Protests as Parliament approves Shs1.7 trillion loan
Members of Parliament during the session on November 3, 2022. PHOTO/DAVID LUBOWA
What you need to know:
- The loan is commercial with its grant element of negative 12.3 percent which is below the benchmark of 35 percent for concessional loans under the Public Debt Management Framework (2018) and less than 10 percent for semi-concessional loans.
- Standard Chartered Bank was the only available creditor offering the cheapest credit at the market rate.
Protests took centre stage yesterday as a divided House authorised the government to borrow Shs1.7 trillion loan from Standard Chartered Bank and other financial institutions.
The money is meant to finance the development and infrastructure budget for the Financial Year 2022/2023.
Speaker Anita Among told lawmakers that the reason she [previously] administratively referred the loan request to the National Economy Committee was due to urgency and that any delay would impede the government’s planned priorities.
Lawmakers on Parliament’s Committee on National Economy on Monday discussed the controversial loan request with some asking for accountability of all the borrowed funds.
Yesterday, Opposition MPs led by shadow finance minister Muhammad Muwanga Kivumbi echoed their discontent in the Minority report presented by Mr Hassan Kirumira (Katikamu County South).
“We encourage the government to look at other financing ways of resource mobilisation like concessional loans to avoid debt trap and protecting the sovereignty of the country,” Mr Kirumira said.
“We requested a list of projects [that will be facilitated under the loan] so that they are ring-fenced, but, up to now, we have not got a list to that effect.”
The Minority report, among others, dismissed the high cost of the loan and the poor terms of the agreement.
On his part, Mr Kivumbi (Butambala County) said the loan should not be approved because the terms were still being negotiated.
“There is no loan in the world where 10 percent (about Shs170b) goes to insurance. We all pay insurance but it can’t be that amount. We need to speak to the Executive and tell them, enough is enough. They shouldn’t stampede us that we have no money,” Mr Kivumbi said.
“The minister has just stated that the terms of the loans are yet to be revised as per the advice of the Attorney General,” Mr Kivumbi noted, adding: “We cannot approve a process of negotiations. Therefore as it stands now, the hands of this Parliament are tied because we cannot approve terms that are still being negotiated. I would love the Minister to concede that as we stand now this [loan] cannot be approved because we cannot approve the terms that are still being negotiated.”
Mr Kivumbi and their outspoken lawmakers voiced concerns in response to a submission from Mr Henry Musasizi, the State Minister for Finance in charge of General Duties, who struggled to defend the loan request. The minister had earlier confirmed that the terms of the loans were yet to be revised.
“This loan, as it is, worldwide, there is no loan in the world today where 10 percent of the loan goes to an insurance. We all borrow money. We all pay insurance on our small loans. The loan fee is normally for insurance around 1 and 2 per cent. It cannot be 10 per cent of a loan,” Mr Kivumbi said.
He added: “This is a poor deal, wrongly negotiated. The fire wall to stop this lies with this Parliament. We must raise the courage, the strength of character to speak true to Power including the Executive and tell them enough is enough.”
The loan is commercial with its grant element of negative 12.3 percent which is below the benchmark of 35 percent for concessional loans under the Public Debt Management Framework (2018) and less than 10 percent for semi-concessional loans. Standard Chartered Bank was the only available creditor offering the cheapest credit at the market rate.
The loan repayment period of 10 years is based on the current market conditions.
Majority report
In the Majority report that was presented by Mr John Bosco Ikojo, the chairperson of the National Economy Committee and the Bukedea County MP, it was recommended that the Finance ministry reviews and presents to the House a Tax Exemption policy with a view of streamlining tax burden proportionately.
In addition, Uganda Revenue Authority (URA) widens the tax base by registering informal businesses, and curb unqualified tax expenditures and illicit financial flows.
The report finally recommended that the government put a halt on the creation of administrative units to minimise the recurrent budget needs as a way of ensuring that additional revenue collections are directed towards critical development projects.
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