Uganda: Parliament approves loan request for 1.7 trillion shillings

Kampala, Uganda – MPs have approved a government request to borrow $464 million (about 1.7 trillion shillings) to fund infrastructure and budget development needs despite objection from the opposition, which says that the terms of the loan are unfair.

Referred to Parliament’s National Economy Committee on Tuesday, the loan is to come from Standard Chartered Bank, which will serve as “lead arranger and agent” for Nippon Export and Investment Insurance (NEXI), an insurance company Japan, and the Islamic Corporation for the Insurance of Investment & Export Credit (ICIEC), which will provide the money.

Committee Chairman John Bosco Ikojo and Hassan Kirumira, MP for Katikamu South, who presented the majority and minority reports respectively, were both uncomfortable with a clause requiring Uganda to waive its sovereign immunity for the assets in the country and abroad, which implies that the lenders can go for the assets of the country in case of default.

“The committee recommends that the Ministry of Finance renegotiate provisions for the waiver of sovereign immunity to avoid exposing critical government assets to creditors in the event of default,” Ikojo said.

Kirumira also instructed the Attorney General to do the same.

“The Attorney General must renegotiate the terms for Uganda so that we do not sacrifice the sovereignty of the country and key national assets in the hands of the lender; the terms are unfavorable as they stand for a country like Uganda,” did he declare.

Shadow Finance Minister Muhammad Kivumbi questioned the payment of interest on the portion of the loan provided by ICIEC, which according to Islamic traditions does not accept interest on loans.

Minister of State for Finance, Henry Musasizi, however, dismissed the fears and said the government will ensure that final terms are negotiated in a way that protects Uganda’s assets.

Regarding the interest payments for the ICIEC portion of the loan, Musasizi said that “the Ugandan government is dealing with Standard Chartered Bank as lead arranger; all loans will come from Standard Chartered Bank (SCB) and, in fact, the debt service payment will be made to SCB because ICIEC has not made a specific request to the Ministry of Finance”.

He also answered the question about waiving sovereign immunity.

“The Attorney General will negotiate and conclude; what we are looking at are the funding conditions and all of them have been presented to parliament,” Musasizi said.

James Kaberuka, MP for Kinkizi West, said that since the Attorney General will renegotiate the terms affecting sovereignty, the loan should be approved.

“Dear MPs, you are the ones who are going to raise issues of national importance about the state of roads and infrastructure in your area, how do you expect the government to fund these projects?” he said.

Defending the loan request before parliament’s national economy committee yesterday, Musasizi said critical projects must be completed and second-quarter releases must be backed by cash flow, saying the loan offers the best conditions compared to the other options available.

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