Parliament has approved the Ministry of Finance’s request to borrow Shs700 billion to facilitate the government’s buyout of private electricity distributor Umeme Limited.
The decision was made on Thursday evening during a session chaired by Speaker Anita Among, following intense debates among legislators and Finance State Minister for General Duties, Henry Musasizi.
Opposition to the Loan Request
Several lawmakers opposed the loan, aligning with minority reports from the National Economy Committee that recommended pausing the borrowing process.
The committee argued that the final buyout amount had not been determined by the Auditor General, Edward Akol, and advised that the loan request be delayed until the audit process was completed.
“Given that the Auditor General has not determined the final buyout amount, he should expeditiously reconcile with the Electricity Regulatory Authority (ERA) and the Uganda Electricity Distribution Company Limited (UEDCL) to establish the final cost.
Parliament should only approve the loan once this report is presented,” said John Bosco Ikojo, Chairperson of the National Economy Committee.
He further recommended that the government halt borrowing up to the euro equivalent of USD 190,988,556 from Stanbic Bank until the Auditor General’s findings are available.
Government Defends Urgency of Loan
In response, Minister Musasizi defended the loan request, stating that it was based on a draft audit report from January 2024.
He assured lawmakers that the government would only disburse funds verified by the final audit expected by March 31, 2025.
“Once the loan is approved, the government will only pay the verified and approved amount. If the required payment is lower than the estimated sum, the excess loan amount will be canceled and will not contribute to the national debt,” Musasizi said.
Despite his assurances, the loan request sparked heated debate, with some MPs expressing skepticism about the government’s financial planning.
However, a faction led by MPs Abdu Katuntu and Faith Nakut supported the loan, warning that delays in the buyout could trigger an energy crisis.
Ultimately, Speaker Among called for a vote, and the loan request was endorsed by Parliament.
Civil Society Raises Red Flags
The Civil Society Budget Advocacy Group (CSBAG) criticized the government’s decision, warning that the loan would significantly add to Uganda’s growing debt burden.
“The Umeme buyout loan exacerbates concerns over debt sustainability. Borrowing on non-concessional terms will result in higher interest rates and shorter repayment periods, placing further strain on the budget,” CSBAG stated in its report.
The organization also questioned the timing of the loan request, highlighting that it was being processed just days before the buyout deadline.
CSBAG suggested that this urgency raised concerns about the government’s true motives, especially given the penalties for delayed payments.
Challenges in Readiness for Takeover
On Tuesday, two days before the loan was debated, Energy Minister Ruth Nankabirwa admitted to the House Committee on Natural Resources that the government was uncertain about the exact amount required for the buyout.
Similarly, the Electricity Regulatory Authority (ERA) CEO, Ziria Tibalwa, raised concerns about the government’s readiness to assume control of Umeme’s operations.
She noted that the Uganda Electricity Distribution Company Limited (UEDCL) lacked the necessary funds and infrastructure to take over distribution.
“We are not even prepared with the USD 50 million required for UEDCL to start operations, let alone addressing issues in the Concession Agreement that restrict immediate takeover,” Tibalwa informed the committee on March 18.
As the buyout process moves forward, concerns remain about financial transparency, debt sustainability, and the government’s capacity to smoothly transition to state-led electricity distribution.
The coming months will determine whether this controversial loan will effectively facilitate a seamless takeover or exacerbate Uganda’s financial strain.
