The International Monetary Fund (IMF) has urged government to cut down expenditure on public administration and other unnecessary expenses to stop economic decline occasioned by COVID-19.

Ms Izabela Karpowicz, the IMF resident representative, says government strategy of borrowing to fund its large public expenditure is not sustainable.

The IMF resident representative was speaking during a virtual presentation of the 2021 sub-Saharan Africa Economic Outlook on Monday, May 31, 2021.

She said Uganda needs to institute administration reforms that will emphasise reduction in expenditures as well as cutting expenditure in non-priority areas.

However, she said this must be done while preserving social spending and ring-fencing resources for financing vaccine distribution. Ms Karpowicz also noted government must in the medium term seek to increase revenue mobilisation by at least 0.5 per cent of gross domestic product per year as well as increase priority social spending by boosting social assistance programmes.

The IMF’s advice comes amid growing concerns over Uganda’s growing debt. Officially Uganda’s stock of public debt grew by 21 per cent to US$15.27 billion over one year (June 2019 to June 2020). This is equivalent to 41 per cent of total economic activities generated in the country in annual basis— GDP and 31.8 per cent in present value terms.

The key driver for the increase in debt is the need for extra borrowing to cover revenue short falls, Covid-19 related expenditure as well as support for economic recovery.

In April, Finance minister Matia Kasaija disclosed that government would seek to reschedule payments, 24 hour after sections of the media revealed each Ugandan now owed Shs1.5 million in debt contracted by the government.

In an interview with Reuters news agency, Mr Kasaija revealed that repayments of the debt, now at $17.96 billion (Shs66 trillion) if domestic debt is included, might have to be renegotiated with major creditors, including China and the World Bank and IMF too.