The amount of interest paid on Uganda’s public debt increased during the six-month period ending in June 2022 due to an increase in the stock of domestic debt.
This data is provided with in the Ministry of Finance’s Debt Sustainability Analysis Report for the months of June 2021 and June 2022.
The stock of domestic debt climbed by 18.2 percent, according to the report, which analyzes the performance and composition of Uganda’s debt. As a result, the interest rate on the total public debt jumped from 2.8 percent in June 2021 to 3 percent.
“Total interest payments increased from 2.8 percent in 2020/21 [financial year] to 3 percent in 2021/22 [financial year] as a percentage of GDP [gross domestic product] largely due to the 18.2 percent increase in the stock of domestic debt between June 2021 and June 2022,” the report indicates, adding that the increased issuance of longer dated instruments has also led to higher cost of debt service due to the higher costs associated with such instruments.
The report, however, omits to mention the precise amount paid throughout the time.
According to a report by the Bank of Uganda in January, the government was spending at least 30% of its tax revenue on debt service, which was straining domestic revenue.
The report noted that “domestic interest payments continue to form the bulk of interest payments given the high cost of domestic debt compared to external debt, which is predominantly contracted on concessional terms.”
In addition to borrowing from commercial banks directly, the government also takes out loans by issuing Treasury Bills and Bonds.
According to the Bank of Uganda, Treasury Bills are short-term debt with a maturity of one year or less, whereas bonds have a maturity of two years or more.
According to the report, throughout the period, Treasury Bills made up 15% of all domestic debt, down from 22.5 percent, while Treasury Bonds made up 85% of the entire debt, up from 77.5 percent.
The report also points out that the stock of public debt increased from $19.54 billion in the 2020–21 fiscal year to $20.99 billion, of which $12.82 billion was attributable to external debt and $8.16 billion to domestic debt.
The report also pointed out that during the same time period, domestic debt increased from 36.6 percent to 38.9 percent while the ratio of external debt declined from 63.4 percent to 61.1 percent.