Kampala, Uganda | THE INDEPENDENT | Government has plans to borrow 2.43 trillion shillings to finance a budget shortfall realized a few months into the current financial year.
According to a domestic loan request presented to Parliament on Wednedsay, government says that out of the 2.43 trillion Shillings, Euros 300 million is to be borrowed from Stanbic Bank Uganda Limited and another Euro 300 million from the Trade Development Bank.
The money will be repaid in 7 years at an interest of 4.4 percent. The grace period provided by the banks is 2 years.
The Minister of State for Planning, David Bahati presented the proposal during the parliament session chaired by Deputy Speaker Jacob Oulanyah. The Constitution requires government to seek parliament’s approval before it can take on or guarantee a loan.
In June, Finance Minister Matia Kasaija presented 40.5 trillion Shillings budget approved by parliament for the financial year 2019/2020.
However, five months into the financial year government has realized a low revenue performance, which is attributed to delays in implementation of some administrative measures which had been projected to generate revenues. These included the digital tax stamps (150 billion Shillings), electronic fiscal devices (170 billion Shillings), rental income tax (174.63 billion Shillings) and the MTN Uganda national operator license fees of US Dollars 100 million.
“In order to implement the budget for financial year 2019/2020 and meet the additional expenditure pressures, government must borrow either domestically or externally to cover the budget deficit,” Bahati says in his proposal.
He said that the Ministry received four offers from the market which included Trade Development Bank (TDB), Stanbic Bank (U) Ltd, ABSA and Citi Bank, two of which offered the best terms.
Bahati says that the shortfall has also been caused by additional expenditure pressures including non-receipt of World Bank budget support funds and non-receipt of capital gains tax totalling to 2.43 billion Shillings.
The Minister also said that the financial year 2019/2020 has additional expenditure pressures amounting to 1.432 trillion Shillings 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 percent on losses carried forward beyond seven years and the repeal of 1 percent of withholding tax on agricultural supplies led to a 48 billion Shillings revenue shortfall.
He said that even after submitting a supplementary request of 437.6 billion Shillings to Parliament, the national budget has additional expenditure pressures amounting to 1.432 trillion intended to cover security and classified expenditure; wage shortfalls; counterpart funding obligations for projects; and emergencies.
Deputy Speaker Jacob Oulanyah referred the proposals to the National Economy Committee to consider and report back to parliament.