Uganda central bank warns of “debt distress” if oil revenues delayed
Adam Mugume, executive director for research at Bank of Uganda, told Reuters the debt load could become problematic if Uganda does not begin exporting crude soon. He pointed to the slump in commodity prices and the weak performance of Uganda’s hard-currency-earning exports.
“We have pushed oil very far, every now and then we’re not ready,” Mugume, a member of the central bank’s monetary policy committee, said in an interview. “We should start now getting worried about debt distress.”
Uganda found big oil reserves a decade ago but a date for large-scale pumping has been pushed back several times. The government now says it will start after 2020, when a pipeline through East African neighbour Tanzania is due to be completed.
Asked when Uganda was likely to start struggling with debt repayments, Mugume said that without oil revenues, “we’ll be having (a) serious challenge” in two to three years.
The country has ramped up external borrowing, mostly from China, to fund infrastructure projects including highways, a railway, hydro power dams and an airport. Total external debt stood at $10.3 billion in May, including disbursed funds and credit yet to be released but on which agreements have been concluded, the central bank said.
Finance Minister Matia Kasaija told Reuters earlier this month there were no concerns over debt levels. Mugume said the fact that most of the projects for which Uganda is borrowing will take years before they start earning any money, while debt repayments start almost as soon as the loan is secured, posed additional risks.
Crude reserves estimated by government geologists at 3.5 billion barrels were discovered in the Albertine rift basin along Uganda’s border with the Democratic Republic of Congo (DRC) in 2006 but production has repeatedly been pushed back.
Spats over taxation, disagreements over field development strategies and delays in erecting infrastructure like the export pipeline agreed with Tanzania in April have all been blamed.
The jointly developed pipeline will carry Ugandan crude to Tanzania’s Indian Ocean port of Tanga for export. Britain’s Tullow Oil and France’s Total, two of the three firms that own fields in the country, have been awaiting production licenses for years, although China’s CNOOC has been granted one.