Government seeks to borrow 3.5 trillion shillings to finance the budget

The Minister of State for Finance, the Hon. Henry Musasizi asked MPs to approve up to 3.5 trillion shillings to fund the 48.1 trillion shilling budget.

The first loan request, which amounts to USD 464, or about Shs 1.7 trillion, is to come from Standard Chartered Bank.

In documents that are now referred to Parliament’s National Economy Committee, Standard Chartered Bank will only be an agent for two financial institutions that will actually provide the money, if Parliament approves the loan request.

While Musasizi said Standard Chartered Bank “became the highest bidder with the lowest cost of funding provided to the government”, £272m of the loan will come from Nippon Export and Investment Insurance (NEXT), a Japanese company trade and investment insurance, while £182.7 million will be drawn from the Islamic Corporation for Insurance of Investments and Export Credits (ICIEC).

Standard Chartered Bank’s role in the loan will be that of “agent and lead arranger for the loan”.

Musasizi defended the loan, saying it is intended to “help pay for outstanding infrastructure certificates, among other things, to avoid accumulating arrears during the fiscal year.”

He also said that due to financial constraints, the government has only managed to finance 7% of the development expenditure of the various votes, which he said will have an effect on fiscal performance and economic recovery.

NEXT will charge 2.9% interest on its facility, while its counterpart ICIEC will collect 3.5% of its credit.

The term of the loan is 10 years, with an additional grace period of four years.

Separately, Musasizi also applied for a $140 million loan from the International Development Association, a facility that comes with a $60 million grant.

This, he said, will fund the Uganda Digital Acceleration Project (UDAP).

Musasizi said the project aims to “expand access to high-speed internet, improve the efficiency of digital government services and strengthen the digital inclusion of host communities and refugees”. [where the project will be implemented]”.

Another loan request from the same agency is a $331.5 million loan, which comes with a grant totaling $276.5 million.

“This particular facility will be used to ‘finance electricity access scaling projects’.

Minister Musasizi said the loan is critical to expanding electricity access across the country.

“[This loan facility] aims to facilitate at least one million electrical connections spanning households, commercial enterprises, industrial parks, mining centers and public institutions,” Musasizi said.

The two facilities together total US$471 million, which are merged with the Standard Chartered Bank arranged facility of US$464 totaling approximately 3.5 trillion shillings.

The committee will process applications promptly to inform Parliament’s decision to approve or reject loan applications.

Distributed by APO Group on behalf of the Parliament of the Republic of Uganda.

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