UGANDA, Kampala | Real Muloodi News | Members of Parliament have approved a request by the government to borrow USh1.7 trillion (USD$464 million) to finance infrastructure and development needs of the budget, despite objection from the opposition. The deal has drawn even more outrage as details of the expenditure plan have emerged.
Details of how government plans to spend the USh1.7 trillion loan are entailed in a letter sent by the Minister of Finance Hon Matia Kasaija, to the Auditor General, seeking approval of the loan.
USh247 billion of the the USh1.7 trillion loan will be allocated to reinstate some of the budget cuts implemented in the current budget, and to enhance salaries for civil servants across different government agencies.
One of the expenditure votes worth USh86.4 billion is reportedly for the construction of a Conference Hall at the 5-star luxury Speke Munyonyo Commonwealth Resort, in preparation to host the Non-Alignment Movement Conference scheduled for next year.
The Resort, which is owned by real estate muloodi Sudhir Ruparelia, was originally constructed with government support to host the 2007 Commonwealth Heads of Government meeting in Kampala.
Government reportedly contributed at USD$7.5 million toward construction of the facility, and another USD$7 million on constructing pathways and widening roads within the complex.
In another vote, USh39 billion is to be spent on pension arrears for Uganda Telecom and Uganda Post Ltd former employees.
USh55 billion of the loan will go to the State House, of which USh135 billion of will go to classified expenditure, while USh20 billion is for Kiira Motors.
The Government also wants to buy out the concession of South African power company ESKOM which operates the Kiira Hydropower plant in Jinja, at USh45 billion. Another USh57.6 billion will cater for the out-of-court settlement of power company.
The USh1.7 trillion loan will be sourced from Standard Chartered Bank, which will serve as “the lead arranger and agent” for Japanese insurance firm Nippon Export & Investment Insurance (NEXI), and the Islamic Corporation for the Insurance of Investment & Export Credit (ICIEC), who will actually provide the money.
However, the loan was protested by several members of parliament due to its “unfair” terms.
The MPs expressed concern over Standard Chartered Bank’s involvement, and questioned why the Ministry of Finance officials didn’t approach the lenders directly, to avoid the undue profit to be obtained by Standard Chartered Bank merely on account of agency.
“Why didn’t you approach the borrowers themselves? Why are you going through Standard Chartered Bank?” asked Hon Muwanga Kivumbi.
Committee Chairperson, Hon. John Bosco lkojo and Hon. Hassan Kirumira (NUP, Katikamu South) who presented the majority and minority reports respectively, were both uncomfortable with the clause that required Uganda to waive her sovereign immunity for assets at home and abroad. Alarmingly, this clause implies that the lenders can go for the country’s assets in case of default.
“The committee recommends that the Ministry of Finance should renegotiate the provisions relating to the waiver of sovereign immunity to avoid exposing critical government assets to creditors in case default,” said lkojo.
Kirumira also tasked the Attorney General with renegotiate the provisions relating to the waiver of sovereign immunity.
“Attorney General needs to renegotiate the terms for Uganda so that we don’t sacrifice the country’s sovereignty and key national assets into the hands of the lender; the terms are unfavourable in their current state for a county like Uganda,” he said.
Another point of contention was the cost of insurance premium, which is to be paid upfront at the rate of 10 per cent for the entire duration of the loan, which translates into one per cent per annum for the 10 years the loan will run.
Kivumbi said for a loan of US$464 million, a premium of US$46.4 million is excessive and reflects bad negotiation on the part of Ministry of Finance officials.
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