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Why Museveni rejected 11 loans

Deputy Premier Kivejinja says president wrong on IUIU

President Museveni’s letter to the minister of Finance, rejecting 11 out of 27 loans that Uganda has applied for was precipitated by the government’s decision to streamline the loan application process, The Observer has learnt.

In his June 19 letter to Minister Matia Kasaija and copied to Speaker of Parliament Rebecca Kadaga, Museveni questioned the usefulness of some of the listed loans and advised his ministers to always seek his endorsement before getting new loans.

A minister has told us that a decision was taken in cabinet about four months ago, to scale back on acquiring loans, following concerns that some of the older loans had not been used for the intended projects.

According to this minister, during one of the cabinet meetings chaired by the president, it emerged that some ministries knew little about the loans ministry of Finance had procured on their behalf.

“Previously, ministry of Finance would process loans without consulting the relevant ministries and because the user ministries had not been consulted, money would come when they are not ready to use it on projects for which it has been borrowed,” the minister explained.

President Museveni with Finance minister Matia Kasaija

Consequently, many loans remained unutilized, yet government had already committed itself and thus had to pay interest on the money. This, the minister told us, was partly responsible for the World Bank decision to suspend funding to Uganda a few years ago.

One such loan, we have been told, was $100m (Shs 340bn) meant for construction of classrooms in selected schools. That money was reportedly borrowed at a time ministry of Education and Sports was not ready to use it.

Another loan of $25m (Shs 75bn), which was borrowed under the Competitiveness and Enterprise Development Project (CEDP) of the ministry of Tourism reportedly suffered a similar fate. About $13m (Shs 39bn) of the World Bank-funded CEDP project was to upgrade the Jinja-based Crested Crane Hotel and Tourism Training Institute to a five-star facility.

Since the user ministry had not been consulted, coupled with the unstable exchange rates, by the time the ministry got ready to use the money, “it was only enough for a three-star facility.”

The minister further revealed that government borrowed $183.7m (Shs 551.3bn) for the second Kampala Institutional and Infrastructural Development Project (KIIDP II) without the knowledge of the minister for Kampala.

With such cases becoming commonplace, cabinet resolved that the ministry of Finance should only play its supervisory role in the management of the loans and leave requests for loans to originate from the user ministries.

Nevertheless, cabinet went ahead and endorsed the 27 loan requests that were subsequently tabled for parliamentary approval in May. The president’s objection to 11 of the 27 loan requests has taken some ministers by surprise as they believed he was well aware of the details, having been part of the cabinet meetings that approved them.

Museveni’s four-page letter to Kasaija argued that some of the requested loans would not add value to Uganda’s economy.

“Cabinet approved those loans; there is no way a loan request can come to parliament without first being approved by cabinet,” a minister said.

While the letter was copied to all ministers, some reportedly learnt of it in parliament after Kadaga read it out on July 11, directing the National Economy committee to drop the 11 discredited loan applications.

Museveni’s letter was a response to minister of State for Planning David Bahati who had written to the president on May 24, consulting him about the said loans.

In his letter, Museveni said Bahati had done the right thing to update him, saying other ministers should be following the same procedure with respect to loans.

On his part, Bahati said his intention was to appraise the president on the progress of the loan application process.

“I wrote to update him about the loans we were procuring at different levels and different ministries so that he can guide us,” Bahati said on Wednesday, July 12.

Asked to comment on claims by some of his colleagues that they weren’t informed of Museveni’s objection, Bahati declined to address those concerns, simply saying, “the most important thing is he has now offered guidance. There’s nothing more I can say.”

Opposition Chief Whip Ssemujju Ibrahim Nganda said Museveni’s loan stance is an attempt to save face in light of Uganda’s heavy debt burden.

The Kira municipality MP, who was outspoken during the parliamentary debate on government borrowing at the end of the 2016/17 financial year, said the president likes to create an impression that he doesn’t sit in his own cabinet and doesn’t know what goes on there.

“Museveni speaks as if he is in opposition of his own cabinet, because loans are debated by cabinet,” Ssemujju pointed out.


Among the loans President Museveni objected to is $13.79m (Shs 49.6bn) from the Islamic Development Bank (IDB) for the establishment of a faculty of Technology at Islamic University in Uganda (IUIU).

Museveni argued that government cannot guarantee borrowing by a private university.

“This is a private university; if we guarantee their loans, how about others like [the Uganda Christian University] Mukono, [Uganda Martyrs University] Nkozi, Ndejje, etc?” Museveni wrote.

The president might have forgotten that unlike other private universities, IUIU was set up by a statute following an agreement with the Organization of Islamic Cooperation (OIC); and that is what Second Deputy Prime Minister Ali Kirunda Kivejinja sought to remind him of.

Kivejinja said government loan guarantees are part of the agreements Uganda entered into with the OIC when Uganda agreed to host the university.

“Unless we are to repudiate on our agreements with OIC, we can’t refuse to guarantee that loan. The relationship between government and the OIC is very clear, and the status of OIC is also very clear.

“IUIU is run under a different statute which was passed by parliament,” Kivejinja told The Observer on July 12.

Kivejinja, who is also vice chairman of the IUIU Council, said he would follow up the matter.

“IUIU is not like the other private universities because according to the [IUIU Act], government has a say in its affairs, government appoints two people to its council,” Kivejinja added.



0 #1 Kabinda 2017-07-17 13:44
This president and minister of everything....When did he become minister of loans?
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