Govt to borrow sh6 trillion to fund budget deficit

The Government has tabled before Parliament for approval, a request to borrow up to sh6.5 trillion to finance a budget deficit for the current financial year.

David Bahati, the planning state minister, said the Government is set to borrow sh4.3 trillion from the domestic market and another $600m (sh2.2 trillion) from the International Monetary Fund (IMF).

Tabling the loan request before the House chaired by Speaker Rebecca Kadaga on Tuesday, Bahati said the move to borrow the money had been occasioned by the fall in revenue collections and economic activities in the country, as a result of the COVID-19 pandemic.

"Because of the downfall in our revenue and economic activity, we have been compelled to borrow to finance the budget for the remaining quarter," Bahati explained.

However, before Parliament could allow the tabling of the loan request, Dokolo district Woman MP Cecilia Ogwal demanded that the Government makes a formal request for the loan, outlining what the money is meant for.

Ogwal wondered why Bahati had rushed to table the loan request, yet he had been invited to lay a supplementary request for the budget.

Asked by Kadaga to move a proper motion for the loan request, Bahati said the outbreak of COVID-19 had affected the economy.

He said economic projections had been revised downwards from 6% to 4.5% in the financial year 2020/2021 due to the impact of the pandemic.

"In the financial sector, the 2019/2020 financial year registered a shortfall in revenue collection of sh1.2 trillion and in the current financial year, we are registering a shortfall of sh2.5 trillion due to the impact of COVID-19," Bahati said.

Sh45 trillion budget

In May, Parliament approved sh45.4 trillion for the financial year 2020/2021 that kicked off on July 1. Out of the budget, sh21.8 trillion is to be raised through revenue collection, while sh15 trillion from external borrowing.

Bahati said sh1.5 trillion has so far been raised from domestic financing, leaving sh1.4 trillion to be raised from the domestic market to finance the budget.

He also told MPs that the Government has been facing different financial pressures that have been brought to the attention of Parliament in different supplementary schedules.

COVID-19 loans

For scrutiny of the loan request, Kadaga referred it to the committee on national economy for perusal and later report back to the House.

Efforts by some MPs led by Kassanda North MP Patrick Nsamba Oshabe to debate the motion were blocked by Kadaga, who directed them to present their views before the committee.

In May, Parliament approved a loan request by Government to borrow sh1.833 trillion from the IMF, to mitigate effects of COVID-19.

The Government also tabled before Parliament another loan request of sh1.1 trillion, from the World Bank, which the House chaired by Kadaga approved in May.

Besides the sh6.5 trillion request, Parliament debated a supplementary budget request of sh3.7 trillion from Government.

The supplementary request is to finance different activities in the budget, including financing the construction of roads in the DR Congo.