A letter dated to the 7th November 2022 by the Minister of Finance, Planning and Economic Development, Matia Kasaija was leaked titled “Request for Proposal to Finance the Government of Uganda Budget for the FY 2022/23”. In that letter, the Minister is specifying the needs to borrow €500 million euros. When you convert this to Ugandan Shillings it ends up being 1,957,704,000,000 or about UGX 2 Trillion Shillings. That’s a lot of money that the Government and the MoFPED needs to borrow.
This is the definition of deficit financing. The cycle of bad loans in combination of lacking domestic revenue. The only way to be able to cough up funds for the short-fall in the short-term is to add additional loans. So, the cycle continues, the state take one loan after another. Loans upon loans to cover for the old loans. While also borrowing more money to be able pay expenditure and government expenses.
That’s why the idea that the MoFPED is asking for this now isn’t surreal. It is the bleak reality and the misfortune of a bloated government. The government has to many entities, to many representatives and a local government structure, which is too expensive. Expensive in the sense, that the government cannot foot the bills and don’t have the revenue to carry the expenses. That is living lavish and someone else is picking up the tab.
We already know the state is running out of loss, when the budget was forecasted with a huge leap of faith that grants and such would cover about 40% of the budget. That is telling and it’s really showing the lack of it when the state this early in the Financial Year needs another 2 trillion shillings loans to cover it’s expenses.
The MoFPED wouldn’t call for this loan and at these levels… if they didn’t know there was a short-fall or a lack funds. There is deficit and that’s not shocking. It is just worrying that it’s happening at this extent and is so normalized. While we are seeing the 11th Parliament is following where the 10th Parliament left off. Accepting loans after loans on development projects and other additional expenses, which only creates a huger debt-burden down the road. These roads or infrastructure projects has to be covered and they are not money generating enterprises. Therefore, the cost of doing it will be ten-fold in the long run. Especially, when you don’t have money for the upkeep or the ones doing the day-to-day works on it.
That’s why you know the latest revelation of this loan is just concerning. It is not a winning bargain, but a proof of mismanaged and lacking progress. When the state cannot sustain itself or be able to get a tax-base to cover these expenses. That’s because the state is wasting funds on paying for old debts and interests, which are far over the grace-period. Peace.