Parliament approves a loan of up to 600 million Euros to finance the budget deficit for FY 2019/20.
During the sitting of 11th February 2020, Chaired by the Speaker of Parliament, Rt. Hon. Kadaga Rebecca, Parliament passed a motion by Hon. Syda Bbumba for the adoption of the report of the Committee on National Economy on the proposal to borrow up to euro 300 million from Stanbic Bank (U) Ltd and euro 300 million from Trade Development Bank to finance the budget deficit for FY 2019/20.
The Committee Chairperson Hon. Bbumba informed the House that the funding gap in the 2019/20 budget was a result of the failure to meet the target revenue collections by the Uganda Revenue Authority. For the period of July to October 2019, the overall revenue collections amounted to UGX 5,467.78 billion against a target of UGX 6,071.47 billion creating a deficit of UGX 603.69 billion. By end of November 2019, the collections had increased to UGX 6,910.8 billion against a target of UGX 7,592.3 billion registering a deficit of UGX 681.76 billion.
During the debate, Hon. Muhammad Nsereko said that the challenge to revenue collection is not that people do not want to pay taxes but rather they are concerned about how the collected revenue is utilized. “The issue is not that Ugandans do not want to pay taxes. Show them where you are going to invest the money collected, they will pay.” Hon. Nsereko said.
Members expressed concern that the country’s rate of borrowing vis-a-vis the rate of national revenue could worsen Uganda’s debt burden. Hon. Anwarach Joshua called it unproductive borrowing since a significant portion is of the loan is meant for expenditure pressures in security/ classified expenditure and wage shortfalls. He indicated that he would have supported the loan if it was meant for infrastructural development.
Another concern was that the loan will be got from commercial banks that have higher interest rates. ‘Should the Government continue borrowing from Commercial banks? If yes, we are selling the nation.’ Hon. Nandala Mafabi asserted.
Members observed that because of the prevailing circumstances, especially the need to meet the deficit in the 2019/20 budget which was already passed, the loan had to be approved.
Parliament approved the loan and put into consideration the recommendations by the Committee that; Government should provide a formal statement on the operations of Uganda Revenue Authority to Parliament within one month. In addition, the Domestic Revenue Mobilization Strategy that envisages increasing domestic revenues be at least by 0.5% of GDP every financial year should be implemented to reduce on the need for borrowing to support the budget and rather limit loans to specific projects.