Uganda will not borrow to finance the Karuma hydro power project because doing so would unnecessarily worsen the country's level of indebtedness, the minister of state for Finance, Matia Kasaija, told Parliament last week.
In his testimony before the House committee on the Economy, Kasaija said the country's level of indebtedness had hit $5.805bn (Shs 15.1 trillion), including Shs 1.3 trillion secured without Parliament's approval since 2011. "We are hovering at about 25 per cent of the GDP, yet we agreed as members of the East African Community that we should never exceed 50 per cent of our GDP locked up in loans," Kasaija said.
Consequently, Uganda is seen by the World Bank as one of the most highly-indebted countries in the world. However, Kasaija was optimistic. "We are still very comfortable and safe because it [debt] is not static, but changing depending on our paying rate." He explained that Uganda's high-indebtedness was the reason government won't borrow to finance the construction of Karuma hydro power dam.
"If we borrowed this money, we could get near the border line which is 50 per cent," he explained, adding, "We agreed as members of the East African community, that we should never exceed 50 per cent of our GDP to be locked up in loans or that the country should not be indebted beyond 50 per cent of its total GDP." An emphatic Kasaija said the government would build the dam even with the withdrawal of the Chinese firm.
"Even if [the Chinese firm] comes up tomorrow to say that we are withdrawing our funds, we shall proceed with Karuma because our money from the oil capital gains is available for that purpose." Kasaija was in the committee to explain how the government secured Shs 1.3 trillion without Parliament's approval.