“China is most likely to take over Uganda’s Entebbe International Airport for default on debt repayment. More of Uganda’s national assets are at stake of seizure because of the unrealistic and endless borrowing which has mountained public debt to UGX65 trillion” (Kingdom Media Uganda, 25.11.2021).
The Deficit Financing can only take you so far. The bloated and crony capitalism can only keep you going so far. There been years upon years with loans for all sort of development projects and infrastructure upgrades in general. The loans have gone to buildings, roads and the only international airport in the Republic.
The National Resistance Movement and President Yoweri Kaguta Museveni have over the years promised they have a threshold and control of the amount of debt. However, in 2021 after a downturn and lack of generating revenue. The state is defaulting on it’s loans. The state has taken out loans it cannot carry. Loans are not only the loan, but the services for it too. The loans are with interests and with additional fees, which was accepted on taking the loans. These loans are now maturing and the grace period of not paying interests etc.
The Ministry of Finance, Planning and Economic Development (MoFPED) have promised they can service it and has it under control. They have said it would be used properly and well-spent funds. Nevertheless, the loans are clearly piling up and the state doesn’t have the revenue to pay them. They have recycled to many bad-loans and now they comes to haunt the Republic.
The state is paying for ghosts, huge patronage and a local government structure that is dilapidated from the get-go. Since, the state has such excess of expenditure, but they have to keep that to breathe life into the regime. This is why the state has to spend and use funds like a drunk sailors in port. Just awaiting to be robbed by a bystander or waste a salary at a gentleman’s club. However, this is a serious government and not a drunk lonely man who has been at sea for months on end.
It is tragic, but there been warnings. The Sri Lankan debt to China and what happened there should have been a “red flag”. What happened in Zambia as well should be another story of which the Ugandan government should have reacted too. However, that is clearly asking to much, as kickbacks, graft and grand corruption is part of the diet at the Entebbe/Nakasero State House. They are just eating and doesn’t care about the ramifications of it. Since, the cattle in Rwakitura farm is better taken care off, than how the budgets are financed. This is the sad reality of the Republic in 2021.
The amount of loans and debt will cause more distress. Why? Well, there is no future or ability to clear the debt without any proper revenue. The state needs to find new measures to get fiscal responsible. However, the state cannot just tax things and start to tax people for their every transaction. Because, with doing that… they are taking away money, which will generate more revenue and even more possibility to create new businesses. Yes, the state gets more taxes, but they are also creating a wormhole where there is no option to generate any real income. Since, if you have any transactions, the percentages of money is siphoned by the state and instead of getting invested to make new markets.
Therefore, the state is forced to change the way it operates. However, by doing so… the NRM and Museveni will have to drop cronies. That is something it cannot afford, because they are to eat and not to make the Republic better. This state cannot sustain itself …. and it’s own fault that it defaults on loans. Nevertheless, the citizens and the taxpayers are the first to be hit by this. Not the ones who has issued or taken out the loans over the years. They are the ones that has to fix it or for generations pay the Chinese for ordinary services. Because, the current regime wants SUVs and envelopes to cover for funerals or pay for medical tourism. Peace.
“The State Minister of Finance, David Bahati assured the legislators that the implementation of the project will be monitored to ensure the funds are properly utilised” (The Observer – ‘Parliament endorses Shs 680bn Entebbe Airport expansion loan’ 30.10.2015).
It is now evident that the Government of Uganda and the National Resistance Movement (NRM) might struggle with a loan it took out in March 2015 from the China EximBank to fund upgrades of the Entebbe International Airport. We are now in October 2021. There was forewarnings about taking expensive and extensive loans to build and development infrastructure projects. The ones who was steadfast and worried about the rate of loans the state took out was silenced. The state had a plan and initiated with thresholds of loans the state could borrow.
Alas, the state is starting to struggle to cope with all of these loans. It is not shocking as the NRM and the state have been busy with deficit financing it’s budgets to balance it. They are operating with a higher expenses than it has domestic revenue. So to go from red to black the state borrows vast sums from various entities, both locally and internationally. These are taken out with interests and with that… the debt burden is ballooned and at one point… the creditor will either ask for the collateral or make an agreement to cover the funds to cover the defaulted debt. This is what that could happen to Entebbe International Airport…..
