Government unused loans increase to Shs8.9 trillion

Ms Sophie Makame, the French Ambassador to Uganda (L), exchanging documents after signing an agreement with former Finance Minister Maria Kiwanuka. PHOTO BY STEPHEN OTAGE

Kampala. Government’s non-performing loans have continued increasing over the years, hitting about Shs8.895 trillion ($3 billion), up from 2.05 billion ($688,000) at the end of March 2014.
These non- performing loans come from the amount government has borrowed from multilateral institutions (creditors) and the Non-Paris bilateral creditors but the funds have not been disbursed to finance the projects that government borrowed for.
Although the money has not been disbursed, government is incurring costs in these loans in form of commitment to the borrowed funds.
A report on Public Debt, Grants and Guarantees for the financial year 2013/14, shows that the undisbursed amounts increased from $0.98 billion (about Shs2.9 trillion) in 2006/07 to $2.47 billion (about Shs6.07 trillion) in financial year 2013/14.
The undisbursed amount in financial year 2013/14 as end of March 2014 accounts for about 56 per cent of the drawing stock, implying that only 44 per cent of the drawing stock was disbursed in that year.
The report says this low level of disbursement is attributed to low absorption capacity of implementing agencies resulting from poor project and/or contract management, procurement related challenges and financial management inadequacies.
Explaining the cause for increasing level of government non-performing loans, the Secretary to Treasury, Mr Keith Muhakanizi, said what led to large volume of non-performing loans is inefficiencies in government ministries.
“The funds that are being borrowed take a long time to get approved by ministries; a loan for a dam or for a road which is supposed to be 60 months equivalent to five years ends up taking eight years,” he said.
The International Monetary Fund and other development partners have advised government to carry out reforms in public finance management to ensure effective use of available resources for the intended purposes.
The government came up with Public Finance Management Bill which has been passed into law to provide direction for proper management of public finances as well as stamp out mismanagement of public funds by government officials.
Mr Muhakanizi said: “Reforms are now being carried out to ensure effective implementation of government programmes. These will reduce on the level of non-performing loans.”

Commitment fees on undisbursed loans grow

Over the years, commitments fees paid on undisbursed loans have grown by about 164 per cent from $1.75m (about Shs5.185b) in 2007/08 to $4.1m (about Shs12.148 bn) paid out in 2012/13.
During 2013/14, $3.5m (about Shs10.4b) was paid out in commitment fees to various creditors.
Cumulatively, over the period of financial year 2007/08 to financial year 2013/14, 69 per cent of the commitment fees was paid to African Development Fund, 27 per cent to Exim Bank of China, 2 per cent to Nordic Fund, Germany (KfW) 1 per cent, IDB 1 per cent and 0.006 per cent to Japan International Cooperation Agency (JICA).

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