Parliament approved up to 5.4 trillion Shillings loan to finance the budget deficit for the current financial year 2020/2021.
Speaker Rebecca Kadaga presiding over Plenary sitting.Parliament Photo
Parliament has approved up to 5.4 trillion Shillings loan to
finance the budget deficit for the current financial year 2020/2021.
This followed the adoption of Parliament’s National Economy Committee report in
a plenary session chaired by Speaker of Parliament Rebecca Kadaga.
The approved funds are meant for items like classified expenditure for State
House and Ministry of Defence, Uganda Development Bank, Ministry of Health,
Ministry of Trade and for recurrent domestic arrears, and a bilateral road
infrastructure project between Uganda and the Democratic Republic of Congo
Initially, the government had sought to borrow up to 6.2 trillion Shillings to
finance the budget deficit and out of this USD, 600 million (2.2 trillion
Shillings) was proposed to be borrowed from the International Monetary Fund
(IMF) and a total of 4.3 trillion Shillings proposed to be borrowed from the
However, in the report presented by the Committee Vice Chairperson Lawrence
Bategeka, legislators recommended approval of only Shillings 3.25 trillion
through domestic borrowing and the approval of USD 600 million (2.2 trillion)
from the International Monetary Fund (IMF).
Bategeka defended the cut on the proposed borrowing by government noting that
borrowing Shillings 4.3 trillion from the domestic market would slow down
private sector credit growth from 8.9 percent registered in financial year
2019/2020 to 3 percent in financial year 2020/2021.
“The Committee recommends that the World Bank loan resources that were
disbursed at the beginning of the Financial Year should be included in the
resource envelope of the current Financial Year, which will eliminate the
projected revenue shortfall that is a partial basis for the borrowing,” said
Bategeka referring to an earlier 1 trillion loan from World Bank.
He emphasized that government should borrow only Shillings 3.25 trillion from
the domestic market since the projected shortfall on the revised resource
envelope is addressed by the World Bank resources, and the borrowing proposal
would create an excess borrowing of Shillings 1.04 trillion.
Bategeka also said that the government should prioritize the borrowed resources
towards expenditure on only productive areas that will stimulate economic
Meanwhile, Bategeka recommended that parliament approves 2.2 Trillion Shillings
loan from IMF. He, however, said that if the economy is unable to register a significant
rise in foreign inflows, the government should adjust its fiscal policy stance
and opt to cut spending in less critical areas, without undermining economic
While presenting the loan request to parliament last month, State Minister for
Planning David Bahati explained that the outbreak of COVID-19 pandemic had
greatly affected the economy of Uganda and that the economic growth projections
were revised downwards from 6 per cent to 4.5 per cent in the financial year
2020/2021 due to the impact of the pandemic.
“Madam Speaker in the financial sector, the past financial year 2019/2020
registered a shortfall in revenue collection of 1.2 trillion Shillings, and in
the current financial year, we are registering a shortfall of 2.5 trillion
Shillings due to the impact of COVID-19,” he said then.
In May 2020, parliament approved a total budget of 45.4 trillion Shillings for
the financial year 2020/2021 that kicked off on July 1, 2020. Out of this
budget, 21.8 trillion Shillings is to be financed through revenue collection
while 15 trillion Shillings is to be financed through external borrowing.
According to Bahati, 1.5 trillion Shillings has so far been raised from
domestic financing leaving a deficit of 1.4 trillion Shillings to be raised
from the domestic market to finance the budget. He also told parliament that
the government has been having different financial pressures and that due to
these, the government had been forced to seek a loan to further finance the