Ugandan Government Loses Shs359 Billion In Unused Loan Charges

Posted by: lukwago J in Uganda news May 10, 2023

Following an analysis contained in the report by the Auditor General for the year ending June 2022 raised a red flag on the cost of undisbursed loans causing hemorrhage of taxpayer’s money.

In the year under review the government paid commitment fees mounting to Shs 77.5 billion, a two percent drop from the previous year.

The Shs 31.6 billion of payments was a result of a loan that was obtained for the budget support.

However the commitment fees are paid for the debt that has been contracted but not yet disbursed.
Meanwhile Mr John Muwanga in his report puts the total amount of undisbursed loans at Shs 15.6 trillion approximately to 17 percent of the total public debt.

“ Government’s failure to draw down and low absorption of contracted government debt continues to attract high commitment fees and affect service delivery,” he said.

In addition other loans highlighted in the report to have attracted fees include a A Shs 355 billion for the construction of a 45 MW Muzizi hydropower plant . By the time of its cancellation last year the government had spent close to Shs 3.97 billion in commitments fees.

The Kampala Jinja express way project loan amounting to Shs 842 billion secured from the African Development Bank has already cost the taxpayers Shs 3 billion in commitment fees.

However the works of this project are yet to commence. According to the ministry of Finance and spokesperson Mr Jim Mugunga explained that before securing a loan the ministry ensures the readiness of the beneficiary entity or agency to utilise the funds.

The approval process for a loan is elaborate. It has to go through government wider approvals. It is initiated by the beneficiary agency, involves the sector and by the time it comes to finance, some appear work has been done and we go through finance systems,” he said.

The timely use of the funds which would avert the commitment fees is therefore incumbent upon the implementing entities.

Mr Mugunga explained further that the implementation of the funds can be derailed by other external factors.

Delayed utilisation of a loan he said can be best judged in a case by case basis. The AG recommended thus :” Government to identify and resolve any bottlenecks hindering the smooth implementation of projects and activities so as to increase its loan absorption rates.”

Meanwhile Mr Mugunga explained to the media that the permanent secretary to the treasury has now directed that no more project loans will be contracted without thorough complete and complete feasibility studies being undertaken

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