Here is how the story went…
How the loan was made:
“On October 8, 2014, Uganda’s Civil Aviation Authority (CAA) and China Communications Construction Company (CCCC) entered into a contract for the up grading and expansion of Entebbe International Airport (Phase 1). To access funding for the project, the Government of Uganda (GoU), represented by the finance ministry, signed a concessional agreement with EXIM Bank of China dated March 31, 2015 for the principal amount not exceeding Renminbi 1.26 billion (about $200m) and interest to be charged at a rate of 2% per annum” (Africa Tembelea – ‘AG Muwanga raises queries on Entebbe Airport Expansion’ 12.01.2019).
How CAA looked at the agreement in 2019:
“Current overall progress for the upgrade and expansion of Entebbe International Airport is at 52 per cent as opposed to the planned progress of 55 per cent. This is commendable progress. At one point in time, there was a delay in release of money from the Exim Bank of China to the contractor (CCCC), which led to a slight delay that has since been resolved. There was a difference of opinion between Exim Bank and the Government of Uganda on the loan agreement clauses. This necessitated the Government of Uganda and Exim bank of China to renegotiate the terms. This was done and the matter resolved amicably. The contractor has since increased resources committed to the project including manpower and equipment. The rainy season also affected works” ( Dorothy Nakaweesi – ‘Renegotiating loan terms slows Entebbe Airport expansion’ 03.06.2019, Daily Monitor).
“Under the Belt and Road Initiative, construction works started in May 2016 after Uganda acquired a 200-million-U.S. dollar loan from the Export-Import Bank of China (China EximBank). The project is scheduled to be implemented in two phases, said China Communications Construction Company (CCCC), which was contracted to design, construct and manage the project. The first phase, with three-quarters finished, involves construction of a new passenger terminal, a new cargo complex, and upgrade of two runways and their associated taxiways, rehabilitation and overlay of three aprons. “For the new cargo building, it is about 10,000 square-meters and when it is finished, it can handle 100,000 tons of cargo per year; for the new passenger terminal building, it is about 20,000 square-meters (and) can handle 3 million passengers per year,” Li Qinpu, CCCC project manager told Xinhua in a recent interview” (Ronald Ssekandi – ‘Feature: China revitalizes Uganda’s aging airport to carry more int’l traffic’ 15.10.2021, Xinhua).
Brian Luwanga tweeted today:
“EXIM Bank of China can take over Entebbe Airport in case Uganda fails to pay back a loan of 740 billion shillings ,this has been unearthed by COSASE while meeting Finance Minister Matia Kasaija. The loan was advanced to Uganda for upgrade of Entebbe Airport” (Brian Luwanga, 28.10.2021).
It is now a shot that the state promised was safe and would be able to liable for. The state said it would be able to repay the Chine EximBank and service the debt. However, it now seems likely the state is failing to pay back the loans. This means the state is defaulting in it and depending on the agreement. The creditor will have power to cover the debt from the debtor. In this instance, the state has to give collateral or any other sort of value, which will practically cover the lost debt and get returns on the loans issued.
This here is a sad story, but they could have done things differently. Even MPs and some said the state should use other sources to raise the funds for the upgrades of Entebbe International Airport. There was one MP who said the state should borrow this from the NSSF to cover it. Alas, that wasn’t the case and now we are here.
We shouldn’t be shocked at this current rate and with the trillions of shillings of debt. The debt isn’t only the amount you get directly from the lender, but you will also pay additional fees and interests. Meaning the loan isn’t just the fixed funds, which the debtor is receiving, but also the costs of servicing it too. That is what the state has do to when it takes these sort of loans and financial instruments.
The general public should worry about this. Because the state has taken out so many loans and these could it easily default on. The state needs domestic revenue, but is running on huge burden of running costs. While it doesn’t have a growing economy or financial structure to cover the deficits. That’s why the state has taken out loans to cover these expenses and this is why they are defaulting on it.
This was inevitable and the state has to restructure itself. Also, ensure it only has expenses that it can cover and just continue to add debt until the sky. Now the rainy days are coming and the loans taken out in recent years will come to haunt the state. This will hurt the state even more and the spiral of depreciative loans will eat up the budgets, which it is already doing. The rate of paying down on it will be destructive, unless there is a sudden miraculous change of financial fortunes. Alas, await more tragedies like these, as the Entebbe International Airport is the top of the ice-berg. Peace.
Today, the Ministry of Finance, Planning and Economic Development (MoFPED) in the first week of the budget year dropped the first supplementary budget of the budget year. What is striking in this one and the International Monetary Fund (IMF) is loaning billions upon billions of shillings for a possible financial recovery after the pandemic.
