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Cash crisis clouds Uganda’s economic outlook

Tuesday, November 29, 2022

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.

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