Infrastructure development has been blamed for the soaring debt of Uganda. In this presentation, we explore the genesis and explain how the country can deal with the bent problem

1. Infrastructual
Development
as a Key Driver
of Public Debt
By Sam Stewart
Mutabazi Transportation and
Urban Planner

2. Key Quick Stats
Uganda’s GDP
$ 37.8 Billion
Uganda's Debt
Burden
$ 20.1 Billion
Uganda’s Current Debt is 51.3% of its GDP. It will rise to
52% in the coming year 2023
2

3. Super Debt Highway
Speed Kills
Debt Leads to
More Debt

4. Pertinent Questions
▸ Does Uganda have a debt
Management Policy that guides
its debt acquisition?
▸ What is Uganda’s debt (Loan)
acquisition process?
▸ Can government finance
infrastructure without borrowed
capital?
▸ Does Infrastructure spending lead
to national development?
4

5. Debt Trap
Debt Overhang
Theory
The negative impact of debt
accumulation which reduces
macro-economic performance
When a nation’s debt is more than
its debt repayment ability
When a country is forced to take new
loans to pay existing obligations

6. “We don’t have a trillion–dollar debt
because we havent taxed
enough. We havea trillion-dollar
debt because we spend too much
Ronald Reagan
6

7. 20% ($3.5 Billion)
Uganda’s Debt Owed to China!
7

8. China-Uganda Infrastructure
Financing and Investment
▸ China is Uganda’s Largest
Creditor
▸ Over 80 Chinese construction
companies currently operating in
Uganda
▸ Most Chinese loans are tied to the
procurement of Chinese goods and
services
▸ China Exim Bank is the sole vehicle
through which Chinese government
channels its official assistance 8

9. Key Drivers of Public Debt
9
Corrup
BOP Deficit
(Less Exports)
Weak Policies
(Lack of Systems)
Corruption
(Lack of Transparency &
Accountability)
Unfavorable Terms
(High Interest Rates)

10. Infrastructure Investments in Uganda
10
Electricity
(Hydro Power
Dams)
.
3
Water Supply 2
Airports (Entebbe
and Hoima
1
Roads and
Bridges
4
Telecommunications 5

11. TYPES OF INFRASTRUCTURE FINANCING
Resource for Infrastructure (R4I):
The actual resources are promised to the
lender
Resource Financed Infrastructure (RFI):
The income from the sale of resources is used to pay
back a loan, with the resources providing the needed
collateral

12. Level of Investment by China in
Selected in African Countries
Country
Total Loans
(Billion USD)
Number of
Loans
Angola 43.2 256
Ethiopia 13.7 52
Kenya 9.0 40
Uganda 2.9 14
Tanzania 2.0 12
Nigeria 6.2 16
12
Source: China Africa Research Initiative

13. $1.4 Billion
Money Uganda needs for her Infrastructure needs Annually
Source: World Bank

14. ▸ Unit Cost of Project execution quite
high in Uganda.
▸ Low technological, knowledge and
skills transfer by foreign expatriates
engages on projects
▸ Weak local capacity for infrastructure
management and development
14
Factors leading to high debt burden

15. ▸ Most projects are not completed on
time e.g. Karuma Dam leading to cost
escalation
▸ Poor scheduling of projects leading to
early repayment even before project
starts
▸ Return on Investment on some
infrastructure is quite low 15
Factors leading to high debt burden

16. 45 TRILLION UGX
Money allocated to Roads in last 15 years
20% Average of GDP
4,500 Kilometres of Roads
16

17. ▸ Employment of foreigners even for
basic jobs
▸ Profit repatriation by foreign contractors
▸ Extravagance in infrastructure
spending
▸ Very expensive infrastructure. Most
projects are overpriced
17
Factors leading to high debt burden

18. ▸ Unit Cost of Project execution quite
high in Uganda.
▸ Low technological, knowledge and
skills transfer by foreign expatriates
▸ Weak local capacity for infrastructure
management and development
18
Factors leading to high debt burden

19. Components of Public Debt
External
Assistance
Treasury Bills
Short Term
Borrowing
Government
Securities

20. Different Types of PPPs
20
Build-Own-Operate
(BOO)
Build-Operate-Transfer
(BOT)
Build-Own-Operate-
Transfer
(BOOT)
Design-Build-Finance-Operate
(DBFO)

21. Uganda Government Debt-to-GDP Ratio 2012-2020

22. Government Dilema on Public Debt
Delay construction of
desired Infrastructure
until resource
revenues eventuate
Borrow Money now to
build the
Infrastructure in the
short term
EITHER OR

23. Way Forward
1. Need for clear prioritization of
infrastructure development sequence
basing on resources available, level of
importance, likely benefits and Rate of
Return
2. There is need for a comprehensive Debt
Policy and Management Plan
3. Need to revive and strengthen the
national Debt Coordination Unit in
MoFPED

24. Any questions?
You can find me at:
Twitter: @StewartMutabazi
Email: mutabazistewartsam@gmail.com