By Frank Kamuntu
Government of Uganda intends to borrow over Shs2 trillion totalling to 600 Euros to finance a budget shortfall realised a few months into the 2019/2020 financial year, a move that could heighten concerns about the growing debt burden, which the International Monetary Fund has warned would likely surpass 50% of gross domestic product in 2021/2022.
In a domestic loan request presented to Parliament this week, Government indicated its plans to borrow up to Euro 600 million from Stanbic Bank (U) Limited, a local bank and Trade Development Bank, a trade and development financial institution, which is the financial arm of the Common Market for Eastern and Southern Africa (COMESA).
The Minister of State for Finance (Planning), Hon. David Bahati, presented the proposal to the House on Wednesday, December 04, 2019 since the Constitution requires Government to seek Parliament’s approval before it can take on or guarantee a loan.
In June 2019, the Minister of Finance, Hon. Matia Kasaija, presented a Shs40.5 trillion budget for the financial year 2019/2020.
However, five months into the financial year, government realised a low revenue performance, which is attributed to delays in implementation of some administrative measures which had been projected to generate revenues including: the Digital Tax Stamps (Shs150 billion), electronic fiscal devices (Shs170 billion), rental income tax (Shs 174.63 billion) and the MTN Uganda national operator license fees of US$ 100 million.
“In order to implement the Budget for FY 2019/20 and meet the additional expenditure pressures, Government must borrow either domestically or externally to cover the budget deficit,” the Minister said in his proposals.
He said that the Ministry received four offers from the market which included Trade and Development Bank (TDB), Stanbic Bank (U) Ltd, ABSA and Citi Bank, two of which offered the best terms.
“The shortfall has also been caused by additional expenditure pressures; non-receipt of World Bank budget support funds; and non-receipt of capital gains tax totaling to Shs 2,473.55 billion,” he noted.
The Minister also said that the FY 2019/2020 has additional expenditure pressures amounting to Shs1,432 billion intended for security or classified expenditure; wage shortfalls; counterpart funding obligations for projects; and emergencies.
Further, the Minister said that certain decisions of Parliament including the refusal of the proposal for accounting for rental tax, imposition of a minimum tax of 0.5 per cent on losses carried forward beyond seven years and the repeal of one per cent of withholding tax on agricultural supplies led to a Shs48 billion revenue shortfall.
Deputy Speaker, Jacob Oulanyah, who chaired the sitting, referred the proposals to the House Committee on National Economy to consider and report back to the plenary.
