Developing countries rely on international borrowing to finance special projects, and infrastructure and to compensate for the needed revenue. Due to natural disasters like heavy rains, mudslides have adversely affected aid to trade like roads, where even the paved ones have either developed potholes or narrowed hence causing accidents.
Even the murram ones are already in poor shape yet they help to transport farmers’ produce hence informing policymakers and economists to borrow in order to bridge that gap at a time when government earnings have shrunk due to covid 19 impact. That’s how borrowing can also smoothen national consumption.
Is it sustainable to borrow?
The ability of a sovereign government to borrow on international credit markets depends on its perceived ability to repay and on the incentives it will have to do it (Gelos, Sahay and Sandleris, 2004). Furthermore,
creditors are only willing to extend credit based on the creditworthiness of the country. There is no lender who can extend credit to you when he wants you to default which means that Uganda has a healthy outlook in the medium and long term. With oil exploration in the pipeline plus other resources like gold, Uganda becomes attractive to lenders like Stanchart bank.
How it is good for Parliament to approve loans.
Article 79 of the constitution provides for the main function of Parliament, which is among others is to approve loans like the Ugx 1.7 trillion which government wants to borrow in order to plug the budget.
In conclusion, by Parliament approving government’s request to borrow to increase the UNRA budget for roads, they are doing it for Ugandans who keep pestering them to make for them roads on their meagre salary. At the end of the day government programs like PDM, Emyooga which are premised on agriculture and trade will be stifled because of poor roads.
In summation, this loan will reduce the pressure on members of Parliament’s wallets because they don’t want to disappoint voters. This loan will also help the government attain their development targets like Vision 2040.
Ben Ssebuguzi is the Secretary-General, Uganda Poor Youth Movement (UPYM), a 2019 Public Opinions Certified Public Awareness and information dissemination fellow, and a July 2022 Chartered International Business Leadership Fellow by Public Opinions.