Cash crisis clouds Uganda’s economic outlook

Significance

The government has been on a borrowing spree, taking on increasingly expensive loans to address a cash crisis that has affected government service delivery and salary payments. This comes against the background of rising commodity prices and inflation, and a tourism dip due to a new Ebola outbreak.

Impacts

• Government borrowing costs may increase, putting further strain on public finances.
• Increased government borrowing from domestic sources may limit credit availability for private-sector borrowers.
• Uganda may face credit rating downgrades amid concerns over levels of public debt, debt service, foreign reserves and currency depreciation.
• Limited capacity to mobilise finances to address shocks such as flood damages will hamper economic activity and fuel popular discontent.