Despite admitting, the Finance Ministry has said that only a small percentage of the Shs736 Billion to be borrowed by government will go into financing the wage bill.
On Monday 19th February 2018 the government newspaper, New Vision that government was set to borrow money part of which would be used to pay salaries for public servants.
Addressing journalists at the Uganda Media Centre on Tuesday, finance Minister Matia Kasaija admitted that Shs48 billion of the money to be borrowed would go in to finance the shortfall in the wage bill.
“Whereas Shs 48 billion of the borrowing will meet the shortfall on Salaries, this is only 1.3% of the total wage bill for this financial year which amounts to Shs3.58 trillion,”Kasaija said.
When put to task to explain the need for borrowing to partly finance wage bills instead capital development and also encourage production so as to grow the economy, the Finance Minister said this was caused by the shortfalls in revenue collected.
He explained that government recorded a shortfall of Shs 324billion from revenues collected due to lower collections from Value Added Tax, international trade taxes and income and excise taxes forcing government to borrow so as to mitigate the shortfall.
“We got this shortfall because the economy is restructuring .We used to import a lot and export less but this has changed as we import less and export more yet we don’t tax a lot for exports,”Kasaija said.
Kasaija said that government ought to borrow so as to be able to finance the budget for the financial year 2017/18 which he noted is at deficit.
Put to task to clarify on the kind of borrowing that government intends to carryout and its impact on the economy, the minister noted that the money will be borrowed from the domestic market but was quick to assure the public that it will not have a significant impact on the private sector because liquidity in the market is currently at Shs 2 trillion.
The loan he said comes at a time when the interest rate is at only nine percent.
“The borrowing will ensure that we meet the financing obligations of the ongoing infrastructure project whose certificates will fall due this financial year.”
He added, “It is therefore, erroneous to assume or create the impression that Government has no money to pay salaries.”