Loan re­quests should be checked

By: Parliament Reporter

In ac­cor­dance with Rule 166(1) of the Rules of Pro­ce­dure of the Par­lia­ment of the Re­pub­lic of Uganda, the Par­lia­men­tary Com­mit­tee on Na­tional Econ­omy analysed the Re­port on Pub­lic Debt, Guar­an­tees, other fi­nan­cial li­a­bil­i­ties and Grants for FY 2014/​15 as at Feb­ru­ary 2015. Ar­ti­cle 159(4) of the Con­sti­tu­tion of Uganda, Sec­tion 13 of the Bud­get Act 2001 and Part IV Sec­tion 36, 42(2) and 44(5) of the Pub­lic Fi­nance Man­age­ment Act, 2015 re­quire the Ex­ec­u­tive to sub­mit the sta­tus re­port on to­tal in­debt­ed­ness of gov­ern­ment; all grants ex­tended to gov­ern­ment; guar­an­tees on loans by gov­ern­ment to pri­vate and pub­lic en­ter­prises; and uti­liza­tion of each loan and grant.

In its re­port, the com­mit­tee noted that as at June 2015, the coun­try’s to­tal pub­lic debt stood at UGX 24, 431.07bn equiv­a­lent to 32.5% of GDP; of which UGX 14,462.1bn was ex­ter­nal debt and UGX 9,969.0bn was do­mes­tic stock. The re­port fur­ther points that the coun­try’s debt ex­po­sure grew up by 35.1% from the US$ 6.650bn in FY2013/​14 to US$ 8.986bn in the FY2014/​15, largely due to the need to in­vest in large in­fra­struc­ture pro­jects. De­spite this, the com­mit­tee re­port as­serts that the coun­try’s pub­lic debt po­si­tion is sus­tain­able in the medium and long-term with the pre­sent value pub­lic debt in­creas­ing from 24.1% in FY2014/​15 to 33.9% in 2019/​20 as a per­cent­age to GDP.

Al­though this amount is be­low the thresh­old of 40% of GDP as out­lined in the Pub­lic Debt Man­age­ment Frame­work of 2013, not far away the thresh­old and there­fore, the com­mit­tee should have strongly rec­om­mended that gov­ern­ment should not go for more com­mer­cial loans. For in­stance the Pro­posal by Gov­ern­ment to bor­row up to US$ 200m from the East­ern and South­ern African and Trade De­vel­op­ment PTA for a Re­volv­ing for­eign Ex­change Fa­cil­ity to sta­bilise the Ex­change rate which had been lined up for ap­proval on the Or­der Pa­per only to be with­drawn from Par­lia­ment by the Min­is­ter of Fi­nance due to pres­sure mounted by the Mem­bers of Par­lia­ment on the floor. This loan had also been highly con­tested by some mem­bers of the com­mit­tee on na­tional econ­omy for be­ing com­mer­cial yet gov­ern­ment should opt for con­ces­sional ones.

The com­mit­tee re­port is also too generic. It should have gone fur­ther to high­light the sec­tors whose bud­get which is mostly funded by these loans but we can pro­vide that. Last year in a blog[1] “Trans­port and en­ergy sec­tors took the li­on’s share of the loan oblig­a­tion amount­ing to US$1.3bn and US$533. 92m re­spec­tively. Most of these re­sources in the en­ergy sec­tor are fund­ing the Rural Elec­tri­fi­ca­tion pro­gram yet  the rate of power con­sump­tion in rural ar­eas is still want­ing.

The re­port of the Par­lia­men­tary Com­mit­tee on Nat­ural Re­source on the Na­tional Bud­get Frame­work FY2016/​17- FY2020-2021 ob­serves that it is 7% of the Pop­u­la­tion which ac­cess elec­tric­ity in rural ar­eas as of FY2013/​14. Dur­ing the State of Na­tion Ad­dress on 4th June 2015, H.E Gen Yow­eri Mu­sev­eni noted; “we have added 1,627 kilo­me­tres of elec­tric­ity trans­mis­sion lines to the 1,427 kilo­me­tres of trans­mis­sion we had be­fore 2006. You can go with your foot ruler and mea­sure the new elec­tric­ity lines since 2006”. It is only fair that the Pres­i­dent uses other pa­ra­me­ters like sta­tis­ti­cal data in terms of power con­sump­tion and not the am­bi­gu­ity of  kilo­me­tres to em­pha­size the progress made so far.

A more log­i­cal use of the loans other than tak­ing elec­tric­ity to the rural peo­ple who can’t af­ford the sky­rocket power tar­iffs would be ini­tia­tives that aim at im­prov­ing their house­hold in­comes first, at that point rural elec­tri­fi­ca­tion would be more vi­able, a so­lu­tion. The same goes for spend­ing huge sums of bor­rowed money on roads with a traf­fic jam of two ve­hi­cles per hour. The Gov­ern­ment should con­sider el­e­vat­ing those roads to first class mur­ram in­stead of tar­mac and the re­main­ing re­sources be chan­neled into the short term pro­duc­tive agri­cul­tural sec­tor.

There is also need to re­view the per­for­mance of pro­jects which re­quire fund­ing by loans be­fore com­mit­ting the coun­try for more loan oblig­a­tions. a case in point is dur­ing the con­sid­er­a­tion of the par­lia­men­t’s con­sid­er­a­tion of the gov­ern­ment pro­posal to bor­row US $ 75m from the In­ter­na­tional De­vel­op­ment As­so­ci­a­tion of the World Bank to fi­nance the Re­gional Com­mu­ni­ca­tion In­fra­struc­ture Pro­gram Phase 5. Dur­ing the de­bate mem­bers re­quested for a re­view of the pro­ject from the min­is­ter cit­ing the poor per­for­mance of the pre­vi­ous phases but they later ap­proved the re­quest with­out the min­is­ter pre­sent­ing a re­view of the ear­lier phases.

We need to re­mind those re­spon­si­ble that Uganda be­came the first coun­try to qual­ify for debt re­lief un­der the Heav­ily In­debted Poor Coun­try (HIPC) Ini­tia­tive in 1998 and sub­se­quently un­der the En­hanced HIPC in 2000. In 2006, it again ben­e­fited from an­other form of debt re­lief un­der the Mul­ti­lat­eral Debt Re­lief Ini­tia­tive. There­fore, it will be un­for­tu­nate for us to fall vic­tim again oth­er­wise, it is an im­ped­i­ment for the  re­al­iza­tion of the good vi­sions in Vi­sion 2040.

[1] “53% of the coun­try’s bud­get to be funded by bor­row­ing yet we have ex­ist­ing unutilised loans”http://​par­lia­ment­​53-coun­trys-bud­get-fy20152016-funded-for­eign-do­na­tions-loans/