28 February 2018

Uganda: Parliament and Finance Share Blame for Uganda's Huge Debt

opinion

The Secretary to the Treasury is undoubtedly one of the topmost civil servants in the country. In Uganda, the Secretary to the Treasury also doubles as the Permanent Secretary, Ministry of Finance, Planning and Economic Development. It is an awesome responsibility requiring not only intelligence and technical know-how, but also excellent public relations, if the person is to withstand the pressures of the job.

This brings me to the standoff and hot exchanges between Secretary to the Treasury Keith Muhakanizi and Parliament. The issue at hand is the $200 million dollars, which Parliament gave approval to be borrowed by the Ministry of Finance from PTA Bank last financial year, for "project support", covering, interalia, purchase of medicines by National Medical Stores (NMS). But NMS says it never received money.

Finance minister Matia Kasaija and Muhakanizi said all the money went into the "Consolidated Fund" and formed part of the monies spent for "budget support". Parliament wasn't satisfied with the explanation because a similar loan from PTA for budget support had been rejected, and Parliament only approved it when the nomenclature changed to project support. Parliament called for censure of the minister and the sacking of Muhakanizi for lying about the loan purpose and for refusing the advice of the Governor of Bank of Uganda that the Central Bank had enough money in its foreign reserves from which government could borrow instead of incurring another foreign debt.

The Speaker in her wisdom stayed the debate and called for a forensic audit by the Auditor General before Parliament could resume debating the matter.

Unfortunately, Muhakanizi decided to speak to the press. I watched his interview on NTV and read the same in the Daily Monitor. I thought the interviews were untimely and not very pleasant. Branding MPs as "ignorant" and "politically biased with hate conspiracy", after failing "to properly scrutinise loan documents they approved"! It is not surprising that the chairperson of Parliament's Public Accounts Committee, Angelina Osege and the vice chairperson Gerald Karuhanga were incensed by this "unprovoked bastardisation of parliamentary procedure" and shot back that Muhakanizi was acting like a guilty man "running even when nobody was chasing him". He should, they said, let the Auditor General complete his work without interruption.

Parliament should take advantage of what has happened to fully examine the processes followed for acquisition of government loans. Uganda is currently choking with a humongous external indebtedness. In the 2017/18 Budget, for instance, debt servicing is the largest single expenditure item, gobbling up more than 20 per cent of the budget. Even the World Bank, as recently as a few weeks ago, warned the government over the exponential growth of its commercial external borrowing, which is putting the country in a precarious debt situation. This is in no doubt a reference to loans from China (though the World Bank did not specifically say so). Uganda's good credit standing is actually a myth, as the country borrows mainly for infrastructure and consumption and not for boosting agriculture, job creation, industrialisation to increase exports and reduce imports. Just a few days ago, Kasaija and his deputy David Bahati went to Parliament seeking permission to borrow money to pay salaries because URA's collections had fallen below what was expected at this time of the year!

As economist Dr Fred Muhumuza pointed out correctly in an article in the Daily Monitor recently, 'the growth rate has reduced when it should be rising to generate enough commodities and government revenue to service debt and meet the basic requirements of a growing population."

When ministers of Finance are forced to come to Parliament seeking a loan to pay salaries, one is left in no doubt that the economy is in grave danger and all the rosy pictures we have been getting are simply not true. With a population growth at 3.5 per cent per annum, more than 1.4 million people are expected to be added to the population every year. Uganda's population is expected to reach 80 million by 2040 if we continue with the current insane birthdates. This must change. Can Parliament 'bell the cat' and direct government to a more sensible approach to borrowing?

Mr Naggaga is an economist, administrator and retired ambassador.

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