13 February 2018

Uganda: Govt Eyes Banks to Plug Shs 700bn Budget Hole

With hardly four months left to the end of the current financial year, government cannot fully finance its Shs 29.1trillion budget, which may leave some of its expenditure priorities unfunded.

The total funding gap stands at more than Shs 650bn, which resulted from a shortfall in the projected revenue collections for the 2017/18 financial year.

As a result, government on Tuesday tabled before Parliament a request to borrow more than Shs 736bn to cater for the revenue shortfalls.

According to the state Minister for Planning David Bahati, the loan, which government intends to source from the domestic market, is intended to finance the revenue shortfall yet at the same time, government faces additional expenditure pressures.

"When we passed the budget, it was appropriated but there are additional expenditures that came which had not been catered for in the budget which requires us to borrow such that we can be able to fill those gaps," Bahati told The Observer.

Other than Ministry of Defence, Bahati declined to name the other sectors that led to the unplanned for expenditures.

Knowledgeable sources have, however, pointed to expenditures that government incurred to see through the controversial constitutional amendment bill that led to the scrapping of age limits for presidential candidates in addition to the Shs 87.2bn that was shared among the 436 MPs to buy cars.

Bahati also blames the shortfall on the reduction in collections of Value Added Tax (VAT) and the narrowing tax base.

"We have been depending so much on taxes levied on imports but ever since we adopted a policy that encourages exports as opposed to imports, there is a fall in the imports, which means that we can't get the revenues that we had projected to get," the Ndorwa West MP said.

The government typically borrows from the domestic market by issuing treasury bills, which are bought, mostly, by commercial banks and other large entities flush with cash, such as the National Social Security Fund.

Such borrowing has been criticized for depriving the private sector of credit, as commercial banks prefer to lend to government.


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