Research Update: Uganda Long-Term Ratings Lowered To 'B-' On Rising Debt Servicing Burden; Outlook Stable

The rising proportion of funding from more expensive commercial sources--which has risen to nearly 60% of total general government debt currently from about a third in 2019--will raise Uganda's already-elevated debt servicing costs as a percentage of general government revenue. The Bank of Uganda has completed multiple local currency bond exchanges over the past three years, the latest of which took place Aug. 24, 2023. We considered these conversions as voluntary and akin to liability management operations, but their increasing frequency points to rising financing challenges and fiscal risks associated with higher debt servicing costs, in our view. We therefore lowered our long-term sovereign credit ratings on Uganda to 'B-' from 'B'. The outlook is stable. On Oct. 6, 2023,

...- The rising proportion of funding from more expensive commercial sources--which has risen to nearly 60% of total general government debt currently from about a third in 2019--will raise Uganda's already-elevated debt servicing costs as a percentage of general government revenue. - The Bank of Uganda has completed multiple local currency bond exchanges over the past three years, the latest of which took place Aug. 24, 2023. - We considered these conversions as voluntary and akin to liability management operations, but their increasing frequency points to rising financing challenges and fiscal risks associated with higher debt servicing costs, in our view. - We therefore lowered our long-term sovereign credit ratings on Uganda to 'B-' from 'B'. The outlook is stable....

Research Update