Parliament’s Committee on National Economy has asked Finance State Minister, Hon. Henry Musasizi for details on the actual intended disbursements of the loan before they can give their nod of approval.
Shadow Finance Minister, Hon. Muhammad Kivumbi objected asking for details of the disbursement, a request he said is informed by fears that the money could be spent on other consumptive items.
Committee Chairperson, Hon. John Bosco Ikojo lent a voice of support.
“The Members only want you to give a schedule so that we are able to track [the loan once approved]; it’s that easy,” he said.
Minister Musasizi assuaged their concerns.
“This borrowing will be fixed to the projects for which we borrowed; we have just released quarter two cash limits to different votes; these cash limits require money,” he said.
The loan will not be directly supplied by Standard Chartered Bank, but they will be acting as agents for Nippon Export and Investment Insurance (NEXI), a Japanese insurance firm, and the Islamic Corporation for the Insurance of Investment & Export Credit (ICIEC), who will be the principle lenders.
MP Kivumbi took the finance officials to task on why they didn’t approach the lenders directly, to avoid the undue profit to be obtained by Standard Chartered Bank merely on account of agency.
“Why didn’t you approach the borrowers themselves? Why are you going through Standard Chartered Bank?” he asked.
Another sticky issue was the cost of insurance premium which is to be paid upfront at the rate of 10 per cent for the entire duration of the loan, which translates into one per cent per annum for the 10 years the loan will run.
Kivumbi said for a loan of US$464 million, a premium of US$46.4 million is over the top and reflects bad negotiation on the Ministry of Finance officials’ part.
The committee later retreated to consider the loan and write their report for consideration by plenary.
The government needs over Shs2.5 trillion in external borrowing to plug the revenue collection deficit occasioned by a slowdown in economic growth.