(Bloomberg) -- Uganda plans to pull back from variable interest-rate loans after government debt has more than doubled in almost five years because of obtaining costly commercial credit, the East African nation’s Finance Ministry said.

The stock of public debt jumped to 93.4 trillion shillings ($24.7 billion) at the end of last year from 42.2 trillion shillings in June 2019, according to the ministry’s medium-term debt management report. It was up 13.6% year-on-year in 2023 in dollar terms, partly due to Stanbic Bank budget financing.

“The rise is on account of progressive acquisition of commercial loans for budget support and costs associated with increased domestic borrowing,” the ministry said.

In the last fiscal year, Uganda replaced some domestic borrowing with external funds to avoid crowding out businesses and households. This resulted in commercial sources disbursing 60% more than budgeted and Uganda tripling semi-concessional loans from what it initially intended, according to the report. 

The country has been forced to seek expensive budget funding for economic growth catalysts such as railways, electricity and irrigation, President Yoweri Museveni said last week at a World Bank summit in neighboring Kenya.

China and Standard Bank are owed the biggest chunks of variable interest-rate loans, which make up about a fifth of external debt, according to the ministry. Multilateral creditors still hold the bulk of fixed-rate external debt.

If successful, talks to unlock fresh World Bank funding will provide relief for Uganda. The lender that’s long been Uganda’s biggest provider of budget support froze new loans last year, saying the nation’s anti-homosexuality legislation contradicts its values. 

Cutting commercial borrowing is feasible for Uganda, according to Enoq Twinoburyo, an independent economist based in Kigali, Rwanda. Commercial loans emerged recently and they are of short tenures, he said. 

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