Uganda’s debt will soon hit the Shs50 trillion mark going by the rate at which the country is borrowing.
The latest is that Parliament has passed a motion for the adoption of the report of the Committee on National Economy to borrow up to Euro600M (about Shs2.4Trn) from both Stanbic Bank and Trade Development Bank to finance the budget deficit for 2019/20 Financial Year.
Uganda’s public debt is now estimated at over Shs46 trillion.
The continued borrowing from domestic banks by government will further crowd out private sector.
The loan approval followed a motion tabled by David Bahati (pictured), State Minister for Planning seeking Parliament’s approval to borrow Euro300million from Stanbic Bank and Euro300million from Trade Development Bank.
At the time of tabling the loan request, Bahati said that Government expenditure was under pressure due to revenue collections shortfall that was recorded at Shs5.46Trn against the projected target of Shs6.07Trn creating a deficit of Shs603.69bn.
While tabling the report, Syda Bbumba, the Chairperson National Economy Committee asked the Ministry of Finance to save the country from the agony of borrowing on commercial terms and called for revision in the tax regime, saying that at the moment, taxes tend to focus on the small formal sector that is heavily taxed and yet high taxes do not necessarily imply higher tax revenues.
“The mode of administration has been associated with unfair taxation .and discrimination towards some tax payers especially importers, as some have been assessed to pay taxes that are more than double the amount spent on the cost, insurance and freight of the imports,” Bbumba, the former Minister of Finance, said.
She added: “The committee recommends that government should develop strategies of reducing the cost of public expenditure. In addition, Government should halt the creation of new administrative units that increase pressure on the meager resources reducing on the fiscal space.”
Muhammad Nsereko (Kampala Central) called on fellow members of parliament to reject the loan so as to protect the interest of Ugandans because this borrowing kills the regulatory principal.
“The interest rate on this loan is 4.5 per cent meaning Ugandans will fork out Shs58 billion per annum in interest and Shs28 billion for arrangement fees. We cannot join the negotiators in accepting this loan,” Nsereko said.
He said that the tax base is narrowing because government is borrowing from commercial banks and the business community cannot do business under this arrangement because it is killing the private sector.
Joshua Anywrach (Padyere County) said that the borrowing is unproductive, arguing that he would have supported the loan if it was meant for infrastructural development.
Despite the protest from some MPs, when the question was put before Parliament to vote on the motion to borrow Shs2.4Trn, those in support of the borrowing outnumbered MPs opposed to the borrowing, a move that saw Parliament approve the loan.
It should be noted that Cabinet on Monday February 10, 2020 approved the proposal to borrow up to Euro 108,521,152.60(Shs435.3bn) from the Industrial and Commercial Bank of China to finance the Masindi-Biiso, Kabaale – Kiziranfumbi and Hohwa –Nyairongo – Kyarusesa – Butoole Road Upgrading Project.