Par­lia­ment needs to change its mode of loans han­dling

By: Isaac Okello

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.