However, the President is now getting more funds in the Supplementary Budget than the 15 referral hospitals. Yes, the Ministry of Health getting a huge slice of the pie this time. Nevertheless, the fine print shows that the President needs 6,964,000,000 to fight COVID-19. He needs 6.9 billion shillings on his own to combat this.
The 15 referral hospitals, which has been deemed fit for additional funding on the other hand gets the handsome sum of 575,500,000 or 575 million shillings. In total 8,625,000,000 or 8,6 billion shillings. That’s the total direct budget supplement from the state to 15 hospitals in the middle of a pandemic and the second wave.
The funds given to the hospital barely have over 1,5 billions shillings more than the President. However, each hospital gets less funding and they are on the frontline. It is not like the President is giving people vaccine in Kawempe or in Makindye. Heck, he will not even do it in Ankole. The President is rather safe behind bulletproof glass in his vehicle, than ever giving a helping hand. Unless, there are some elders willing to bend their knees for him and kiss the ring for his majesty.
This is a supplementary budget to fight COVID-19 not to further salaries for additional Presidential Advisors or whatnot. Neither it is to cover expenses from the general election or what else you can imagine.
It is just baffling that the state prioritize this way. Just like the External Security Organization gets additional 1.1 billion shillings and Internal Security Organization gets 4.7 billion shillings. You can wonder how these organizations combat this deadly disease. In combination that the Ministry of Defence is getting the 10.4 billion shillings and the Uganda Police Force for some reason has the grand total of 19 billion shillings. This is all security, tear-gas and to enforce the Standard Operational Procedures SOPs or the Presidential Directives plus keeping the officers and soldiers happy during the lockdowns. Because, what does these entities has to offer in the combat of COVID-19?
That is beyond the point, right? Just like the Office of the President has little to nothing to do in the ambition to stop the spread. This just shows how mismanaged the whole thing is and lack of priority. When such vast sums of money can be spent on these parts of government. This is not to procure or get vaccines. This is not to buy PPE or produce more oxygen. This is not train more nurses or doctors. No, this is to boost the fragile ego of one man and secure his reign. Why else would he spend billions on the State House and Security, as a measure to fight COVID?
He is not kidding anyone, only himself and his fellow cadres who eats this nonsense for breakfast. This a mockery and public wastage at it finest. Peace.
The Ugandan National Airline Company is the sort of State Owned Enterprise (SOE) which is the epitome of everything done wrongly. The company was launched with grandeur. As socialites and others was on the maiden journey. The airline was aiming for the skies and for the moons.
However, the way it was launched. The stakeholders, the shareholders-structure and everything else was put into the question. Just the questionable way of ownership and secretive deals was a detriment from the get-go.
This company was launched in 2019, but now by 2021. The Board of the Company is either on-leave or suspended. What we do know is that its a mess. Where the company had the opportunity to pay civil servants to get favourable reports of the standing of it (stated in the Confidential Report of 27th January 2021). Though the Auditor General gave it a bad report. Where the company already was only earning 10% of projected revenue. Meaning the company had a 90% shortfall of revenue. That was the OAG Report February 2021 saying about the company.
Now, there is leaked a Confidential Report of 27th January 2021, which is showing more dire needs too. The report for instance states that members of board is promoting self-interests, instead of safeguarding the interest of Ugandan Airlines. There members of the management team who tries to find way of invoice loading or other money-making schemes from the Airlines. Procurement managers worked directly with people in the government ministry to find ways of making money out of the airline. That means the company culture is wicked already.
What is also striking is that officials from the ministries in the contracting processes, but these officials didn’t understand aviation or the supply chain of an airline. That’s why the airline didn’t have proper boarding passes in the beginning. This also resulted in procurement of high prices, lack of supplies and ensuring the services needed. The lack of expertise and people with knowledge of the aviation industry was also a burden on the company.
That plus the lacking funds needed to keep the company is showing how this has been a cash-cow for the officials, the board members and everyone running the company. Everyone have been able to pull the tenders, the procurements and the services to get a quick buck. The state owned company has become a fountain of coins.
The Uganda National Airlines Company Limited is clearly run like a bird with no wings. It is a reason why its an expensive flashy bird, but not really ready to fly. The wings are clipped off and it’s just a spending spree with no end.
