The House approves a loan request for Sh1.7 trillion to finance infrastructure.
Despite opposition, which claims the loan terms are unreasonable, members of parliament have approved the government's proposal to borrow $464 million (about Shs1.7 trillion) to support infrastructure and development needs of the budget.
The House approves a loan request for Sh1.7 trillion to finance infrastructure.
Despite opposition opposition, which claims the loan terms are unreasonable, members of parliament have approved the government’s proposal to borrow $464 million (about Shs1.7 trillion) to support infrastructure and development needs of the budget.
The loan, which was referred to the National Economy Committee of Parliament on Tuesday, will come from Standard Chartered Bank, which will act as “the lead arranger and agent” for the Japanese insurance company Nippon Export and Investment Insurance (NEXI) and the Islamic Corporation for the Insurance of Investment & Export Credit (ICIEC), which will actually supply the funds.
Both the majority and minority reports, which were presented by the committee’s chair, Hon. John Bosco Ikojo, and Hon. Hassan Kirumira (NUP, Katikamu South), respectively, expressed discomfort with a provision requiring Uganda to waive its sovereign immunity for assets both domestically and abroad, which suggests that the lenders may seize the country’s assets in the event of default.
In order to prevent disclosing important government assets to creditors in the event of default, the committee advises the Ministry of Finance to rewrite the terms relating to the waiver of sovereign immunity, according to Ikojo.
The same assignment was given to the Attorney General by Kirumira.
To avoid ceding Uganda’s sovereignty and important national assets to the lender, he added, “Attorney General needs to renegotiate the terms for Uganda; the terms are unfavorable in their current state for a county like Uganda.”
The minority report was presented by Hon. Kirumira.
The interest payment on the portion of the loan provided by ICIEC, which according to Islamic customs does not accept interest on loans, was questioned by the Shadow Finance Minister, Hon. Muhammad Kivumbi.
Hon. Henry Musasizi, state minister for finance, dispelled the worries, saying the government would see to it that Uganda’s assets were protected when the final terms were discussed.
The government of Uganda is working with Standard Chartered Bank as the lead arranger; all loans will be from Standard Chartered Bank (SCB), and in practice, debt service payment would be made to SCB because ICIEC did not make a specific request to the Ministry of Finance, according to Hon. Musasizi.
He also addressed the query regarding the renunciation of sovereign immunity.
The funding terms and conditions are what we are looking at, and all of them have been brought to Parliament, according to Musasizi. “The Attorney General will negotiate and reach a decision.”
The loan should be granted, according to Hon. James Kaberuka (NRM, Kinkizi West), since the Attorney General will rewrite the clauses pertaining to sovereignty.
He remarked, “Hon Members, you are the ones who will be raising issues of national significance on the condition of the roads and infrastructure in your region. How do you want the government to finance those projects?”
Musasizi defended the loan request yesterday before the Parliament’s Committee on National Economy, arguing that crucial projects needed to be finished and that the releases for quarter two needed to be funded by cash flow. He also claimed that the loan has the best terms in comparison to other available options.
