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OIL ROADS: Gov’t To Borrow Shs1.7 Trillion From China

Uganda’s public debt is set to soar further if Parliament approves a request to borrow USD456.370M (Shs1.68 trillion) from the Exim Bank of China to finance the upgrade and construction of national oil roads project in Masindi, Hoima and Buliisa districts. The request is expected to be tabled before Parliament this afternoon.

The loan request that was sent to the National Economy Committee is ready for debate after the majority members on the Committee okayed the proposal.

According to the breakdown, the design and Build of Masindi (Kisanja)-Park Junction and Tangi Junction-Paraa-Buliisa 159Km Road Project will cost USD218.8m of which USD186.05m will be funded by China Exim Bank while Uganda will meet the USD32.8m.

The Civil Works for the upgrading to bituminous class II paved standard of Hoima-Butiaba-Wanseko Road (111km will cost USD179.53m of which China will foot the USD152.6m and Government will meet the remaining USD26.93m.

The design and building of Buhimba Nalweyo-Bulamagi and Bulamagi-Igayaza-Kakumiro Road Project (93km will cost USD138.48m, with China Exim Bank bringing USD117.7m while Government will contribute the remaining USD20.7m.

If approved by Parliament, the loan will increase Uganda’s total nominal public debt that stood at Shs42Trn as at the end of June 2018.

A new report  released by the Committee On National Economy On The State Of Indebtedness, Grants And Guarantees in August this year shows that Uganda’s public debt has grown  by 22% in the last two financial years.

“Uganda’s Public debt stock increased by 22% from Ushs.34.423.52 trillion recorded in the FY 2016l17 to Ushs.42.07047 trillion in the FY 2017/18. The existing debt stock constitutes of Ushs.28.51448 trillion as external debt, while Ushs.13.55599 trillion is domestic debt,” the  report of the Committee On National Economy On The State Of Indebtedness, Grants And Guarantees as at June 2018 released reads in part.

It adds: “In terms of shares, external debt takes the largest share of total public debt at 68% while domestic debt is 32% of the total public debt.”

The report obtained by this site further adds that the stock of debt has consistently taken on an increasing trend from the FY 2013/14 to FY 2017/18 with the highest increase of 33% attained in FY 2014/15 due to the large investment made in infrastructure and energy projects that was required to stimulate Uganda’s growth as guided by the National Development Plan (NDP). Similarly in FY 2Ol7 118, debt accumulation has rebound to grow at 22%o as was in FY 20151t6.

The estimated nominal debt as a percentage of GDP as at end June 2018 stood at 42%, increasing the risks of public debt sustainability if the productive capacity of the economy grows at a much lower rate.

The Committee noted that despite the increase in sovereign debt, it is still sustainable and Uganda is not under debt distress if it stays within the Charter of Fiscal Responsibility.  The Committee assured Parliament that Uganda’s Public debt will is manageable, if infrastructure spending raises growth and domestic revenues improve further.

During the scrutiny of the latest loan request, the Committee discovered that Uganda National Roads Authority (UNRA), which is the implementing agency entered into an agreement with three Chinese companies to upgrade the road network within the oil region of Bunyoro.

According to the contract, the Contractors were to Pre-finance and execute works for a period of 12 months from the commencement date and Government would refund the contractors for works executed.

The pre-financing of works by Contractors for packages 1-3 commenced in April 2018 and ended in April 2019 but due to lack of funds and loan negotiations between Government and Exim Bank, the period was extended through addenda to the end of July 2019 to enable Government negotiate and conclude the Loan.

The Committee warned that Government Agencies should desist from making commitments on behalf of Government before seeking approval of Parliament and in future, if any Government officials, Ministry, Department or Agency commits Government in such a manner, they should be held personally liable and should be dealt with in accordance with the law.

The Committee also warned that in future, any loan presented before Parliament with this kind of provision shall not be approved.

However, this didn’t deter the Committee from recommending to Parliament to authorize Government to borrow up to USD 456.37m from the EXIM Bank of China.

Taddewo William Senyonyi
William is a seasoned business and finance journalist. He is also an agripreneur and a coffee enthusiast.

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