Govt yet to utilise sh16 trillion loans

MINISTER | KASAIJA | LOANS

KAMPALA - The government is yet to utilise loans totalling to about sh16.4 trillion it secured from different funders.

According to the budget policy statement for the Treasury’s operations vote, the committed but undisbursed loans are to the tune of sh16.4 trillion.

The policy statement issued by the Minister of Finance, Matia Kasaija, indicates that as of June 30, 2020 committed but undisbursed debt stood at 19.53 trillion.

From July 2020 to December 2020, which covers the first half of the current financial year, a total of sh3.6 trillion worth of loans had been disbursed.

Within the same period of the first half of the current financial year, the Government received grants worth sh750.9b from external donors, the bulk of which (sh412b) came from World Bank and Global Fund (sh218b).

Meanwhile, the budget policy statement for treasury operations indicates that sh15.4 trillion has been earmarked for debt repayment and servicing in the next financial year (2021/2022), up from sh12.9 trillion allocated for the same in the current financial year.

The finance ministry, which is responsible for treasury operations, indicates that from the half-year expenditures made so far for the current financial year, domestic debt amounting to sh6.173 trillion has been paid and another sh721.9b for external debt servicing has been released.

The document indicates that the bulk of debt repayment which now takes the biggest portion of the national budget goes to domestic entities the Government borrows from, which are predominantly commercial banks.

The finance ministry notes that the stock of domestic debt as at December 31, 2020 stood at sh22.9 trillion.

Meanwhile, the stock of the disbursed and outstanding external debt as of December 31, 2020 stood at sh42.8 trillion. This implies that Uganda’s public debt has now reached sh65.7 trillion.

Pointing out some of the challenges the finance ministry is facing in securing and management of loans, Kasaija noted the increasing cost of borrowing arising from a shift from concessional borrowing to marketbased loans which are costly in terms of interest and arrangement fees.

He also points out that some loans take long to be utilised yet commitment fees and interest are charged on them, making them in the end more expensive than initially envisaged.

Out of the total national budget of sh45.6 trillion, sh21.9 trillion is expected to come from domestic revenue collections and the balance from external and internal borrowing.

By implication, if sh15.4 trillion for debt-service-related expenditures is subtracted from the sh21.9 trillion the Government will have generated in revenue collection, it means that 70.3% of the country’s revenue collection would be spent on debt repayment.

In its recent report on the draft national budget, Parliament’s budget committee contends that te Government is now caught up in an awkward situation of having to use borrowed money to pay debts.

The committee observed that in the last financial year, Uganda’s public debt increased by sh10.5 trillion, which represented a growth rate of 23%.

Responding to the matter of the Government having secured loans worth sh16.4 trillion it is yet to utilise, the Opposition Chief Whip Ibrahim Ssemujju Nganda, said:

“Lending entities usually announce the availability of loans and our government quickly goes for the loans before planning the projects for implementation. Like for the roads projects, they got many loans without acquiring the right of way.”

Makerere University Business School Principal Prof. Waswa Balunywa said: “It is important to note that out of the sh21 trillion government will generate mostly from taxes, sh15.4 trillion, which is 70% of government revenue collection, will go towards debt repayment. That means the bulk of the sh45.6 trillion budget will be funded using borrowed money.”