External financing. Government is set to borrow Shs25 trillion to finance the budget. FILE PHOTO Government has presented to Parliament a request to borrow up to 600 million Euros (about Shs2.46 trillion) to fund deficits in the Budget for the current Financial Year 2019/2020.
The request was submitted during the House sitting yesterday, just five months into the financial year whose total budget estimates stand at Shs40.5 trillion.
The request made by Mr David Bahati, the Minister of State for Planning, indicates that Shs1.229 million (Euros 300 million) is to be obtained from Stanbic Bank Uganda while a similar amount is to be obtained from the Trade Development Bank (foreign).
The Trade and Development Bank, formerly the PTA Bank, is a trade and development financial institution in Africa and stands as the financial arm of the Common Market for Eastern and Southern Africa.
Mr Bahati justified the need for borrowing on “revenue shortfall and budget expenditure pressures.”
The minister also argued that with the target of Shs20.44 trillion from local revenue, government envisages Shs2.47 trillion shortfall, which will be fixed by borrowing.
Under Article 159 of the Constitution requires government to secure Parliament’s approval for every loan, including those intended to finance budget deficits.
Once obtained, government will have to service the loan within seven years at an interest rate of Shs217b (8.85 per cent) with Stanbic Bank charging 4.45 per cent and Trade Development Bank, 4.40 per cent. Government will be charged Shs79.9b as arrangement fees for the loan with Stanbic Bank and Trade Development Bank charging 1.75 per cent and 1.5 per cent of the loan sum respectively.
Government will also be given a grace period of two years from each bank.
In documents justifying the borrowing, Mr Bahati said government envisages a big shortfall worth Shs2.47 trillion in its budget for the current year.
Government also cites budget pressures such as a projected revenue shortfall of Shs1.87 trillion yet there is additional expenditure requirements worth Shs1.43 trillion for classified expenditure (security).
The minister also said Shs11.22 trillion of the planned net local revenue (Shs20.08 trillion) has been released, leaving the next financial quarters with huge financial uncertainty.
By the end of June, Uganda’s public debt amounted to $12.43b (about Shs45.8 trillion) of which external and domestic debt accounted for $8.27b (Shs30.5 trillion) and $4.16b (about Shs15.3 trillion) respectively.
Government, however, insists its latest request to borrow will […]