Finance Miniter Matia Kasaija denied ever granting permission for the tax.

The Government in partnership with commercial banks and other financial institutions has revised the Agricultural Credit Facility (ACF) with emphasis on helping smallholder farmers in Uganda access loans that they can manage to pay back at 12 percent interest.

David Kalyango, the Chief Internal Auditor in Bank of Uganda (BOU), said commercial banks have given out loans worth Shs261.3b since government launched the ACF in 2009. But the funds, which government guarantees 50 percent, have gone mainly to clients who borrow above Shs100 million, he noted.

So far 416 eligible projects have received the funding, and according to Kalyango banks do not pay any interest on the money acquired from government under this arrangement. He said this meant to encourage them lend to agriculture sector but also that the sector has many investment risks.

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Kalyango also said that the ACF total loan portfolio grew by 5.20 percent in the last quarter of 2017/18 to Shs261.3b from Shs24.41b.

Government, he said, hopes that attracting smallholder farmers to the ACF will help them commercialise their enterprises as loans will be used to purchase farm equipments, livestock, pesticides, fertilizers build warehouses and silos but also loans can be used in value addition.

Kalyango says ACF has helped the country increase agricultural exports but also helped create employment. With smallholders coming onboard, Kalyango hopes more employment will be created.

He says government will soon begin a nationwide campaign popularizing the existence of the ACF. The Ministry of Finance allocates taxpayers money to this facility whose account is in BOU.

But for farmers to benefit from this loan facility, they will have to organise themselves, including keeping financial records as well as operating bank accounts.

Meanwhile, of the Shs261.3 billion disbursed, government contributed Shs130.56 b while commercial banks and other financial institutions contributed 130.77b. The banks have already repaid 73.13b to BOU as proceeds from projects financed under ACF, which is a revolving fund.

Also, repayment of loans by December 2017 increased by 125 percent from Shs2.4b to Shs5.56b.