Debt Financing will cost Uganda Future Billions

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During the last 35 years, the National Resistance Movement – NRM and Yoweri Kaguta Museveni have borrowed money for Uganda with of course the approval of Parliament which also has the Opposition.

I am surprised many Ugandans don’t appreciate the economic importance of borrowing money from the ruling Government, I will labor to explain in this post.

Essentially, the government of Uganda borrows so that it can enable higher spending without having to increase taxes. The annual amount the government borrows is known as the budget deficit. The total amount the government has borrowed is known as the national debt or public sector debt. This money is paid back by taxes government collects, which means that every year government pays on the loans.

Infrastructure Investment. The government invests in public sector investment. For example, roads, electricity dams, hospitals, and others. This investment can give a return on the investment which helps to boost production capacity and increase economic growth. Your relative in Hoima can produce goods and get them to Kampala within 3 hours due to the good road that was not there before, at the same time a businessman can sell his goods in Hoima at the same cost the road has opened a new market for him therefore he can increase production as a result of increased demand of goods. These roads have lead to the development of many areas as goods and services have become available for people in those areas.

In this case, the government is acting like a firm that takes out a loan to finance investment and uses the taxes collected to service the loan. Anyone against this is an enemy of the country development.

Political. The biggest tendency to borrow comes from political pressures. Voters generally like to hear the promise of lower taxes and increasing spending. A manifesto to tackle a budget deficit (higher taxes and lower spending) is unlikely to be popular. Voters often are supportive of the general idea of reducing government debt, but when it comes to actual policies like lower benefits, increased VAT rate, then it is likely to hit some particular pressure group with a vested interest in maintaining low tax and spending. For a government to increase borrowing is generally less politically damaging than increasing taxes. (though ironically. In a country like Uganda whose tax base is only 1.6 million taxpayers out of 46 million people government has no option but to borrow to give services to the people.

Well as developed countries borrow on social security, food subsidies, stabilization of the economy during recession, public health, security (war), economic growth, and others, Uganda mainly borrows for infrastructure development like Electricity, roads, hospitals, economic growth, and security.

Anyone who says the country should not borrow money is either ignorant or doesn’t comprehend economics. No country in the World doesn’t borrow, every country uses taxes to pay loans as they continue to develop. Infrastructure attracts investments and investments lead to employment I don’t need to tell you what employment does.

The government for example has Gulu University, Kabale University, Mbarara University, Busitema University, Soroti University, Lira University, and Kyambogo University. All these started in the last 35 years.

Uganda currently has 5 referral Hospitals, 14 regional Hospitals, 176 General Hospitals and 1,592 Health Center IV.

I will only agree with someone who argues that the NRM as stayed long in power but again do we understand the impact of political stability to investment and development, the western world was not changing leaders frequently when they were developing no, go and read history. They are only practicing democracy of changing leaders now after they have everything and systems in place it’s takes year’s to achieve this, they know that the only way to influence us is through change of leaders if this one denies them contracts on oil then they support another leader so that they can benefit from the new leader. To them it’s about them not us.



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