The Government has been authorized by Parliament to borrow $464m (about Shs1.7 trillion) to finance the infrastructure and development aspects of the 2022/2023 Financial Year national budget.
The loan is to be sourced from Standard Chartered Bank, which will serve as “the lead arranger and agent” for Nippon Export and Investment Insurance (NEXI), a Japanese insurance firm, and the Islamic Corporation for the Insurance of Investment & Export Credit (ICIEC), who will actually provide the money.
Despite the House voting in favour of the loan, the Committee on National Economy in both the majority and minority reports raised a concern about a clause in the loan agreement which requires that Uganda has to waive her sovereignty for assets at home and abroad, which implies that the lenders can go for the country’s assets in case of default.
“The committee recommends that the Ministry of Finance should renegotiate the provisions relating to the waiver of sovereign immunity to avoid exposing critical government assets to creditors in case of default,” said John Bosco Ikojo the committee chairperson.
The Minority report also noted that the Attorney General needs to renegotiate the terms for Uganda so that we don’t sacrifice the country’s sovereignty and key national assets into the hands of the lender; the terms are unfavorable in their current state for a county like Uganda.
With this controversial clause, the loan puts Uganda in a difficult situation like it has been on the $200m dollar loan from the Exim Bank of China for the expansion of the Entebbe International Airport. During the investigations by the Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) into the operations of Uganda Civil Aviation Authority (UCAA), it was noted that China holds all the rights to the agreement because it has to approve the budget of UCAA a Uganda government agency.
Concerning the latest loan, State Minister for Finance in charge of General Duties, Henry Musasizi assured Parliament that the government will ensure the final terms are negotiated in a manner that cushions Uganda’s assets.
On the interest payment for the ICIEC part of the loan Musasizi said that, ’the government of Uganda is dealing with Standard Chartered Bank as the lead arranger; all loans will be from Standard Chartered Bank (SCB) and in effect debt service payment will be to SCB because ICIEC did not make a specific request to Ministry of Finance’.
Meanwhile days after the loan was approved President Yoweri Museveni on Wednesday revealed that government is devising means to reduce or even completely eliminate borrowing especially internally. The President was meeting members of the Uganda Bankers Association (UBA), an umbrella body of 36 financial institutions mostly regulated by the Bank of Uganda. The President commended the banking and financial services sector for their effort to align to the National Development Plan. “In the past commercial banks have been aligned to netcolonialism, supporting imports of consumer goods. I am glad we are beginning to see a change if you have started to support agriculture and export promotion,” he said.
The Permanent Secretary / Secretary to the Treasury, Ministry of Finance Planning and Economic Development, Dr. Ramathan Ggoobi said the ministry has already employed several measures to stop internal borrowing through means such as fiscal consolidation, restoration of fiscal discipline, clearing domestic debt and disciplining accounting offers among other measures.
President Museveni in his remarks, expressed disappointment on the educated people who have failed to put to an end to Africa’s hemorrhage saying that they have continuously supported foreign industries thereby betraying Africa’s purchasing power. “It is really betrayal, African elites have betrayed Africa, and this has led to purchasing power not growing,” he added.
The Chairperson UBA and the Managing Director Citi Bank, Ms Sarah Arapta thanked the President for his support of the financial sector specifically his good stewardship of the country that has led to macroeconomic stability, security as well as numerous financial sector reforms. She noted that the financial services sector is focusing on ten areas on how to support government development plans singling out support of the Parish Development Model (PDM), digital transformation to drive in financial inclusion and promotion of domestic manufacturing as well as supporting the growth and development of commercial agriculture among other areas. The meeting was attended by the Minister of Finance Planning and Economic Development, Hon. Matia Kasaija among other senior banking and financial sector officials.
