Domestic Borrowing is done through the issuance of government securities like treasury bills which are short term debt instruments with tenures ranging from 91, 182 and 364 days and treasury bonds with a maturity period of more than a year.
The Central Bank has rejected the Government’s plan to borrow up to 4.3
trillion Shillings from the domestic market to fund the supplementary budget expenditure
of 6.5 trillion Shillings.
The matter came up when officials from BoU, the Private
Sector Foundation and Uganda Bankers Association appeared before the National Economy Committee
to present views on the loan request to finance a budget deficit for the 2020/2021 financial
year.
Domestic Borrowing is done through the issuance of government
securities like treasury bills which are short term debt instruments with
tenures ranging from 91, 182 and 364 days and treasury bonds with a maturity
period of more than a year. The government
intends to borrow 2.2 trillion Shillings from the International
Monetary Fund-IMF.
The BoU Deputy
Governor, Michael Atingi Ego says that borrowing from
the domestic market will lead to a decline in private sector credit extension and cause a decline in private sector credit growth by about
3 per cent by the end of the 2020/2021 financial year.
Atingi Ego says
in this case, the private sector will be constrained to access resources for
investment. He advised that if the Government is to borrow, the money should
be spent on productive sectors of the economy as opposed to consumption.
//Cue in;
"If we are going...
Cue out... with this money."//
Atingi Ego proposes a syndicated borrowing arrangement between local commercial
banks that can arrange loans from their parent banks since Uganda's financial
market is shallow.
Gideon Badagawa, the Executive Director of Private Sector
Foundation-PSF is outrightly opposed to the government’s decision to during these
hard times. He instead called on the government to scale down on its expenditure.
//Cue in; "Borrowing is one...
Cue out...going to pay"//
Wilbroad Owor, the Executive Director Uganda Bankers Association also
emphasized that once the money is borrowed, it should be used to stimulate the
economy. He, however, said the reasons advanced for the loans in question are questionable.
//Cue in;
"Is really the...
Cue out...well we manage."//
The
Committee Vice-Chairperson, Lawrence Bategeka, said Uganda will be paying
almost 2 billion Shillings daily as interest pm the domestic loans they are
planning to borrow.
//Cue in;
“Who is going…
Cue out…go per day.”//
The committee is expected to meet the Ministry of Finance on Thursday to deliberate the
matter further before compiling its report.
