The Ugandan government is said to be in plans of preparing to borrow 600 million Euros ($665 million) to finance a shortfall of its 2019-20 budget since it failed to acquire more funds from the World Bank.
The Ugandan government is seeking approval from the members of parliament for the loan of 300 million Euros each from Standard Bank Group Ltd’s local unit and the Trade & Development Bank.
According to a statement on the parliament’s website, citing state minister for finance, David Bahati, the two lenders offered the most favorable terms among four who submitted proposals.
“In order to implement the Budget for FY 2019120 and meet the additional expenditure pressures, Government must borrow either domestically or externally to cover the budget deficit,” the Minister said in his proposals.
Further, the Minister said that certain decisions of Parliament including the refusal of the proposal for accounting for rental tax, imposition of a minimum tax of 0.5 per cent on losses carried forward beyond seven years and the repeal of one per cent of withholding tax on agricultural supplies led to a Shs48 billion revenue shortfall.
Uganda is facing difficulty in funding its spending plans of 40.5 trillion shillings ($11 billion) this fiscal year with increased investment in roads leading to oil fields and tourist destinations, as well as the reintroduction of a national airline.
The failure to meet revenue targets threatens to widen further a budget deficit forecast to reach 8.7% of gross domestic product in the year through June.
Uganda may not be able to collect 170 billion shillings in taxes from electronic devises and 175 billion shillings in rental levies as earlier anticipated due to delays in starting required administrative measures, according to the statement.
The Ugandan government is facing a serious dilemma as its already failing to finance its 2019-20 budget
The government will probably not receive the 2.4 trillion shillings it expected in capital-gains tax and an unspecified amount of funds in budget support from the World Bank.
The anticipated renewal of the license of wireless carrier, MTN Group Ltd’s local unit hasn’t been concluded, which means a delay in fees of about $100 million to the government.
The already stretched budget is now facing new spending pressures from insecurity following a spate of unexplained killings in the country, the damage caused by recent floods and landslides, as well as the need to fill a shortfall in the wage bill. New demands may require an additional 1.4 trillion shillings, according to Bahati.
Uganda is currently facing huge amounts of rainfall which are causing landslides in the country, with River Nile being the most recently affected area where a bridge was washed away. In Bugisu, homes have beendestroyed landslides meaning that the government is going to spend more than that it had expected.
The Ugandan government is now seeking for a loan from the World Bank so as to finance the expenditures that it is anticipating to have.
Earlier this year, the World Bank warned Uganda over its rising debts which would only damage the country’s economy further if not checked. Taking commercial loans amid a widening budget deficit could lead to higher principal and interest payments and deprive the state of money to fight poverty, the Washington-based lender said in an economic report.
External loans account for two thirds of Uganda’s debt, 70% of which is from multilateral creditors, according to the report, which didn’t give details of non-concessional debt.
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Author: Moses Echodu
Moses is a freelance writer for Newslibre and Programs Manager at the Craft Silicon Foundation. He loves writing about sports, politics and news around the globe and Inspiring new young people!!