Parliament has passed a motion for the adoption of the report of the Committee on National Economy on the proposal to borrow up to euro 300 million from Stanbic Bank and euro 300 million from Trade Development Bank to finance the budget deficit for FY 2019/20.
The request was made during Tuesday plenary by the Committee on National Economy represented by Hon Syda Bbumba.
With regard to performance, for the period July to October 2019, overall revenue collections amounted to shs5,467.78 billion against a target of shs6,071.47 billion creating a deficit of shs603.69 billion.
By end of November 2019, the collections had increased to shs6,910.8 billion against a target of shs7,592.3 billion registering a deficit of shs681.76 billion.
The Committee was informed that to facilitate budget execution for half year FY 2019/20 Gov’t received some budget support grants, acquired an advance from Bank of Uganda and borrowed from the domestic market in line with the approved fiscal framework.
Despite the approved supplementary expenditures by the Minister, the loan request indicates that the FY 2019/20 Budget has additional expenditure pressures amounting to shs1,432.20 billion for security/classified expenditure; wage shortfalls counterpart funding obligations for projects; and emergencies.
The loan request is based on the expected revenue performance for the Financial Year and non-receipt of the World Bank budget support loan.
The draft financing terms for Stanbic bank and Trade Development Bank (formerly PTA) were submitted in compliance with the Parliamentary Approval Guidelines for the loan requests.
Taxes tend to focus on the small formal sector that is heavily taxed and yet high taxes do not necessarily imply higher tax revenues.
The mode of administration has been associated with unfair taxation and discrimination towards some tax payers especially importers, as some have been assessed to pay taxes that are more than double the amount spent on the cost, insurance and freight of the imports.
Bbumba said the committee recommends that Government should develop strategies of reducing the cost of public expenditure.
“In addition, Government should halt the creation of new administrative units that increase pressure on the meagre resources reducing on the fiscal space.”
Kampala Central MP Muhammad Nsereko said the interest rate on this loan is 4.5 per cent meaning Ugandans will fork out shs58 billion per annum in interest and shs28 billion for arrangement fees.
“We cannot join the negotiators in accepting this loan. I call upon members to reject this loan & protect the interest of Ugandans.”
He added: “It kills the regulatory principal. The tax base is narrowing because government is borrowing from commercial banks & the business community cannot. We are killing our private sector.”
Nsereko said the issue is not that Ugandans do not want to pay taxes.
“Show them where you are going to invest the money collected, they will pay.”
Hon. Anwarach Joshua said this is unproductive borrowing.
He noted that the report indicates that the loan of up to 1,432.2 billion is meant for security/ classified expenditure, wage shortfalls.
He said that he would have supported the loan if it was meant for infrastructural development.
Hon. Nandala Mafabi pointed out: “Should the Government continue borrowing from Commercial banks? If yes, we are selling the nation.”