Finance explains how it will fund Shs24 trillion Budget
What you need to know:
Justification. Government to re-allocate some departments’ budget provisions, reduce interest rates, get external funds and appropriation of aid
Kampala.
Government yesterday explained how it will raise money to finance the Budget for the next financial year that has since been revised upwards from Shs18 trillion to Shs24 trillion.
Among other measures, government will re-allocate some departments’ budget provisions, reduce interest rates, get external funds and from appropriation of aid.
Appearing before the Parliamentary Budget Committee, State minister for Finance David Bahati said a total of Shs4.787 trillion is already on the Consolidated Fund and will be used to redeem government securities.
Shadow Finance minister Geoffrey Ekanya said including the Shs4.787 trillion in the Budget is “illegal”.
“What the Finance minister has brought to us is the entire bond they issued plus the interest. That is illegal,” Mr Ekanya said.
He said government borrowed the money to control inflation and interest rates not for budget financing.
A total of Shs359.96 billion is to be raised through the above means. Of this, Shs105.3 billion will be from the reduction of interest rates resulting from reduced external debt and through Uganda Revenue Authority’s enhanced tax administration.
External financing will account for Shs100.26 billion, which will be spent on, among others, the Northern Uganda Social Action Plan Phase II and the feasibility study for the Standard Gauge Railway and the Inspectorate of Government.
A total of Shs42 billion will be for the Karuma and the Isimba hydropower plants insurance and management fees, Shs150 billion counterpart funding for taxes and Shs110b for the Standard Gauge Railway.
The minister’s explanation, however, prompted West Budama North MP Fox Odoi to ask why government has budgeted for loans Parliament has not yet approved.
“I do not recall you coming to Parliament to seek approval for a loan to finance the construction of the Standard Gauge Railway. So on what basis are you providing this counterpart funding?” Mr Odoi asked.
Procedurally, the government provides counterpart funding in cases when it expects external financing for a project.
“Are you providing the counterpart funding to either a loan or a grant government has procured or are simply speculating?” Mr Odoi said.
Mr Bahati said government has received a grant of Shs48.2 billion from China for the project’s feasibility study.
“The grant has not come to Parliament but we have received a grant of Shs48.2 billion. The counterpart funding for this project will be 15 per cent. The estimated total project cost, if Parliament approves the loan, will be $3 billion (Shs9 trillion).”
Some sources of funds
Shs4.787 trillion on the Consolidated Fund will be used to redeem government securities
Shs359.96 billion to be raised through borrowing
Shs105.3 billion will be from the reduction of interest rates resulting from reduced external debt