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Adhere to the initial objectives of PTA loan to fund National Medical Stores

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Added 28th September 2017 11:04 AM

Of recent, the government acquired US$ 200m loan from the East and southern African Trade and development Bank (PTA) with initial objectives to; Finance a short fall in the domestic revenue which at that time was projected at sh288b

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Richard Ssempala is a research associate at the Uganda Debt Network

By Richard Ssempala

Uganda, over a decade has been financing her development projects and budget deficit through domestic and external borrowing.

Of recent, the government  acquired US$ 200m  loan from  the  East and southern African Trade and development  Bank (PTA)   with   initial objectives to; Finance a short fall in the domestic revenue which  at that  time was  projected   at sh288b, substitute domestic borrowings amounting to sh280b, finance the supplementary expenditure that was approved by parliament that required additional  financing amounting to sh156.37b and  finally to finance expenditure pressures resulting from the exchange  rate depreciation experienced  during FY 2015/16.

However, due to the national outcry that National Medical Stores(NMS) as a beneficiary of the said funds had not received its portion and therefore could not purchase drugs for health facilities in this FY 2017/18 even though the loan was contracted to effect  for that provision, the parliamentary Public  Accounts  committee (PAC) was instructed to investigate this matter.

According to the PAC on the utilization and performance of the $200 PTA loan; laid to the 10th parliament two week back, a lot of anomalies were cited in the use of this loan. In spite of having been rejected by the 7th parliament on January 7, 2016, the ministry kept on changing the objectives and title of the said loan by incorporating in the provision of medical supplies to insinuate parliamentary approval.

In addition, the report high lightened that the said loan had been rejected by the Governor Bank of Uganda on grounds that the initial objective of borrowing to stabilize the shillings would be short lived. He further emphasized that the country had sufficient foreign exchange reserves to support the needed interventions.

It should be noted that on July 11, 2017, the president through his letter to speaker cautioned the house from approving “un productive”           loans. In this he rejected 11 loans worth $914.79m.

According to the Bank of Uganda report on the state of economy, Uganda’s national debt has increased at the tune of 34.0 trillion and by incorporating the general population figure everyone is indebted at the tune of almost one million.

Though there are set rules to follow while borrowing as given by the Public Finance Management Act (2015) and Public Debt Medium Framework, it’s upsetting that the lined ministry and the house sometimes ignore such rules.

It was discovered that PTA loan documents by the time of borrowing were to support NMS, the subsequent communications from MoFPED to NMS did not mention the loan facility which had earlier been referred to. On receipt of the loan facility, the committee also realized that instead of the ministry to prioritize the stated beneficiaries namely, health, roads, earthmoving equipment and rural electrification, the money was transferred to Uganda’s Consolidated Fund for budget support.

There is therefore a need for the MoFPED to adhere to the set objectives of borrowing and stipulated regulations in the PFMA if the borrowed funds are to meet their intended goals and beneficiaries.

The writer is a research associate at the Uganda Debt Network

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