Deputy Speaker, Thomas Tayebwa defended the highly commercialized Euro126.44 million (Shs534.91 billion) loan from CitiBank, for the construction of the 97-kilometer Lusalira- Lumegere- Ssembabule Road, saying globally, there is no longer cheap money in the world and Ugandans should either forget about cheap loans or forfeit borrowing, adding that he is also struggling to get cheap loans to fund his personal businesses.
Tayebwa made the spirited defense for the controversial loan during yesterday’s plenary sitting, despite warning by the Committee on National Economy that the loan had many unfavorable terms, including the demand by Ugandans to pay all taxes associated to the loan, which would thus drive the cost of this road project to Shs627.309 billion.
MPs disregarded the recommendations by the Committee on National Economy to have only Shs38.8Bn approved as insurance fees for the 60% loan facility from China and exempt the insurance charge on the 40% funding to be met by the Government.
John Bosco Ikojo, Chairperson, National Economy Committee while reading the report recommended that, “Uganda National Roads Authority (UNRA) renegotiates the contract with Chongqing International Construction Corporation (CICO) with a view of reducing the insurance cost by 40%, thus reducing the total cost, inclusive of VAT from Shs64,779,400,239 to Shs38,867,640,143.”
However, Deputy Speaker Thomas Tayebwa disagreed with the Committee’s recommendation noting, “Then I am seeing the one for insurance, you approved the loan here and then you are saying you can’t approve the insurance component, and then it means you have to recall the whole loan.”
The Committee faulted UNRA usurping powers of Parliament when the Authority committed the addendum as part of the contract with the Chinese Contractor, and subsequently, a commencement letter was issued for the contractor to kick start major works in July 2024, an action MPs say was done in contravention of section 23 of the PFMA which states that no entity shall enter a multiyear commitment without approval of Parliament.
“The Committee had a discussion with the Minister of Finance and got assurance that the Government will prioritize payments to the contractor after the two year’s grace period. With this assurance, the Committee is confident that the government will finance the 40% of the project cost in time to avoid delays in the project implementation, since debt service is given a priority in the available resource envelope. This means that insurance will only be on the 60% of the project cost which the contractor will borrow,” said Ikojo.
However, UNRA defended the need for the full insurance coverage of the loan, saying that this will allow Sinosure to cover 100% of the Contract price such that in case of any delays or failure to pay by government of Uganda in fulfilling the contractual financial obligations, the Contractor will continue undertaking the works to completion as they wait for payment.
Yesterday night, Parliament also cleared the request by Government to pay an extra cost of Shs64, 779,400,239 in insurance fees for the loan facility acquired by the Chinese contractor for the Masaka-Mutukula Road, a move that will see the cost of the project increase from Shs691.68 billion to now Shs751.002 billion.
