Government of Uganda Geared to Update its MTDS

As in most former HIPCs, Uganda’s public debt has been increasing both in nominal terms and as a percentage of GDP from about US$3 billion (or about 20% of GDP) end of FY2008/09 to US$7.4 billion (or about 31% of GDP) at the end of FY 2014/15. Both external and domestic borrowing to finance infrastructure projects contributed to this increase. Nevertheless, public debt has remained within the cost-risks thresholds set in the 2013 Public Debt Management Framework, largely due to the concessional nature of external debt.

 Recognising the growing debt and the need to modernize debt management functions, the Government initiated some reforms in public debt management. These include consolidation of public debt management functions within a newly established Debt and Cash Management Directorate (DCMD) in the Ministry of Finance, Planning and Economic Development (MoFPED) in 2014, and annual updates of the medium term debt management strategy.

In order to strengthen debt management capacity on designing debt management strategies,  the Ministry of Finance, Planning and Economic Development of Uganda requested for a technical assistance from Bretton Woods Institutions. In response, a joint World Bank-IMF mission, in collaboration with MEFMI and UNCTAD, visited Kampala from 2 to 10 December 2015. The mission team comprised Messrs Lars Jessen (Team Leader) and William Battaile, both from the World Bank, Lekinyi Mollel of MEFMI, Peter Breuer of IMF and Gabor Piski of UNCTAD.

The main objectives of the training mission were:

• To train officials on the formulation of a medium term debt management strategy; and

• To test and appreciate of the revised version of the MTDS Analytical Tool. The version was released in 2015 and Uganda was among the first countries to apply it.

In this regard, the mission team trained participants on how to develop a debt management strategy using the revised excel-based MTDS Analytical Tool, covering the following:

i. Introduction to the MTDS formulation and implementation process;

ii. Introduction to the IMF/World Bank MTDS Analytical Tool and the Guide including the revisions of 2015;

iii. Setting objectives and scope of debt management;

iv. Assessment of the existing public debt portfolio, including the costs and risk characteristics;

v. Assessment of the potential sources of funding;

vi. Determining the baseline macroeconomic projections and assessment of the main structural factors that may have a bearing on the chosen borrowing strategy; and

vii. Assessment of the potential alternative debt management strategies for Uganda. This included designing and analyzing the performance of alternative debt management strategies over the next five years. The alternative four strategies were considered by differing in the mix of financing sources and terms.

Participants in the workshop were drawn from the Debt and Cash Management Directorate and Macroeconomic Policy Department in the Ministry of Finance, Planning and Economic Development, as well as from Financial Markets and Research departments of the Bank of Uganda. The workshop targeted junior, middle to senior officials responsible for public debt management and macroeconomic forecasting and analysis. A total of 20 participants attended the workshop, of which seven (7) were female, representing 35% of the total.

The trained officials gained knowledge and practical skills for designing a debt management strategy using the MTDS Analytical Tool. It is envisaged that these skills would enable them to update Uganda’s debt strategy planned for early 2016.