Why Finance, BoU differ on Uganda’s debt figures

KAMPALA. Finance Minister Henry Musasizi has moved to clarify a three-percentage-point difference between the government’s public debt projection and a figure attributed to the Bank of Uganda, saying the variance could be due to how the two institutions treat domestic arrears.

Mr Musasizi told Parliament’s Budget Committee that the Ministry of Finance projects public debt at 54.7 per cent of non-oil GDP in the 2026/27 financial year, compared with 57.7 per cent attributed to the central bank.

The difference emerged during scrutiny of the Charter for Fiscal Responsibility for the financial years 2026/27 to 2030/31, which sets fiscal rules to guide government borrowing, spending and revenue management over the next five years.

Mr Musasizi said the Ministry of Finance, Bank of Uganda and Uganda Bureau of Statistics (UBOS) normally harmonise their debt measurements through the annual Debt Sustainability Analysis (DSA).

He said the Ministry would engage the Bank of Uganda to establish the source of the difference, noting that the treatment of domestic arrears could be one explanation.

“The Ministry, however, remains the authority mandated with debt reporting and projection through the Annual Debt Sustainability Analysis (DSA) and reporting framework,” Mr Musasizi said.

“One reason could be that they included the stock of domestic arrears, which we do not include in the DSA in line with international practice,” he added.

The Minister explained that the institutional coverage for public debt under the government’s framework is central government.

He said external debt is valued at the nominal amount disbursed and outstanding, while domestic debt is valued at cost.

Domestic arrears and temporary advances from the Bank of Uganda are not included in the international definition of public debt, although their associated risks are reported through the annual Fiscal Risk Statement.

Under the new Charter, public debt is projected to peak at 55.1 per cent of non-oil GDP in the 2027/28 financial year before declining to 50 per cent by 2030/31.

Mr Musasizi said the Charter provides the overall fiscal limits, while detailed borrowing decisions and management of interest-rate, refinancing, foreign-exchange and private-sector credit risks would remain under the government’s debt management framework.

The clarification comes as Parliament scrutinises government’s plans to consolidate its finances over the next five years while financing infrastructure and other development priorities.

The Charter targets a reduction in the fiscal deficit excluding oil revenue from 6.6 per cent of non-oil GDP in 2026/27 to 1.5 per cent by 2030/31.

Mr Musasizi said the adjustment would be weighted towards the later years because revenue gains expected from the Domestic Revenue Mobilisation Strategy would take time to build up, while expenditure associated with first oil production would be concentrated in the earlier years.

He said the government would first respond to any revenue shortfalls through expenditure reprioritisation and containment of non-priority recurrent spending and, where necessary, additional revenue measures rather than additional borrowing.

The Charter also seeks to reduce commercial borrowing relative to domestic non-oil revenue from 33.7 per cent in 2026/27 to 19.3 per cent by 2030/31.

Total interest payments are projected to fall from 32.5 per cent to 20 per cent over the same period.

The Minister said the fiscal framework is intended to provide greater discipline in borrowing and spending as Uganda prepares for oil production and seeks to expand its domestic revenue base.

On petroleum revenues, Mr Musasizi said the fiscal rule in the Charter does not replace provisions of the Public Finance Management Act but sets the annual limit on petroleum revenue that can be used to finance the budget.

Under the rule, transfers from the Petroleum Fund to the Consolidated Fund cannot exceed 0.8 per cent of the preceding year’s estimated non-oil GDP outturn provided by UBOS.

“The remainder of the petroleum revenue shall be transferred to the Petroleum Revenue Investment Reserve,” Mr Musasizi said.

He said the rule would help ensure that oil revenues are not used to finance excessive recurrent expenditure while preserving part of the proceeds for investment.

The Minister also told MPs that government would continue to monitor implementation of the five-year fiscal framework through the budget process, macroeconomic modelling and forecasting.

The Ministry of Finance will report performance against the Charter to Parliament through the Half-year Fiscal Performance Report by the end of February and the Annual Fiscal Performance Report by the end of October each year.

The debt projections will therefore remain an important measure of whether government achieves the fiscal consolidation targets set out in the Charter, particularly as it seeks to reduce borrowing costs and create room for private-sector investment.

The difference between the Finance Ministry and Bank of Uganda projections will also need to be reconciled to ensure that Parliament and the public are working with a consistent picture of Uganda’s debt position as the new fiscal framework takes effect.