Lawmakers on Parliament’s Committee on National Economy will on Monday next week scrutinise a request by the government to borrow Shs1.73 trillion from locally based commercial banks to plug funding gaps in the National Budget.
According to a notice sent to Members of Parliament on the committee, they are expected to interface with Minister of Finance, Matia Kasaija, and other officials on their request to borrow money from the Standard Chartered Bank and others.
“Notice is hereby given that the committee on National Economy will have a meeting with the Ministry of Finance to consider the urgent assignment of scrutinizing the request by the government to borrow up to Euro 455.03 million to finance the development and infrastructure budget for the financial year 2022/2023,” the notice to the MPs reads in part.
According to the request before Parliament, the finance ministry argues that in the first quarter (July to September) of the current financial year, they were able to only release Shs10.25 trillion of the expected Shs14.57 trillion, creating a deficit of Shs4.3 trillion.
To add an insult to an injury, the ministry says that Shs5.62 trillion of the released money went to debt and interest payment and the remaining Shs4.67 trillion was released for discretionary expenditure by MDAs.
After scrutinising the request, the Committee on National Economy is expected to formally table the government request before the whole House on Wednesday for approval.
This comes after delivery of government services across the country was paralysed following substantial reduction in budget releases for the first quarter of the 2022/2023 fiscal year.
The crisis in the government came to the fore when Treasury released about 19 percent of the expected 25 percent of the new Financial Year budget, describing the measure as necessary to reduce liquidity and tame inflation.
But while releasing money for the second quarter of the budget early this month, the Permanent Secretary of the Ministry of Finance, Ramathan Ggoobi said that the government withheld substantial amounts of funds which were supposed to be released in the first quarter of the financial year 2022/2023, as a way of controlling the count of money in circulation.
He said that this fiscal action came as a way of supplementing the Bank of Uganda’s monetary policy where it increases the interest rates to tame the demand for loans by the public.
For the second quarter, the Ministry released a total of 7.3 trillion Shillings and Ggoobi explained that the government was not broke when it failed to release all the budgeted funds for the last quarter. Ggoobi said that the economy was recovering, but challenges like the rising foreign exchange rate and high inflation were affecting this recovery.