Parliament approves Shs700 billion loan for Umeme buyout
Umeme is expected to exit the electricity distribution market at the end of its concession in March. Photo / File
What you need to know:
- Lawmakers against the loan sided with minority reports on the loans that advised against the decision to endorse the said loan request
Parliament on Thursday evening okayed the Ministry of Finance’s request to borrow Shs700 Billion to facilitate the government’s buyout of the private-led electricity distributor Umeme limited.
The House sitting chaired by Speaker Anita Among endorsed the loan request after a protracted exchange between a section of legislators and State Minister of Finance in charge of General Duties Mr Henry Musasizi.
Lawmakers against the loan sided with minority reports on the loans that advised against the decision to endorse the said loan request.
Request opposed
Both reports from the House committee on National economy recommended that the loan request be paused until the ongoing processes by Auditor General Mr Edward Akol to establish the actual amount to be compensated to Umeme for its investment in Uganda is concluded.
“Given that the Auditor General has not determined the final buyout amount and considering the period remaining to come to the end, the Auditor General expeditiously reconciles with Electricity Regulatory Authority (ERA) and [Uganda Electricity Distribution Company Limited]- UEDCL to determine the final UMEME buyout cost and submit to Parliament to guide approval of the loan request,” the chairperson the National Economy committee Mr John Bosco Ikojo said.
He added “Given the above observations, the Committee recommends that the Government proposal to borrow up to Euro equivalent of USD 190,988,556 from Stanbic Bank for the UMEME buyout be halted until the report of the Auditor General is presented to Parliament.”
Musasizi insists on approval
However, the Finance Junior Minister Musasizi instead reported to Parliament the estimates for the request he had tabled in Parliament had been premised on the draft audit report that had been previously done this year in January.
“Decision to borrow was based on the guidance of the Auditor General’s draft special audit report for the end of the lease and the assignment agreement between Umeme limited and Uganda Electricity Distribution Company Limited of January, 2025,” Mr Musasizi told Parliament.
In an attempt to persuade MPs to endorse the request, Mr Musasizi promised that any excesses on the loan would be saved if the audit process expected by March 31st recommends a lower buyout amount.
“Once the loan is approved by Parliament, the government will only payout to Umeme the amount verified and approved or recommended by the auditor General’s draft special as the payment due to Umeme before the end of 31st March 2025,” he stated.
He added: “If the required payment is lower than the eventual amount verified and or recommended by the Auditor General, then the balance of the loan will be cancelled and the cancelled portion will not form part of the government debt.”
This however triggered wide ranging submissions that were mostly against the request.
However, a section of legislators who included Mr Abdu Katuntu and Ms Faith Nakut spoke in support of the loan request reasoning that Uganda would be plunged into a crisis if the buyout is not undertaken on time.
To this end, the Padyere county Member of Parliament Mr Isaac Otimgiw suggested that Speaker Among put the request to a vote and thereafter rule on the outcome.
Consequently, the Speaker Among ruled that the Parliament had endorsed the request.
CSO raise red flags on buyout model
In its deductions on the Umeme buyout processes being undertaken, the economists that the Civil Society Budget Advocacy Group (CSBAG) stated the decision to borrow “adds significantly to Uganda’s growing debt burden.”
“The UMEME buyout loan exacerbates concerns over debt sustainability, as borrowing on non-concessional terms will likely result in higher interest rates and shorter repayment periods, increasing budgetary pressure,” CSBAG assessment report on Umeme buyout reads in part.
It adds “The timing of the government's move to secure funding, with only a few days to the buyout date, raises suspicions about the motive, especially considering the penalty rates for default.”
Rocky journey to clearance
On Tuesday, just two days to the processing of the Shs700 Billion loan request, the Minister for Energy Ms Ruth Nankabirwa had informed the House committee on Natural Resources that her office was not certain on the exact amount required for the Umeme buyout.
Similar fears were stated by the Chief Executive Officer of Electricity Regulatory Authority (ERA) Ms Ziria Tibalwa notified the House committee on National Economy that the government may not be ready to take over operations of Umeme.
“On our side, we aren’t even ready with the US$50 Million for UEDCL to start, let alone, the Concession agreement wouldn’t allow UEDCL to step in, Ms Tibalwa told the committee on Tuesday 18th March as MPs converged to dissect the loan request documents availed by government.
