Parliament on Tuesday afternoon voted to approve a government request to borrow sh2.43 trillion to finance a budget shortfall realized a few months into the current financial year 2019/2020.
This followed a heated debate on the report by Parliament’s National Economy Committee that recommended the approval of the domestic loan request. Out of the 2.43 trillion Shillings, Euros 300 million is going to be borrowed from Stanbic Bank Uganda Limited and another Euro 300 million from the Trade Development Bank.
The money will be repaid in 7 years at an interest of 4.4 percent. The grace period provided by the banks is 2 years.
In June 2019, Finance Minister Matia Kasaija presented 40.5 trillion Shillings budget approved by parliament for the financial year 2019/2020.
However, five months into the financial year government realized a low revenue performance, which was attributed to delays in implementation of some administrative measures which had been projected to generate revenues. These included the Digital Tax Stamps (150 billion Shillings), electronic fiscal devices (170 billion Shillings), rental income tax (174.63 billion Shillings) and the MTN Uganda national operator license fees of US Dollars 100 million.
Due to the revenue shortfall, government run to parliament seeking approval of the loan in order to implement the budget for financial year 2019/2020 and meet the additional expenditure pressures to cover the budget deficit. The expenditure pressures are security or classified expenditure, wage shortfalls, counterpart funding obligations for projects and emergencies.
Government revealed that the shortfall had been caused by additional expenditure pressures including non-receipt of World Bank budget support funds and non-receipt of capital gains tax totalling to 2.43 billion Shillings.
Before the approval of the loan, a section of MPs objected to the borrowing saying that it was meant to stifle the economy and the private sector.
Kampala Central MP Nsereko Muhammad Nsereko appealed to his colleagues to reject the loan in order to protect the interest of Ugandans by not accumulating debt and encouraging government to compete with the private sector by borrowing from the same domestic commercial banks.
However, the Chairperson of Parliament’s National Economy Committee Syda Bbumba insisted that government was not borrowing from the local market since Stanbic Bank is an international bank. She said that there were desperate needs for government to borrow the funds.
Bbumba’s statement that money was not being borrowed domestically raised furious statements from MPs who accused the Committee Chairperson of misleading Parliament since an earlier request by the Ministry of Finance indicated that funds were to be borrowed from Stanbic Bank Uganda Limited and Trade Development Bank. Bugweri County MP Abdu Katuntu demanded for clarification on the matter.
Attorney General William Byaruhanga told parliament that Stanbic bank signed a contract and had the capacity to borrow the money.
With more questions being raised for government to be specific on who is borrowing, the Minister of State for Planning David Bahati weighed in saying that it was Stanbic Bank Uganda Limited borrowing Uganda and the Trade Development Bank. He argued that it did not matter on who was borrowing but rather the purpose of borrowing.
Maracha East MP James Acidiri said that the country needed to borrow for critical funding only and not expenditure pressures such as wages, security and others that the loan in question wants to carter for.
Masaka Municipality MP Mathias Mpuuga described the loan as problematic, lacks clarity and that he was hesitant to support it. He reported to Parliament that the Ministry of Finance was already under declaring the country’s debt by not including domestic debts among the country’s National debt.
He further noted that the internal borrowing was clouding out private investment in the country.
Bahati appealed to the MPs to support the loan saying that the purpose of the borrowing was to support the appropriation that parliament made. He said that government was experiencing a shortfall in the revenue collected hence a need to fund key activities in the current 2019/2020 financial year budget.
West Budama South MP Jacob Oboth also argued that the loan was necessary since government was facing problems to implement a budget that was approved by Parliament.
After a long debate, MPs okayed the loan when Speaker Rebecca Kadaga put the matter to vote.