Minister of State for Finance (General Duties), Henry Musasizi
Parliament’s Joint Committees of National Economy and Finance have recommended that the Ministry of Finance sues Standard Chartered Bank for breach of contract and wasting Parliament’s time in considering their loan proposal. This is after the lender failed to raise money /loan it had promised Government to finance the current 2022/2023 national budget.
The recommendation is contained in the report by the Joint Committees where MPs castigated the Ministry of Finance for letting Standard Chartered Bank to walk away from its own contract, raising fears that this would breed further impunity in the private sector while conducting business with Government.
Presenting the report to Parliament, Robert Migadde, Vice Chairperson National Economy Committee said, “The Committee wonders how the bank could just freely walk away from its own agreement. The Committee recommends that sections of the agreement that provide for consequences to breach of contract be invoked to force the bank to adhere to the agreement and compensate government for wasted time and resources that were invested in negotiations and agreement.”
It should be recalled that in November 2022, Parliament approved a budget support loan amounting to Euro 455.03million (1.822Trn) from the Standard Chartered Bank and other Financial Institutions to finance the current FY 2022 /23 national budget.
Documents before Parliament indicated that Standard Chartered Bank was meant to source funds in two components namely; Euro 182.7 million guaranteed by the Islamic Corporation for the Insurance of Investment and Export Credit, and EUR 272.33 million guaranteed by Nippon Export Investment Insurance.
However, by this week, Standard Chartered had only disbursed Euro146M (Shs584.609Bn) of the part guaranteed by ICIEC and the balance of the Euro 36 million (Shs144.150Bn) is to be disbursed in May 2023.
Migadde informed Parliament that after the failure by Standard Chartered Bank to disburse the remaining balance of the loan amounting to Euro273.03 million (Shs1.093Trn), the Bank has since proposed different financing terms higher than what was negotiated and approved by Parliament, citing new developments in the market.
He said, “The Committee considers this irregular, as there was a binding agreement between the two parties which ought to have had repercussions for breaches.”
Minister of State for Finance (General Duties), Henry Musasizi while appearing before the Joint Committee informed lawmakers that the failure by Standard Chartered Bank to raise the funds promoted Parliament to seek funding to a tune of Shs2Trn from Amarog Capital Ltd, a company MPs discovered was a money lender in Kenya and had no experience of ever raising funds to such a magnitude.
The development comes at the time when the December 2022 financial statements by Standard Chartered Bank, headed by Sanjay Rughani as Managing Director, recorded a dismal performance having lost its position as the fourth most profitable bank in 2021 to now the 8th position.
Standard Chartered Bank saw its profit decline to Shs44.23bn in 2022, down from Shs94.28bn in 2021, while its assets increased to Shs3.79 trillion in 2022, up from Shs3.74 trillion ion 2021.
People well versed with the Bank’s operations attributed it instability in management with the Bank having not had a stable Managing Director in recent years
Meanwhile, the bickering between Government and Standard Chartered Bank comes at the time Bank of Uganda in the April 2023 State of the Economy Report put Uganda’s provisional total public debt stock as at end March 2023 at Shs86.352Trn yet only Shs18.747Trn has been set aside to manage public debt in the 2023/2024 national budget.