Government borrowing discipline untamed as 14.8tn remain undisbursed

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Government borrowing  discipline untamed as  14.8tn remain  undisbursed
Ramathan Ggoobi

Economists and legislators are warning that the government is continuously drifting at a wrong tide for continuously borrowing for arrears considered to be non-immediate to cost the government heavily in interest payments. This after realizing that the government is set to borrow about 18tn to finance infrastructure. Some question whether government should tighten the rope in its neck in the name of development most of which have ended up delayed and others cancelled.

In this financial year 2024/25 the government intends to borrow for development projects close to 18tn for infrastructure according to the ministry of finance report on public debt,grants, guarantees and other financial liabilities as of march 2024.

Key projects in these loans is the Standard Gauge railway taking USD 1.928.86 M amounting to UGX 7.150tn but still lacking a financier, budget support USD 414.8M totaling to 1.537tn with a status of discussions underway, borrowing USD 130 M in UGX 491.848bn for Nkonge -lumegere- sembabule road including EUR 150M totaling to 616.870bn for Kisoro industrial park.

These loans for project support come shortly after an audit by the office of the auditor general which reveals that in the financial year 2022/23 undisbursed loans totalled to 14.5tn. This is short of loans whose contracts were cancelled attracting penalties of 5.564Bn.

As the government borrows commitment fees are increasing to 44.5%. for the past five financial years these fees UGX 434.982Bn and its interest payment bill now 9.069tn.

Economist and executive director at the civil society budget advocacy group explains that undisbursed loans are as a result of fiscal indiscipline in which officials rush to acquire loans without an implementation plan.

"Government has teams clueless about rolling out programs and violation of projects rules.they are only much interested in signing the Contract to secure their commission and after that they are not interested in implementing the projects a case of Official at UIA who shared commission on a project which has stalled." Julius Mukunda said

Mukunda explains that procuring loans that remain utilized but attracting interest has drawn Uganda to a sketchy place making it risky for many to invest in the economy. This he concurs with members of parliament who argue the trend of credit rating is drawing to C.

"If u do not utilise money ur fined but also Fiscal space reduces. So you then have to go for more loans which are even more expensive." Julius Mukunda ,JED, CSBAG

Legislators argue that government ought to realize its rate of the burden and revisit its priorities

"This is purely bad economics and it renders us helpless" - Felix Okot Ogong , MP Dokolo south

With commitment fees increasing, interests and recurrently the economy is left choking on a debt of 97tn whose principal government struggles with only to end up with debt rollover.

the budget deficit is projected at 5.7% of the GDP in this financial year up from 4.5%

Legislator for Bukimbiri county explains that government borrowing from local entities is going to crowd out the private sector. He elaborates that the government is headed for more troublesome days as it will have to borrow to pay debt for it to register revenue shortfalls.

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