The reports of the reckless spending, the operational costs and the arrears from previous years are just growing. Only by the time of 2019 the company lacked UGX 133 billion shillings. Funds required in the budget year of 2020/21 is close to UGX 219 billion shillings. The state budget is already creating a shortfall of UGX 101 billions shillings. The budget was UGX 117 billion shillings. The arrears of the airlines is already as high as UGX 219 billion shillings, which will cover the last two years arrears. This shows how bad things are…
The state run company is clearly not only mismanaged, but been a corrupt fantasy-land.
This bird shouldn’t fly. It isn’t a dream, but a corporate nightmare. Peace.
The National Resistance Movement and President Yoweri Kaguta Museveni have created a negative spiral of debt. The state have taken out more and more debt over the years. The CSBAG, Uganda Debt Network and other organizations have spoken out about this. As the state have the need to pay more in interests and it takes away more from the general budget.
Now the state is saying it has 65 Trillion Shillings in unsustainable debt. That is happening after the Parliament have had sessions over the last few years. Where the only thing they do is to vote over debt and approve more loans to the state for various of development projects, roads and you can wonder if it does anything.
The state is now owning a lot of money. More money than it usually uses in a state budget. The state budgets of late have had half of the revenue coming from domestic taxes and the other either grants or loans. There is also additional supplementary budgets, which is coming in cycles during the budget year. Which is adding more debt… and creating more debt.
There been worry about the rise of debt, but the NRM and the President has said it has been done within reason. However, that is now the chickens coming home to roost. There is enough problems ahead and the state has created this financial conundrum. It has been done deliberately over time.
The Parliament is on the regular issuing now loans… and taking new loans. While hoping one day they have the revenue to actually do these things. The state is spending money and funds it doesn’t have. That is an unforgiving task… and the NRM cannot run away from this.
The NRM have created problem. The appointments of the President is doing this. The Bank of Uganda (BoU) and Ministry of Finance, Planning and Economic Development (MoFPED) should have seen this coming. They have been looking over the expenditures and the interests rates. They know when the grace periods of the loans are over. These folks are the ones who has the oversight and supposed sound judgement to advice the Parliament to accept all these loans. However, that is clearly not the case.
The state is crippling its budgets, overspending and over-loaning funds over time. Now, the creditors and debtors wants their pieces of coins back. They cannot bail on it or default on it. Then the state will not be trustworthy and be credible as a economic broker. The state is clearly struggling and lacking funds. That’s because they are having trouble to raise domestic revenue and have to high costs.
This is a self-inflicted ill-advised debt-cycle. A government not listening to CSBAG, Uganda Debt Network and others. The NRM and Museveni should have done that. It will be harder for them to get solidarity this time around. As the Museveni era of now is destructive. The state actions against its own citizens and totalitarian acts. Is not the ones who makes outsiders forgiving like it did in the early 1990s when Museveni was part of a new group of leaders that the West had hopes in. However, that boat has sailed and the truth has come out. That is why Museveni is still there and depleting the state like there is no tomorrow. This is why the debt is rising and its run without any balance of the budgets. That is why the debt is rising and there is no way out.
They want debt forgiveness. However, getting that now will be a feat, but not sustainable either. As this state will just take out new loans and not re-coup or try to absorb the lack of revenue, which is causing the problem in the first place. That is why the state doesn’t have any liquidity or equity to trade for the lack of revenue. It is just a sinking boat and the captain seems clueless…
Deficit financing can only take that far and now its at the end of that journey. Peace.
The Uganda National Airlines Company Limited (Ltd.) was registered in March 2019, but incorporated on the 30th January 2018. That was done with shares both in the Ministry of Works and Transport (MoWT) and Ministry of Finance and Planning & Economic Development (MoFPED). That happened after scrutiny of it was all operating and who was really owning the company.
With that in mind, the statements or quotes from the Auditor General Reports of February 2021 isn’t helping the company either.
As it states this:
“Whereas Government had invested a total of UGX 934,840,887,000 and reflected it as an investment in the Treasury records at Ministry of Finance, only an amount of UGX200,000,000 was shown as Share Capital in the company statements, the rest of the amount was shown as Share Application Funds. The processes for recognition of the Government investment in the company have not been undertaken to enable appropriate treatment and reporting in the company’s books of account” (Office of the Auditor General, February 2021).
This here proves the problematic aspect of ownership and hows it still not operative. The Company is still not addressing the “owners” and what sort of role the government have in it. Still, the government is providing funds for it and investing in it. But… we cannot know who is owning it and what percentages the state has. That is obnoxious… and outrageous at this point.
