KAMPALA – Parliament has passed a motion for the adoption of the report of the Committee on National Economy to borrow up to Euro600M approximately UGX.2.4Trn from both Stanbic Bank and Trade Development Bank to finance the budget deficit for Financial year 2019/20.
The loan approval followed a motion tabled by David Bahati, State Minister for Planning seeking Parliament’s approval to borrow Euro300million from Stanbic Bank and Euro300million from Trade Development Bank.
At the time of tabling the loan request, Bahati said that Government expenditure was under pressure due to revenue collections shortfall that was recorded at Shs5.46Trn against the projected target of Shs6.07Trn creating a deficit of Shs603.69Bn.
While tabling the report, Syda Bbumba Chairperson National Economy Committee asked the Ministry of Finance to save the country from the agony of borrowing on commercial terms and called for revision in the tax regime saying that at the moment, taxes tend to focus on the small formal sector that is heavily taxed and yet high taxes do not necessarily imply higher tax revenues. Bumba, former Minister of Finance said, “The mode of administration has been associated with unfair taxation .and discrimination towards some taxpayers especially importers, as some have been assessed to pay taxes that are more than double the amount spent on the cost, insurance, and freight of the imports.”
She also added; “The committee recommends that Gov’t should develop strategies of reducing the cost of public expenditure. In addition, the Government should halt the creation of new administrative units that increase pressure on the meager resources reducing on the fiscal space.”
Muhammad Nsereko of Kampala Central called on fellow members of parliament to reject the loan so as to protect the interest of Ugandans because this borrowing kills the regulatory principal.
“The interest rate on this loan is 4.5 percent meaning Ugandans will fork out shs58 billion per annum in interest and shs28 billion for arrangement fees. We cannot join the negotiators in accepting this loan,” said Nsereko.
He said that the tax base is narrowing because the government is borrowing from commercial banks and the business community cannot do business under this arrangement because it is killing the private sector.
Joshua Anywrach (Padyere County) said that the borrowing is unproductive, arguing that he would have supported the loan if it was meant for infrastructural development.
Despite the protest from some MPs, when the question was put before Parliament to vote on the motion to borrow UGX. 2.4Trn, those in support of the borrowing outnumbered MPs opposed to the borrowing, a move that saw Parliament approve the loan.