Business
Parliament warned about approving expensive loans
In the latest UGX1.7tn loan request, the broker will get a US$46m (10%) bounty, minus interest & insurance fees
Butambala County MP, who is also the Shadow Finance Minister Muhamad Muwanga Kivumbi raised the alarm, as the State Minister of Finance Henry Musasizi pushed to have the loan approved hastily
The Shadow Minister for Finance Mohammed Muwanga Kivumbi has warned his colleagues sitting on the Committee of National Economy not to approve a loan request by the government worth 1.7 trillion shillings from private lenders.
Although Parliament allowed the government to borrow 12 trillion from abroad in the 2022/23 budget, Kivumbi and his colleagues say that the government is first of all not transparent about the way it wants to use the money.
But most importantly, Kivumbi said the loan that government wants to secure from private international lenders, is too costly.
Finance State Minister for General Duties Henry Musasizi who interfaced with the MPs to defend the loan request, didn’t provide the breakdown of the loan. But Kivumbi intimated to his colleagues that Standard Chartered Bank has acted as the loan broker with international lenders and for this deal, it will bag a cool US$46m commission.
The MPs insisted that the government should consider borrowing from international funding institutions such as the World Bank, the IMF that are usually cheaper.
Kivumbi, just like the rest of the committee members, challenged the State minister Musasizi to provide the committee with the detailed activities that would justify this borrowing. Although Musasizi had told the Committee that the loan was meant to finance development activities including infrastructure projects, the MPs insisted on getting the breakdown of the intended spending priorities before they can relax their stand.
The Butambala County MP observed that borrowing at commercial rates internationally shall worsen the already poor state of Uganda’s debt situation.
Appealing to the committee chaired by Buvuma County MP Robert Ndugwa Migadde, not to pass the loan request, Muwanga Kivumbi reminded members that a recent supplementary budget request worth 1.4 trillion shillings was spent on none-priority activities.
Muwanga Kivumbi says considering the huge debt burden the country is carrying, the parliamentary committee on national economy should save Ugandans by declining the loan request, otherwise the committee and Parliament would turn into a loan processing bureau.
Meanwhile the committee members including Alex Byarugaba, Jimmy Akena, Hassan Kirumura, Jane Avur Pacutho, Abedi Bwanika among others expressed reservations on the hashed manner in which the government wants this loan request to be approved without clear scrutiny of the details like the interest rates, the cost of insurance and other terms related to this loan.
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