It doesn’t help that this is the current results of the company:
“The company was unable to realize its planned revenue, yet the expenditure on operations was way above projected costs. The company only realized US$ 9,985,495 (10.8%) of the project revenue of US$92,863,811. On the other hand, the company incurred expenses that were beyond the planned costs and its actual revenue. For example; the company spent US$29,220,933 on direct costs, US$3,606,965 on indirect costs. As a consequence, the company incurred a net loss of US$27,477,513 in the year” (Office of the Auditor General, February 2021).
The company projections was clearly out of whack, but it also came in a year of the pandemic. So, the help of tourist and tourism to gain passengers went in the wind. However, the company is a pit-fall of money loss and wastage of public funds. They have spent money they don’t have and earned mediocre or nearly nothing while having huge bills. That is not a good way of running business.
It is also striking about who will pick up the bill and who will write-down the losses of this company. As the government involvement and unsure owner structure should make people question whose role is it to pay for the costs, which the company have created last year.
The Auditor General quotes isn’t strengthening the company nor its projections. Only that its a money pit and someone has to cover it. It has a higher burn-rate of cash than what it earns. That is a company running towards bankruptcy. One way or another. The government can save it again. It can save it another time too. However, how much value does it add and what services is the public gaining from such a company?
That is for someone else to answer, but there is no proof of now. That the state or the Republic needs this. It is a vanity project and flying high without money for gas (jet-fuel). Peace.
“By implication, if sh15.7 trillion for debt service-related expenditures is subtracted from the sh21.9 trillion the Government will have generated in revenue collection, it means that 72% of the country’s revenue collection would be spent on debt repayment. The committee raised concern that the high rate at which government is borrowing is not commensurate with the low level of increasing government revenue collection and, therefore, violates the country’s charter of fiscal responsibility. The report indicates that as of June 2020, Uganda’s public debt had reached $15.27b, which is equivalent to sh56.9 trillion. Out of this sh38.9 trillion is external debt and sh17.9 trillion domestic debt” (Moses Mulondo – ‘Govt earmarks sh15.7 trillion for debt repayment ‘ 03.02.2021, New Vision)
The news on how the state got to repay old loans is coming out. As the Ministry of Finance, Planning and Economic Development (MoFPED) have put forward the budget for the Financial Year of 2021/22. This is initially telling stories on the revenue or tax base, which will be preoccupied or used for paying debt repayment.
Just to put things in perspective. This is the definition of ‘Deficit Financing’:
“Deficit financing, however, may also result from government inefficiency, reflecting widespread tax evasion or wasteful spending rather than the operation of a planned countercyclical policy. Where capital markets are undeveloped, deficit financing may place the government in debt to foreign creditors. In addition, in many less-developed countries, budget surpluses may be desirable in themselves as a way of encouraging private saving” (Encyclopaedia Britannica – ‘Deficit financing’ (25.08.2015).
This here is telling the story, which the state media and others isn’t telling. Because, they are borrowing funds to cover up for the deficit. The deficit is created as a result of the rising cronyism and misuse of funds. These funds have to cover the bloated government and its staff. That is why deficit is created to fix the shortfall between the needed revenue and the expenditures of the state. They are using loans to cover and fix the lacking revenue of the state. If the state had enough funds through its tax-base, the state wouldn’t need these loans in the fist place.
However, the state have prolonged with this game over years. The state has used loans to cover its baseline and usage of funds. They have went out for foreign creditors to get enough funding. That shows that the state haven’t been fiscal responsible. They have misused the authority of the state and taken up loans, which now accumulate to over 70% of yearly revenue. While this is happening. The state and the Parliament is still issuing new loans and creating a bigger debt burden. That is what they are doing… and that cycle must stop.
Soon, all revenue will go directly to debt repayment. We know the state wants to have debt relief, but this is self-created by the regime, as they are borrowing for basic commodities and necessities. They are always loaning funds to build development projects and infrastructure, which will be costly. As funds are lost and misused in the building of these. That is why the price of road is so expensive and also projects in general. Therefore, the state is crewed over more than it can swallow.
That is why the state is deficit financing and its become a burden, which it cannot carry. The debt is not sustainable. When 72% revenue is spent on debt repayments. That shouldn’t be a thing, but that is fiscal policy of this regime and apologist cannot hide the fact. They have run down the state and taken up loans they cannot carry. Peace.