Idle Govt Loans Pile Pressure on Tax Payer

The Civil Society Budget Advocacy Group (CSBAG) has raised concerns over the burden of undisbursed loans on the tax payer.

The body has raised the alarm over inefficient loan management and underutilization of borrowed funds.

The group convened to deliberate on the office of the Auditor General’s (OAG) Report, which was released on 31st December 2024.

The CSBAG’s statement focuses on 13 audited areas of debt management management, education sector, roads, and infrastructure, performance of the Parish Development Model (PDM), Water and Environment, Energy and Extractives, Revenue Losses, Risky Ventures and loss making enterprises,  health, agriculture, pension crisis, Procurement and misuse of supplementary funding. 

According to the Office of the Auditor General’s (OAG) Report, undisbursed loans in FY 2023/24 increased by UGX 1.890 Tn (12.95%) compared to the previous year, resulting in UGX 73.904bn in commitment fees 

CSBAG’s Executive Director, Julius Mukunda, noted that the government has paid UGX 469.778 Bn in commitment fees between 2018 and 2024 due to loans that were not promptly used. The OAG report also revealed that UGX 2,820.30bn remained undisbursed across 17 government loans, highlighting a critical failure in loan absorption.

The group is worried about Uganda’s escalating debt servicing costs, which threaten fiscal stability. In FY2023/24, 20.99% of domestic revenue was used to service debt, exceeding the 12.5% target set by the Charter for Fiscal Responsibility (CFR). This breach, coupled with inefficiencies in loan utilization, poses significant risks to Uganda’s economic stability.

Risky ventures and loss-making enterprises:

According to CSBAG, Shs 930.53 Bn cumulatively invested in private companies without following proper procedures as risky ventures, specifically, 723.40 Bn invested in Dei-Biopharma Ltd as financial support, without a valuation report to establish the company’s net worth.

The government acquired preference shares in ROKO construction Ltd worth UGX 207.013 Bn. However, this transaction was executed before parliament approval.

“The continued investment in risky ventures is a clear indication of poor Public Finance Management in the country,” Mukunda said.

Procurement Irregularities:

Asiimwe Kenneth, an economist from CSBAG, says the OAG report revealed that goods and services valued at UGX 1,216.72 Bn were procured in FY2023/24 in breach of the Public Procurement and Disposal Regulations 2023 (PPDA). Some of these instances include procurements valued at UGX 42.79 Bn initiated by 8 government entities without confirming fund availability, while 11 entities undertook 63 unplanned procurements valued at UGX 59.02 Bn. This caused delays in project implementation and affected disbursements, particularly for donor-funded projects such as the Kampala Metropolitan Transmission System Improvement Project, where donor fund disbursement stood at only 16% compared to 89% for Government of Uganda/counterpart funds.

Roads and Infrastructure:

Asiimwe also points out the Gravity of Unpaid Arrears for Road and Bridge Construction Projects. By June 30, 2024, the Government of Uganda had unpaid arrears totaling UGX 798.97 Bn for road and bridge construction projects only, primarily under the Uganda National Roads Authority (UNRA) and the Ministry of Works and Transport (MoWT).

This situation reflects significant shortcomings in budget planning and execution, exposing the government to potential litigation and financial penalties. UNRA alone incurred UGX 27.66 Bn in interest charges due to delayed payments, resulting in an average daily interest payment of UGX 0.075 Bn and a monthly loss of UGX 2.305 Bn. These unbudgeted expenses divert crucial funds from core infrastructure development, affecting service delivery and undermining national progress.

CSBAG urges the government to take immediate action to address these concerns and ensure prudent public finance management.