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Mounting Debt: Worry As Gov’t Tables Additional Shs2.7Trn Loan Request

Gabriel Ajedra

Members of Parliament have raised concerns over the debt sustainability of Uganda after Ministry of Finance appealed to Parliament to approve an additional Shs2.319Trn loan request  to cover revenue shortfall in the 2020/21 Financial Year.

This is after  State Minister for Finance-General Duties, Gabriel Ajedra (pictured) today tabled seven fresh loans before Parliament’s National Economy Committee to allow Government borrow to support several budget shortfall .

The first loan tabled before the Committee was the proposal to borrow Euros 69million equivalent to Shs306.954bn from Agencie Francaise De Development (AFD) to finance the construction of water and sanitation infrastructure and associated activities in Isingiro district.

There was also a proposal by Government to guarantee Uganda Development Bank Limited borrow USD16Million from the European Investment Bank, USD10Million from  International Trade Finance Corporation, USD20Million from OPEC Fund for International Development and USD20Million from the Arab Bank for Economic Development in Africa.

Government is also seeking to borrow a loan from Kuwait Dinars USD19.8Million from the Kuwait Fund for Arab Economic Development to support program for operations for 2020-2024 for Uganda Development Bank Limited.

There was another proposal to borrow an additional financing of USD240Million from World Bank to support Uganda-Intergovemental Fiscal Transfers Programme for results. The money would go towards establishing seed secondary schools in several subcounties and upgrade health center IIs to health center IIIs.

The National Economy Committee is also set to scrutinize a proposal to borrow 65.5 Million special drawing rights worth USD90Million from World bank to finance the Uganda Secondary School Education Expansion Project

The other loans include a proposal to borrow USD31.61Million from Africa Development Fund to finance revenue shortfalls and the proposal to borrow USD90Million from the Islamic Development Bank and USD15Million from Arab Bank for Economic Development in Africa to support development of irrigation schemes in Unyama, Namalu and Sipi Regions Project.

However, it was the irrigation loan equivalent to Shs384.462Bn that received protest with some MPs recommending to the farmers in the targeted areas to rely on rain other than sinking the country into further debt.

Aston Kajara (Mwenge South) asked the Committee to halt the processing of the seven loans until Government assesses its capability to service its debt.

 “We have passed many loans for irrigation we need to know their progress. The debt situation in the country is really high, Bank of Uganda told us that the window for borrowing was close to 50% threshold regarding borrowing,” Kajara said.

He added: “Why should you commit government to more borrowing? We hear that Government assets are about to be attached like Entebbe airport, now you are asking for more loans. I have seen the list of seven loans I would suggest until this country can assess its ability to pay, we should stop borrowing to allow us cope with debt situation.”

Michael Ayepa (Labwor County) wondered why the farmers in the areas don’t rely on the rain instead of sinking Uganda to debt.

“These areas aren’t totally dry, they receive rain. Why aren’t they using rain water to plant trees? Can the Ministry convince us that with irrigation they can do these things? It gives me question of poor planning. The irrigation is going to a group of individuals, which percentage of population are we targeting?” noted Ayepa.

Minister Ajedra however said Uganda’s debt burden isn’t alarming and the projections indicate that Uganda Revenue Authority is slated to hit its revenue collection targets.

The Minister’s statement is contrary to his own loan to a tune of USD31.6Million needed to cover revenue shortfall.

Parliament’s consideration of the seven loan requests comes at the time the Monetary Policy Report for December 2020 released by Bank of Uganda revealed that Uganda’s total public debt had reached the Shs63.3Trn.

The Central Bank revealed that Uganda’s debt increased by 21.7 percent in FY2019/20 with External debt increasing from US$8.35 to US$10.45 billion approximately Shs38,458Trn while domestic debt increased from Shs16.2 trillion to Shs19.1trillion.

“The provisional total public debt stock as at end October 2020 stood at Shs63.352Trn, corresponding to an increase of 13.8 percent from June 2020 compared to an increase of 3.9 percent over the same period the previous year,” Bank of Uganda noted.

The report on business transacted by Parliament in 2020, revealed that the Legislature approved loans to the tune of Shs16.105Trn up from Shs10.188Trn approved in 2019.

The report highlighted that as at 17th December 2020, Parliament had approved 17 loan requests from the Ministry of Finance and these were approved between 30th January 2020 to 19th November 2020.

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