By Mulengera Reporters
A troubling report from the Auditor General, presented to parliament on January 15, 2024, has uncovered the significant financial toll that inefficiencies in loan absorption have had on Uganda’s economy.
According to the report, the government paid a staggering UGX 73.9 billion in commitment fees during the 2023/2024 financial year for loans that were not fully utilized. These fees, which are levied on unused credit lines, were associated with unabsorbed loans totaling UGX 1.89 trillion.
This marks a concerning 12.95% increase in unabsorbed loans compared to the previous year.
The report points to several factors that have contributed to this inefficiency, including delays in procurement processes, poor project readiness, and bureaucratic bottlenecks that hinder the timely absorption of loan funds.
Such delays are often the result of inadequate planning and the lack of coordination among the various government departments responsible for project execution.
Despite promises by the government to implement a Project Implementation Management System to ensure that projects are ready for implementation before loans are secured, the progress on this initiative has been slow. This was intended to address the recurring issues with loan utilization by improving project preparedness and reducing the delays that lead to unused loans.
However, the lack of substantial progress in implementing this system is one of the key reasons why Uganda continues to face this financial drain.
The report also raises broader concerns about Uganda’s growing external debt. As of the end of the 2023/2024 financial year, the country’s external debt had risen to UGX 54.36 trillion, with multilateral creditors holding the largest share at UGX 35.15 trillion.
While borrowing can play a critical role in funding infrastructure and development projects, the inability to utilize these loans effectively undermines their intended purpose. Instead of stimulating economic growth, the underutilization of loans leads to wasted financial resources and hinders long-term fiscal sustainability.
The Auditor General has recommended urgent reforms to improve the efficiency of loan absorption, streamline project execution, and ensure that borrowed funds are utilized in a timely and effective manner. A key part of these reforms includes addressing the systemic inefficiencies in Uganda’s debt management practices.
The government must not only focus on borrowing but also improve its capacity to absorb and utilize those loans effectively. As the old adage goes, [A loan that is not used well is a burden that lasts forever]. This warning is a reminder to Ugandan policymakers that their borrowing practices must be closely scrutinized and improved to ensure that the country does not continue to bear the financial consequences of inefficiency.
Addressing these issues is crucial to safeguarding Uganda’s fiscal health and ensuring that borrowing continues to serve its intended developmental purpose.
In conclusion, the Auditor General’s report serves as a stark reminder of the importance of effective project management and loan absorption. Without swift action to address the inefficiencies that have plagued Uganda’s loan utilization, the country risks incurring further unnecessary costs that could drag its long-term economic development. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
