Poorly negotiated loans risking national assets - Auditor Genera

   
The Auditor General has noted that government is increasingly putting national interests at risk by signing poorly negotiated loan agreements that could lead to attachment of public assets within and beyond Uganda in the event of a dispute. 

In the report for the period ended June 2020, Auditor General John Muwanga, said that whereas his office had in previous reports raised the concern of loan agreements that expose the country’s properties and sovereignty, there has been no action yet there is a notable increase in the number of loans with stringent terms and conditions that waive sovereign immunity. 

“A review of the new loan agreements being signed indicates an increased waiver of immunity by the Minister of Finance with regard to assets of Uganda within and outside. Government irrevocably and unconditionally agreed to waive immunity over Uganda or its properties to which it or may become entitled to at any time whether under sovereign immunity or otherwise from any suit …  attachment prior to judgment [and] attachment in aid of execution to which [Uganda] or its assets may be entitled in any legal action,” Mr Muwanga noted. 

Government has increasingly been borrowing from non-concessional lenders that put in place stringent measures and conditions to protect themselves in case of a dispute as well as ensuring that they have channels through which they can enforce recovery of money they lend. 

However, the Auditor General warned that whereas the waivers form a major part of international business to protect lenders, there is need to exercise this function judiciously taking into considerations of the general objective of protecting and preserving public property. 

Under international law, a state holds sovereign immunity that protects it and its properties from the jurisdiction of the courts of another state. 

However, whereas international law, according to the Auditor General, provides for a waiver of such immunity, it must be exercised with extreme caution. 

In response to the Auditor General’s, according to the report, government said that whereas there had been consensus with financiers about putting in place safeguards such as advance of 15 per cent counterpart funding and insurance premium payment, lenders had insisted to retain some conditions, noting that they have never been applied in any country and that they do not think that it will ever be applied as the agreements allow for mutual discussions before a  dispute is tabled before court. 

Government has been borrowing heavily to push large infrastructure projects. 

However, Uganda’s debt, which has ballooned to Shs56.8 trillion, is increasingly being sourced from non-concessional lenders such as international and local commercial banks, which are pegged to short-term repayment periods and high interest rates. 

Mr Ramathan Ggoobi, an economist and lecturer at Makerere University Business School, yesterday said there was need to give such negotiations special attention, noting it was time government takes the Auditor General’s concerns seriously. 

“These are “yellow cards” which [government] needs to take seriously. We are not doing so well as far as negotiation skills on the side of government is concerned. Countries and organisations have heavily invested in this area [negotiations]. Government needs to effectively listen to the Auditor General and address the queries,” he said. 
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