Legislators want Gov’t to consider reducing domestic borrowing

State Minister for Finance David Bahati says that up to 4.3 trillion Shillings will come from domestic borrowing, while 2.2 trillion will be borrowed from the International Monetary Fund (IMF). MPs have however said that Government needs to reduce domestic borrowing to at least two trillion Shillings.

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State Minister for Finance and Planning also Ndorwa west MP David Bahati. File/Photo

By Nasser Kasozi Akandwanaho

Members of Parliament have want the government of Uganda consider reducing domestic borrowing as a means to finance the budget saying it will hit the private sector and thus killing jobs and affect the economy.

Uganda parliamentarians were on Wednesday meeting the officials from the Ministry of Finance and Uganda Revenue Authority (URA) to consider two loan applications worth 6.5 trillion Shillings, to finance a budget deficit for the financial year 2020/2021.

State Minister for Finance David Bahati says that up to 4.3 trillion Shillings will come from domestic borrowing, while 2.2 trillion will be borrowed from the International Monetary Fund (IMF). MPs have however said that Government needs to reduce domestic borrowing to at least two trillion Shillings.

Domestic Borrowing is done through the issuance of 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. These investments are considered advantageous because they consider the guaranteed rate of return and have no value loss. 

Minister for finance and planning also Ndorwa west MP David Bahati noted that they will trade carefully on the matter and ensure that the domestic borrowers are not affected.

David Bahati said Government is expect to raise 19 trillion Shillings from domestic revenue, but the remaining 32 trillion Shillings will be external funds through loans and grants.   

The Ruhinda North MP Thomas Tayebwa observed that, many businesses are facing challenges accessing loans because of the COVID-19 risks, and fears that as the government moves to borrow, many banks will withhold money from Ugandans with the hope of loaning the government

However, the Nakaseke North MP Syda Bbumba said that the government needs to provide a clear strategy on how to generate revenue and stay away from borrowing. She added that domestic borrowing by the government is an issue they have been discouraging because it is likely to stress the financial prospects of the private sector.

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