Monday February 19 2018

Muhakanizi lashes at MPs on Shs700b loan

Ministry of Finance Planning & Economic

Ministry of Finance Planning & Economic Development PS Keith Muhakanizi 



The Secretary to the Treasury, Mr Keith Muhakanizi, has described MPs as politically biased “with hate and conspiracy” against the ministry of Finance over the controversial $200m (Shs715 billion) loan and wondered whether they read the facts about it.
Mr Muhakanizi told Daily Monitor in an interview last week that it is Parliament which approved the government’s loan from the East and Southern African Trade and Development Bank and for some MPs to “turn around and make false claims” that he ‘lied to them’ during the discussions to acquire the loan implies “ignorance”.
He added that it also reinforces the view that the MPs did not properly scrutinise the documentation provided by the ministry.

“I am highly suspicious that this whole thing is about something else. They (MPs) say that they were duped: they want to mean they didn’t or don’t read records for the loan approvals?” Mr Muhakanizi asked.
Parliament’s Public Accounts Committee (PAC) kicked up the storm during an inquiry into the loan, which was initially for the benefit of National Medical Stores (NMS) and other selected government agencies.
The MPs say the loan was categorised as “project support” for NMS and other select agencies but the ministry of Finance insists it was titled “budgetary support” and not specific to any project or institution.
However, Bank of Uganda Governor Emmanuel Tumusiime Mutebile and Accountant General Lawrence Semakula had cautioned and advised Finance against taking the loan.
Mr Mutebile specifically advised Finance against repackaging the loan, after the initial rejection by the House, and resubmitting it to Parliament for approval.
Nevertheless, the ministry resubmitted the loan request and Parliament passed it on the second attempt.
However, during the interview, Mr Muhakanizi defended the ministry’s decision to repackage and resubmit the loan for approval.
He argued that even in PAC’s final report, it “does not question the purpose of the loan”.
“In the first place, was the loan approved? Yes it was; and if they (Parliament) are not sure, what then did they approve? Aren’t they the ones who approved the loan amount and the terms?” Mr Muhakanizi said.
The PAC vice chairperson, Mr Gerald Karuhanga, told Daily Monitor last year that the PTA loan was a fraud while Ms Syda Bbumba (Nakaseke North MP), the chairperson of the parliamentary Committee on National Economy, responsible for scrutinising loans, admitted lapses in the process of loan approval but said safeguards would be put in place.
In its findings, PAC recommended that both Mr Muhakanizi and Finance minister Matia Kasaija be fired for misleading Parliament and obtaining the loan by false presentation.
However, when the report was submitted to Parliament for debate about a week ago, the Speaker, Ms Rebecca Kadaga, deferred the proceedings and ordered an independent investigation by the Auditor General, Mr John Muwanga, into the loan saga.
Mr Muhakanizi said the Finance ministry specifically acquired the loan to finance the supplementary expenditure, which was approved by Parliament, requiring an additional Sh156.37b and cover a shortfall in the domestic revenue which was projected at Shs288b at the time.

Purpose of loan
Part of the loan was to finance expenditure pressures resulting from the exchange rate depreciation at the time.
Bank of Uganda had advised against the loan on account that government had sufficient foreign exchange (forex) reserves to support the needed interventions.
But Mr Muhakanizi counter-argued that the loan was needed to float (stabilise) the Uganda Shilling, not the forex.

Interview with PS

The loan was to fund shortfalls in the FY 2015/2016 but it came late, so what happened in that FY and later?
We forecast that we were going to have a shortfall around January in the budget of the FY 2015/16. Because of the processes, we went to Cabinet and then Parliament, and at that time, the Shilling was depreciating very fast. The Consolidated Fund is in Shillings, so we thought that when we bring the dollars and sell them to Bank of Uganda, they would give us shillings and that would help the Shilling.
Unfortunately because of the processes, the money came in the next financial year in October 2016/2017. When the money came in, it was eventually absorbed. We are being crucified that we did not give the National Medical Stores (NMS) money and yet in spite the PTA loan delaying, by the time of the first disbursement, we had given them Shs181b, and Shs265b in the FY 2016/2017 against their budget of Shs238b. In this FY 2017/2018, we have so far given them Shs269b against a budget of Shs258b.

Why didn’t the loan come in one FY?
That is what has caused the confusion, especially to people who don’t want to listen. The first reason is that PTA bank, by its nature and its charter, does not finance ineligible imports. So if they give you money, it cannot be used on things like military imports but the money we were getting was going to budget support, so it went to the Consolidated Fund.
They said, ‘but you people when we give you money for budget support, you end up spending on expenditures such as Parliament, State House, Defence, name it. So how sure are we that our money is not going to be used for such?’
We approached them with ingenuity and told them to list those areas they are comfortable with, generate their documentation and if they are satisfied, they disburse the money. That is how NMS, Uganda National Roads Authority (Unra), Rural Electrification Agency and ministry of Works (for equipment from Japan) came up. The money was not for NMS alone.

The other sticking issue is that it appears the whole $200m did not go to the Consolidated Fund or it doesn’t matter to you as long as there is accountability?
The accountability is there, but is there anyone who says the money didn’t go to the account in Bank of Uganda? I want anyone to challenge me on that. Did the money get out without appropriation by Parliament or the warrant by the Auditor General? I still want anyone to challenge me.

Let’s say it went to the Consolidated Fund but did it go to NMS, ministry of Works and UNRA or some of it went Somewhere else outside the original plan?
We have one consolidated account, which is a collection point for all money to service the budget, but do you think the funds that go in have a specific colour like blue [for money] from Uganda Revenue Authority? The money left the account by appropriation and as it left, it was not marked with colour; that blue went to NMS. The point I am making is that I released money as per to appropriation by Parliament.

Regardless of the reasons you mentioned earlier?
No. I have said we went to PTA Bank for a loan for budgetary support, not project support, and that is what is causing confusion. Parliament is charging me but did they appropriate Shs1 trillion to give to these institutions and I didn’t give any money or gave less? Now the Auditor General is doing an audit Let him do it. In his just released report did he raise any audit query on the PTA loan? Go read the full report.

Was there conflict of interest?
It is true I was a board member of PTA Bank having risen through the ranks: and I was representing interests of Uganda, not interests of Muhakanizi or his wife or private company. If I used my previous position to get a cheaper loan for Uganda, should I be hanged for that? I represented Uganda to the highest level and I am proud of what I did.

It is also said that the loan was expensive?
To say the loan was expensive, you must compare it with another, which we don’t have in this case. The PTA loan had a fixed rate of 4.6 per cent per annum, which is way cheaper than domestic borrowing. At the time, we got the loan in 2016/2017, the average depreciation of the Shilling against the dollar was about 3.3 per cent and added to the 4.6 per cent, it would give us a shilling interest of 7.6 per cent.