Uganda now seeks commercial loans from global market

Uganda is back to the global market hunting for commercial loans to pay soldiers’ salaries, finance classified expenditures and meet other financial obligations.

Topping the priority list is paying Uganda Peoples Defence Forces salary enhancement which was supposed to start July 1. Other public servants too want money. In the second week of November, the intern medical staff went on strike as had local government workers earlier, who also demanded the government honour promises made regarding salary increases. A few months ago, the teachers were on strike over a pay dispute when the government offered to raise the salaries of only science teachers.

In what some interpret as signs of a broke government, even Parish Development Model, which President Yoweri Museveni has touted as a model that will transform Uganda from a peasant economy to middle-income status, has suffered the same fate: Lack of funds.

The government did not release adequate funds in the first quarter of the current financial year, resulting in government agencies going without enough funds for their projects, except for payment of salaries and funding for defence and security projects.

Workers not fully paid

Many public servants were also not fully paid by the end of the quarter. The Finance Ministry has indicated that it seeks to borrow Ush3.7 trillion ($986.2 million) from commercial lenders — a major shift from concessional credit options that the country has been depending on to finance its budget deficit.

“We are looking for loans with favourable terms,” Finance Minister Matia Kasaija told The EastAfrican on November 16 without delving into the loan terms.

Mr Kasaija said with an economy that has been battered by Covid-19, inflation, and prolonged drought, the pressure was high, confirming that he was worried.

On November 7, Mr Kasaija placed a notice calling lenders to express interest in advancing Uganda Ush1,948.2 billion ($519.6 million) loan. The government asked private sector lenders to advance €500 million (Ush1.9 trillion) to close a 2022/2023 budget gap.

“Due to strict implementation guidelines, we request you to submit your expression of interest by the closure of November 18,” Mr Kasaija’s wrote.

Uganda’s budget

In the same week, on November 2, 2022, Uganda lawmakers approved a request by the government to borrow $464 million (about Ush1.7 trillion).

Uganda’s 2022/23 budget is Ush48 trillion ($12.8 billion), with about 71 per cent allocated for recurrent expenditure and 29 per cent planned for development.

Some experts have argued that the rush to borrow from private lenders, despite the availability of bilateral and multilateral lenders could be because the country is avoiding scrutiny, especially at a point where the previously borrowed money has ended up in consumption expenditure rather than development.

Opposition politicians such as leader of opposition Mathias Mpuuga say the government should reduce politically motivated public expenditure, make money cheaply available to the critical sectors, to ensure that jobs are sustained.