The government can only borrow $1.8bn out of the total $8.5bn required for the standard gauge railway project due to concerns that our economy might not sustain too much debt, Keith Muhakanizi, the secretary to the Treasury, told MPs yesterday.
Muhakanizi said Uganda would then have to forego $6.69bn from China’s Exim bank so that our public debt does not exceed half of the country’s GDP– a threshold economists believe should not be passed for better economic governance. Uganda’s public debt (domestic and external) stands at about $10bn while our GDP is $24 billion after the economy was rebased last month.
Muhakanizi had been summoned by a select committee investigating the controversial railway project, to clarify the contents of his letter dated November 5 and addressed to the permanent secretary, ministry of Works and Transport.
In the letter, Muhakanizi wrote: “The effect on Uganda’s economy debt sustainability of contracting the entire $6.69bn immediately is Uganda’s debt to GDP ratio will rise 84.1% much higher than the prudent level of 50%”.
Parliament is investigating circumstances under which the Chinese Harbour Engineering Company (CHEC) won the $8.5 billion deal to upgrade and expand Uganda’s railway system to a standard gauge.
This followed the controversial cancellation of a memorandum of understanding government had signed with another Chinese firm, China Civil Engineering Construction Corporation [CCECC), to undertake the same project.
Muhakanizi told the MPs that while the railway project was an urgent matter, the country had to be careful not to accumulate too much debt. He said cabinet had agreed with the ministry of Finance on this matter and was in the process of reviewing the project cost.
Muhakanizi said that Cameroon and Tanzania undertook similar projects in their countries, but the costs incurred per unit were relatively lower compared to the estimated unit costs in Uganda.
Meanwhile, the proprietors of China Civil Engineering Construction Corporation [CCECC) will have to testify before the committee after summons were forwarded to them through police.
“We expected to have CCECC, but they told us that they are not interested in hearing anything from the Parliament of Uganda regarding the standard gauge railway, but we have decided to invoke our powers given to us in Article 90 (3)(C) of the Constitution to force any witness to appear before this committee and the summons are ready because it’s not their choice to come, and we feel that there is something they are hiding from the committee,” said MP Kafero Ssekitoleko, the committee’s chairperson.
Source : The Observer