While President Yoweri Kaguta Tibuhaburwa had projected that Uganda would have reached the lower middle income status by 2020, the IMF says the earliest the country can reach this milestone is over a decade from now.
Uganda, under Museveni, had hoped to attain per capita income of $1,039 (about Shs3.7m) by 2020, the measure for lower middle income status.
The country had also hoped to attain upper middle income status by 2040, with per capita income of USD 9,500 (about Shs33.7m).
Uganda’s debt burden continues to rise (with the debt to GDP ratio having surpassed the 50 per cent threshold), and so is the government’s appetite for borrowing. (See: Cecilia Ogwal: Museveni Government is mortgaging the future of our grandchildren).
But IMF Uganda country representative Izabela Karpowicz has told local news agency URN, Uganda’s debt is sustainable.
Karpowicz noted that in present value terms, as of the 2020/21 financial year, the net present value of debt to GDP for Uganda stood at 41 per cent. She added that this was expected to rise to 43 per cent in the next year but it would drop.
“Uganda is still below the threshold. The threshold for convergence is 55 per cent. The nominal 50 per cent threshold that you are quoting is debt ceiling under the charter of fiscal responsibility. But that is not debt distress threshold. In the debt sustainability framework, it’s more of an outdoor discomfort label. It doesn’t mean that after that level, the country is in distress,” she told URN.
“We see Uganda’s debt is sustainable although the risk of distress has moved from low to moderate in the latest assessment. This debt threshold number should always be contextualized because regardless of the threshold one uses growth and financing costs are the most important element determining sustainability.”
As for the lower middle income status, Karpowicz said IMF projected Uganda will reach this milestone in about 12 years from today.
“If we assume Uganda continues to grow at six per cent going forward in the medium term as before covid19 [time] and with stable inflation and exchange rate, we think that lower middle-income status would be achieved sometimes by 2033 or 2034. Lower middle income status threshold is about $1,000 per capita,” she revealed.
“For this projection, we use some realistic assumptions on population growth. Typically we use the United Nations medium variation to make projections. That (lower middle income) status is achievable in about 10 to 12 years from now.”
She further explained: “For per capita GDP to grow fast, you have two elements, you have the GDP and you have population growth. And this is why the core elements of the IMF supported program are the higher budgetary allocation on education and health that will address the human capital element. We think it will improve education and prepare the 600,000 entrants into the labour market every year to be better skilled.”
Additional Reporting: URN
