May 5, 2014

Uganda Borrows Extra Shs 700B

The Uganda government is borrowing an extra 700 billion Shillings through the issuance of treasury bills and bonds to cater for revenue collection shortfalls by Uganda Revenue Authority (URA).

Uganda president Yoweri Museveni.
Uganda president Yoweri Museveni.

This increases the amount it borrowed from the domestic market to 1.7 trillion Uganda Shillings in 2013/14 instead of 1.02 trillion Uganda Shillings.

Dr Louis Kasekende, the Bank of Uganda (BOU) Deputy Governor, explained that the government had approached them to issue more government debt in 2013/14. BOU borrows the money on behalf of the government.

Commercial banks, National Social Security Fund and other offshore investors are biggest lenders to government on the domestic scene. The increased borrowing by government has been said to be one of the reasons commercial banks are lending less to the risky private sector. Government rarely defaults on its loans and is considered less risky, which explains why banks would rather lend to it. Dr Fred Muhumuza, an advisor to the finance minister explains that there are two indirect effects to the economy if the government continues to borrow domestically.

In the 2013/14 National Budget, to fill the financing gap of about one trillion Uganda Shillings, Maria Kiwanuka, the finance minister recommended that government borrows this from the domestic market. The International Monetary Fund (IMF) in December 2013 had warned against government borrowing above the one trillion shillings saying it would increase government debt interest payments and also restrict the private sector from borrowing.

In March this year, Kiwanuka, while at an African Central Bankers conference also warned on how further government borrowing from the domestic market would hurt the private sector. In fact she pointed out that the focus of the government should be on increasing revenues. This has however not been the case as URA has continued to see its revenue collection deficit continue to expand as the financial year comes to a close.

In January 2014, Standard and Poor’s (S&P), an international credit ratings agency downgraded Uganda from B+ to B Stable as it warned of the rising government expenditure yet revenues remained largely limited.

2 thoughts on “Uganda Borrows Extra Shs 700B

  1. Let Musweveni give seven sound reason to back his claim that Uganda is borrowing extra 700 Billion shillings not for his Presidential Campaigns to bribe and buy supporters from Uganda.

  2. Museveni is ajoke him and his NRM borrow money to use it for there personal use i wonder who is going to stop this guy he has done more damage than good to the country ,we all know what he does when he wants money he even orders money to be taken from the reserve bank to be taken at his house ,him and his wife they always do that,when is this old useless guy ever going to be stop this guy has destoryed Uganda for good and i think and am begging all Ugandan to join me and say enough is enough with this crazy old corrupt monster.Ugandans really when are we going to stop those old fools from robbing everything our great grand parents died for when they were fighting for our country,this mother fucker used them ,he never fought any war and he has robbed and destoryed everything they fought for.please Uganda lets come together and stop those theives for NRM.So what if he has gun and he intmedates us with his army and the police remember the power belongs to the people he will never kill more 10,000 people before he is taken off,let all as Ugandan come together and stop those day time thieve Museveni and his NRM out of Uganda

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