Government to borrow Shs 3 trillion to fund budget deficit

Parliament’s committee on National Economy has authorized government to borrow Shs 3 trillion from the World Bank and the International Monetary Fund (IMF) to mitigate the effects of the Covid-19 pandemic on the economy.

This money will be used for supporting the budget and Bank of Uganda to stabilize the shilling and bridge the gap in the balance of payments position.

Out of the 3 trillion, Shs 1.8 trillion, which will be borrowed from the World Bank, is for budget support during the Covid-19 pandemic.

Out of the Shs 1.8 trillion, shs 455 billion and Shs 90 billion will be for recapitalisation of Uganda Development Bank(UDB) and Uganda Development Corporation(UDC) respectively.

Another, Shs 70 billion will be injected into Saccos while Shs 40 billon will be used to support agriculture.

In addition, Shs1.3 trillion will be borrowed from the IMF to support Bank of Uganda and to bridge the gap in balance of payments position through maintaining sufficient levels of foreign exchange reserves.

This will also help to ensure that the shillings is stable throughout the pandemic.

As of December 2019, Uganda’s total public debt stood at Shs 48.9 trillion of which Shs 31.5 trillion is external debt and Shs17.8 trillion domestic debt.

This implies that Uganda total debt is higher that Shs 45.5 trillion overall budget for 2020/2021 financial year recently approved by parliament.

Yet some analysts have argued that as government receives grants, loans and donations both internally and externally, it remains to be seen is whether the institutions have the capacity to absorb  the money and to account for it at the end of the day.

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