Government has discredited reports made by the media that it is planning to borrow a whopping Shs 700 billion to pay salaries for public servants, describing it as an exaggeration.
Finance Minister Matia Kasaija on Tuesday called a news conference to clarify on the facts presented in a news article carried by the state owned newspaper, New Vision yesterday titled ‘Government is borrowing UShs. 700 Billion to pay salaries’.
Kasaija told journalists that the story was inaccurate and erroneous.
“It is erroneous to assume or create the impression that government has no money to pay salaries. I would like to inform the public that this story was an exaggeration of the proposed borrowing that I laid before Parliament,” Kasaija said at a news conference at the Uganda Media Centre.
He said that the large portion of the funds borrowed by government go towards financing capital development and production.
In his clarification, the Minister stated that in his proposal to Parliament, government sought authority to borrow additional Shs 736 billion from the domestic financial market to finance the Budget for the 2017/18 financial year. Of this money, only Shs 48 billion would go towards payment of salaries as opposed to Shs 700 billion as reported by New Vision.
According to the Minister, the total budget required to meet payments of wages and salaries in the entire financial year is Shs 3.58 trillion, Shs 2.70 trillion (75.4%) of which has already been released to cover the first three quarters.
He explained that government’s decision to borrow follows revenue shortfalls experienced in the first half of the financial year.
“In the first half, government revenues recorded a shortfall of Shs 324 billion on account of the following due to lower collections for Value Added Tax (VAT), international trade taxes and income and excise taxes,” the Minister said.
The shortfall in VAT amounted to Shs 139 billion, while Shs 53 billion was lost in uncollected international trade taxes and Shs 144.8 billion in income and excise taxes.
“We are undergoing an economic restructuring which has seen exports grow compared to our imports especially to Kenya, Europe and China. We don’t tax exports as much as we do to imports, so, the bulk of the revenue supposed to come from excise duty was lost,” he said.
Kasaija said that the borrowing will not have a significant impact on the private sector since liquidity in the market currently amounts to Shs 2 trillion and interest rates are curently low.
“It’s important to note that the borrowing will ensure that we meet the financing obligations of on-going infrastructure projects whose certificates will fall due this financial year as well as other statutory obligations such as wages,” he said.
It is therefore, erroneous to assume or create the impression that Government has no money to pay salaries.
It should be noted that government’s approved budget for this financial year, excluding debt and external financing amounts to Shs 12.59 trillion.
So far, Shs 9.94 trillion (79%) has been released.
The Minister reassured that government is undertaking reforms to prevent wasteful spending, beginning with cutting down on foreign travel by public servant.
