Parliament has approved a government proposal to borrow up to €270 million (Shs 1.1 trillion) from the African Export-Import Bank (Afreximbank) and €230 million (Shs 940 billion) from Ecobank Uganda and the Development Bank of Southern Africa (DBSA) to finance the 2024/2025 national budget.
This amounts to €500 million (Shs 2 trillion). The debate on the approval of the debt was heated as some MPs argued against the move.
The borrowing adds to Uganda’s public debt stock, which stood at $25.55 billion as of June 2024.
Tabling the motion during the plenary sitting, the Minister of Finance, Planning and Economic Development, Matia Kasaija, defended the borrowing, citing urgent obligations and pending invoices.
“We have a number of pending invoices. The contractor is on the road. He has to be paid, and we do not want to carry it to the next financial year when the opportunity is available,” Kasaija told the MPs.
The minister reiterated government’s struggle to meet financial obligations, noting delays in negotiations with lenders.
“If we had closed with them two months or three months behind, I would not be standing here. Now, if we do not pass these loans, we are going to default,” he warned.
However, opposition MPs sharply criticised the timing, purpose, and terms of the loans.
Muhammad Muwanga Kivumbi from Butambala accused government of mismanagement and circumventing the law and said the manner of borrowing “is a post-mortem kind of approval” and described the process as “unconstitutional.”
“You are speaking to a minister who has undisbursed money, borrowed 16 trillion. It is lying out there. We are paying interest,” Muwanga Kivumbi said.
He further questioned the loan’s intent.
Theodore Ssekikubo from Lwemiyaga echoed those concerns, pointing to hidden costs.
“We are having new conditions like management fee, agency fee, commitment fee, base tranche, commercial tranche – can we unpack this loan?” he demanded.
“We are ready to support, but once you stampede Parliament at the last minute, who is to blame really?”
Karim Masaba from the Industrial Division, Mbale City, went further, citing legal violations.
“When you look at the law, the Public Finance Management Act (PFMA), this loan was supposed to be brought before us passing the next annual budget. We are breaking the law by passing it now,” he said.
Despite the criticism, government defended its position.
The Government Chief Whip, Denis Hamson Obua, explained that the delay was due to “prolonged and protracted negotiations with the banks” and that part of the loan would fund Supplementary Schedule No. 3, already approved by Parliament.
Eddie Kwizera from Bukimbiri questioned the ministry’s planning.
“This is a ministry responsible for economic planning. Do they plan? If they did, they should have come and given us sufficient time,” he argued.
Speaker Anita Among acknowledged the concerns but sided with the urgency of the situation.
“There is no money. So can we agree that since we do not have money, nobody should be paid salary? We should stop working on roads?” she questioned.
According to the motion document, the loan from Afreximbank carries an effective interest rate of 7.33 per cent, while the Ecobank and DBSA loans have rates of 7.28 per cent and 7.18 per cent respectively.
