arrears policy for official creditors, as the underlying Paris Club agreement was adequately representative, and the authorities continue to make best efforts to resolve the arrears.
Implementation of the DRMS is projected to raise tax revenues by 0.5 percent of GDP per annum. The strategy outlines key tax policy reforms, including a rationalization of exemptions, and revenue administration modernization to improve compliance. For example, a Tax Expenditure Framework – to streamline and eventually scale down revenue leakages from tax expenditures – has now been finalized and approved by MoFPED. These leakages were estimated to have reached about 5.2 percent of GDP in FY20/21. Furthermore, several partners, including the IMF, World Bank, USAID and FCDO, are providing significant support to the Tax Policy Department (MoFPED) and Uganda Revenue Authority (URA) to ensure full implementation of the DRMS.
Significant Public Investment Management reforms and institutional strengthening have taken place over the last five years, to improve the identification, selection and implementation of projects. This reform momentum is expected to pick up and be sustained over the medium term, with continued support from IFIs (including under the ECF-supported program and an ongoing World Bank program) and bilateral partners.
Moreover, export shocks might intensify due to volatile oil exports over the long term.
The government’s Charter of Fiscal Responsibility requires public debt to stay below 50 percent of GDP in present value terms, which is also one of the convergence criteria for monetary union in the East African Community. The government’s publicly stated debt ceiling is 50 percent of GDP in nominal terms.