Parliament needs to change its mode of loans handling

Published 4 years ago - 1

Parliament of Uganda kicked off the year 2016 with a fairly busy schedule, having a long list of items to be considered on its order paper. Bills, Budget Framework Paper for the Financial Year 2016/2017, and a total of eight loans to be considered, and other things on business to follow. The 1995 Constitution of the Republic of Uganda under Article 159 provides for the powers of government to borrow or lend money. However, it bestows upon Parliament the responsibilities of approval of such borrowings. To this effect, government shall not borrow, guarantee, or raise a loan behalf of itself or any other public institution, authority or person except as authorised under an Act of Parliament.

The 21st sitting of the 2nd meeting of the 5th session of the 9th Parliament of Uganda, if the entire list were successful, would have seen the country borrow a total of 127.5 million Euros, US$ 604,049,502.54, and UA 5 million from various banks including African Development Bank, The Eastern and Southern African Trade and Development Bank (PTA), German Bank Consortium, International Development Association, African Development Bank, African Development Fund, French Agency for development, and from the Export-Import Bank of China.

This came after the Minister of Finance, Planning and Economic Development tabled the loans requests to Parliament on 16th December 2015 and were handled during their first sitting in the year 2016. The loans are being requested for various activities, including 42.5 million from German bank consortium (A.K Ausfuhrkredit-Gusellschaft MBH and Commerzbank AG) for the development of an inland port at Bukasa on the shores of Lake Victoria, and SDR 106,400,000 (US $150 Million) from the International Development Association (IDA) of the World Bank Group to support the agriculture cluster development project (ACDP), and US $200 million from the Eastern and Southern African Trade and Development Bank (PTA) for a revolving foreign exchange facility to stabilize the exchange rate, among other loans.

The issue is not the loans, for government needs to continue functioning. The issue is the timing for the borrowing and how much work and time Parliament spends on the loans before they are considered and approved. This being an election time, Members of Parliament are hardly available for they are soliciting for votes from the electorate. Before loans are passed, there is need to have a thorough scrutiny by the committee of Parliament (National Economy), and carefully looked at before committing the country to such debts. There is need to thoroughly put into consideration the economic viability of the loans.

The mode of voting for the passing of the loans is premised on a simple majority of the members present, who ought to have made quorum. In the conduct of Parliamentary business, the practice for voting in parliament for any matter before them often leaves those who shouted loudest with “Aye” or “No” as “winner” after the Speaker of Parliament puts a question to the floor for consideration. Very often, the members who vote or shout loudest do not participate in the debate on the floor.

However, it would suffice to assert that each Member of Parliament votes and is put on record for supporting a loan for they are the representatives of their constituencies. In this case, to pass a motion for government to borrow from another financial institution or country, it should be supported by 2/3 of all the Members of Parliament (except for those with justifiable reasons not to attend such sessions), for such loans commit the future generation of this country to debts, yet in most cases, such monies borrowed do not perform the intended functions for which they are borrowed.

There hardly goes a sitting without a loans request presented by the Minister of Finance. Whether the loans are adequately put to use needs to be ascertained. According to the Auditor General’s report of 30th June 2015, Government of Uganda’s external borrowing has risen over the years from (United States Dollars) US $ 3.71 billion in Financial Year (FY) 2012/13 to US $ 9 billion FY 2014/15. Out of the 73 active loans, 16 had 0% disbursement levels despite having run for an average of 3.2 years, more than half of the project life. As it stands now, a total of US $  4.47bn remains undisbursed in the 2014/15 financial year.

The Auditor General observes that the failure to utilize the loans increases the cost of debt to Government and the tax payers in form of commitment fees paid on undisbursed loans. It also undermines timely implementation of projects for which these resources were borrowed, denies citizens the intended benefits of the loans acquired and stifles Economic Growth.

Parliament should therefore step up its oversight role to address such inadequacies on the side of the executive by holding them accountable so that borrowing is controlled. Otherwise, no one really knows who benefits from the loans being borrowed and left idle, or whether they are being utilized for the purpose for which they are borrowed.



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One thought on “Parliament needs to change its mode of loans handling

  • Do you by chance know- how the approval process panned out? In subsequent articles, kindly nail in more details like terms of contract. again do the projects have feasibility and related studies undertaken or the projects usually start from zero. eg the bukasa expected to sit on 500 acres of land , ought to have had compensation plans, environmental and social standards (ESIA) etc before approval of loans. any ways any heads up on loans approved will be much appreciated


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