Africa-Press – Uganda. The failure by government to put in place robust risk management policies to manage losses resulting from loans hedged on foreign currencies saw Uganda lose about Shs1.5b in the 2019/20 financial year.
The details contained in the Auditor General’s report for the period ended June, indicated that government had to pay more than it had committed, especially for the loan that had been advanced towards implementation of the phase III of the National Backbone Infrastructure Project.
In this case, the report noted, government had had to pay an extra Shs516m on the National Backbone Infrastructure Project loan in addition to $261,760 (Shs986m) on a loan that had been advanced by Exim Bank in Chinese Yuan and later converted into a dollar loan.
“It is good practice that the Treasury puts in place systems and controls that should ensure that financial losses resulting from foreign currency borrowing are avoided or minimised as much as possible,” the Auditor General noted.
Foreign currency borrowing
By their nature and source of borrowing, most of Uganda’s loans are secured in foreign currencies, including dollar, Euro and Chinese Yuan, among others.
Therefore, the Auditor General noted, that whereas it was investable for government to secure loans in foreign currencies, it was prudent that turnkey agreements, which require a contractor complete work to a certain level before they are paid, are denominated in the loan currency to avoid financial loss. Government has been borrowing heavily for infrastructure projects, especially in the roads and energy sector.
However, there has been concern about the nature of loan agreements that are signed with stringent terms and conditions that continue to expose national assets to attachment in the event of a dispute. In the report, the Auditor General said, there was need for government to be conscious about such loans that waive the immunity of Uganda and its assets.
Concern and frustration
Dr Fred Muhumuza, an economist and lecturer at Makerere University School of Economics, said at the weekend that the Auditor General was right to show concern and frustration in the face of continued abuse of globally accepted common practice. “It is very sad that we are losing money out of negligence. The impact of this of course speaks to the loss of billions, which could have been used for something that lacks funding,” he said.
Finance Minister Matia Kasaija, at the weekend told Daily Monitor that he instructed staff at the Ministry of Finance to take note of all the Auditor General’s recommendations with the view of taking them to Cabinet to be discussed.
