Parliament has approved a request to borrow US$ 464.13 million (about Shs1.7 trillion) from Standard Chartered Bank and other financial institutions to finance the development and infrastructure budgets for the fiscal year 2022/23.
The Speaker of Parliament, Anita Among, said that the loan for budget support was in fulfillment of a portion of what the MPs approved for the current financial year.
However, the opposition MPs said that a comprehensive schedule on how the funds are to be expended has not been provided, besides this being an expensive commercial loan.
“The effective rate and costs associated with the loan are considered too high for Uganda. In effect, the value of the total loan is Euro 455 million, but the take-home net is Euro 409.5 million, leading to a 65% total cost of the loan over 10 years,” said Hassan Kirumira Lukalidde, who presented a minority report about the loan request.
Kirumira urged the government to look at other financing methods for resource mobilization, like concessional loans, to avoid debt traps and protect the sovereignty of the country.
John Bosco Ikojo, the MP for Bukedea County, and a member of the National Economy Committee, which looked into the loan proposal, said Standard Charted Bank is playing three roles that attract different costs.
“In addition, there is a broker who is also paid a different fee. This implies the cost of borrowing increases through intermediaries, which would have otherwise been avoided if the government was procuring these loans through direct sourcing,” he said.
“The committee recommends that government devises means of direct sourcing of financing from creditors so as to bring down the cost of borrowing,” he added.
In September this year, the Committee on the National Economy revealed that Uganda’s public debt stock increased by 22 percent from Shs50.9 trillion in the 2019/2020 fiscal year to Shs69.5 trillion by the end of the 2020/2021 fiscal year.