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Moody's Investors Service has today downgraded the long-term issuer rating of the Government of Uganda to B2, from B1, and changed the outlook to stable from negative.


The key driver of today's rating action is the sustained erosion of fiscal strength that has occurred since the rating was assigned in 2013. The Government of Uganda's debt burden has risen 9 percentage points to 33% of GDP in the past four years, and is projected to continue rising towards 45% of GDP by 2020. Debt as a percentage of revenues has risen by 54pp since 2012 and is expected to exceed 250% by 2018. Deteriorating debt affordability is reflected in interest obligations expected to consume almost 16% of revenues by 2018, far exceeding the median for B-rated countries of 8%. Meanwhile, low, and in some respects eroding institutional strength will challenge the government's capacity to manage the rising debt burden.

The stable outlook reflects Moody's expectation that, despite the anticipated further deterioration in the government's fiscal metrics, Uganda's credit fundamentals will generally remain commensurate to peers at the B2 level meaning a further rating downgrade is unlikely in the near term.


Concurrently, Moody's has lowered the long-term local-currency bond and deposit ceilings to Ba2 from Ba1, and the long-term foreign-currency bond and deposit ceilings to Ba3 and B3 from Ba2 and B2, respectively.

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