KAMPALA – The government is set to pay Ugx2.5trn in matured securities to the Bank of Uganda.
Micheal Atingi-Ego – the Deputy Governor of the Bank of Uganda told the finance committee of Parliament that the money remained outstanding at the end of 2021- mainly because the government could not raise sufficient revenue to clear the securities that had been held to maturity during the Covid-19 lockdowns.
Atiingi-Ego told the committee that the Central Bank had agreed with the government that the money would be repaid over two financial years, which explains the Ugx1.25trn reflected in the Budget Framework Paper for the coming financial 2023/2024.
This followed an inquiry from the Finance committee chairperson, Keffa Kiwanuka and his vice Jane Pacuto Avur in regard to the Ugx1.25trn domestic debt payment reflected in the budget framework paper. Kiwanuka said that the money wasn’t clearly described in the budget framework paper for the next financial year 2023/2024.
In his explanation, Atingi-Ego said that it was not true that the government took any advance from the Bank of Uganda-BoU in the last two financial years under the Public Finance Management Act -PFMA provision of accessing 10 per cent of revenue.
“….what we are aware of, is when the government securities that have been issued, mature, Bank of Uganda immediately redeems those securities and then makes a claim and waits for reimbursement from the government,” said Atingi-Ego – as he emphasised that the only money that the Bank of Uganda was expecting from the government was on account of matured securities that had been redeemed by the bank.
Last year, the Opposition in parliament pegged the inadequate budget releases for the current financial year 2022/2023 on the government’s borrowing of Ugx8trn from the Bank of Uganda due to revenue constraints.
Muhammad Muwanga Kivumbi – the Shadow Minister for Finance, then said that this exceeded the statutory limit provided for under Section 36 of the Public Finance Management Act, which permits the government to raise a loan from the Central Bank that doesn’t exceed 10 per cent of the domestic revenue.
“In the budget of the financial year 2022/2023, Ugx25.78trn was approved as domestic revenue. Hence, the government is only permitted to borrow Ugx2.57 trn from the Bank of Uganda.
“The provision further demands that funds should be repaid from URA collections within the financial year in which, it has been borrowed. However, Government has failed to pay back the funds that were borrowed in past financial years,” asserted Kivumbi.
He added that amidst the inability of the government to pay back advances from the Bank of Uganda, on February 18, 2022, it signed an Addendum to the Service Level Agreement – SLA with the Central Bank to include debt provision, which he said conflicts with the mandate of the Bank as provided for in the Bank of Uganda Act.
“No wonder, creditors particularly the International Monetary Fund– IMF have conditioned that before Government repays advances from the Bank of Uganda, there would be no further external financing releases to Uganda. This has compromised the availability of discretional resources for the running of affairs of the Government,” said Kivumbi, then.
Parliament approved a budget of Ugx48.1trn for the current financial year 2022/2023 and out of this; Ugx17trn is for interest and debt repayment. The budget was envisaged to be financed through revenue collections of Ugx25.7trn, grants of Ugx2.1trn, and domestic borrowing of Ugx7.1trn.
Since the financial year started in July 2022, there has been an apparent lack of resources for running the government business and different entities have been reporting a shortage of funds to meet salary obligations.
Additional reporting by URN