Uganda’s growing debt burden

Tuesday January 14 2020

 

By Hussein Lumumba Amin

With the entire country continually alarmed at the growing debt levels, we are yet to see the implementation of a policy that balances the budget deficit and reduces the national debt.
Meanwhile, recent media reports indicate that Uganda is again to borrow Shs2.4 trillion to fund the national budget for this ongoing financial year 2019/2020.
Half of this money is reportedly to be obtained from Stanbic Bank Uganda, while the other half is to be obtained from the Trade Development Bank.
The Finance ministry cited “a projected revenue shortfall of Shs1.87 trillion in this year’s national budget”, plus an additional expenditure requirement worth Shs1.43 trillion “for classified expenditure”. Basically the entire budget shortfall amounts to Shs3.3 trillion.
Given the known collection capacity of Uganda Revenue Authority, this basically means that someone drafted a national budget 2019/2020 that knowingly exceeded the projected revenue. What about starting with financial discipline and living within one’s means? Because what some of us are seeing is that the national budget has turned into a fictional document. The briefcase presented to the media for photographs might just be containing someone’s lunch and home-made juice. Meanwhile Ugandan taxpayers and their children and grandchildren will be left to repay this new loan as well. For the record, the two banks are charging Ugandans Shs79.9 billion as “arrangement fees”, with Stanbic Bank and Trade Development Bank charging 1.75 per cent and 1.5 per cent of their respective total loan sums.
One might ask what is arrangement fee? If not an opportunity to fleece more money from the taxpayer for no reason after already charging interest.
In the framework paper for Financial Year 2020/2021, the Finance Ministry also sets a new tax revenue target of Shs21.54 trillion up from Shs20.4 trillion in the current financial year to enable financing of the 2020/2021 budget. Now if we already failed to reach the previous target, what are we doing putting an even higher target?
And while as a country we are wallowing in national debt up to our necks, another Shs6.93 trillion in new loans is projected for the next financial year already while approximately Shs7 billion has been earmarked in the budget for repaying old loans.
One doesn’t have to be a genius to notice the similarity between the amount of new loans for next year and the amount budgeted for repaying old loans. It is the infamous debt trap. The vicious cycle where we are now basically taking new loans to repay the old ones. It sounds like running a pyramid scheme. Clearly this cannot be a healthy habit to live by, be it an individual, home economics, an enterprise, or a nation. It actually sounds like corruption being ahead of the game.
But as if that was not enough, we are simultaneously engaging in massive unbudgeted activity that is draining the same national budget every financial year. This combo symbolises either poor financial planning, or plutonium-grade politically-related corruption in broad daylight, or both.
In the 2019/2020 financial year alone, Parliament reportedly approved loans to a tune of Shs6.15 trillion, and according to the Daily Monitor newspaper, “more loan requests are still under scrutiny by the National Economy Committee of Parliament.
Hussein Lumumba Amin

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