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Minister Musasizi (R) appearing before the committee on the request
Request for insurance premium on existing loan queried
A request by the Ministry of Finance, Planning and Economic to acquire an extra loan to cater for an insurance premium on a running loan aimed at financing the development of industrial parks has come under scrutiny by Parliament.
While appearing before the Committee on National Economy, the Minister for Finance, Planning and Economic Development (General Duties), Hon. Henry Musasizi, presented an addendum to a proposal to borrow Euros162.4 million from the EXIM Bank of China to supply and extend power transmission lines to industrial parks.
Musasizi said the loan that was approved Parliament on 30 June 2020 did not account for insurance premium of 7.06 per cent (Euros17.29 million) on the loan principal and interest.
“The Sinosure insurance fee is a prerequisite for securing commercial loans from China EXIM Bank, as it offers export credit insurance to safeguard against sovereign defaults and payment delays by the borrowing country,” Musasizi added.
Legislators, however, questioned the addendum to the loan.
Hon. James Baba (NRM, Koboko County) said the delay in applying for the insurance premium on the loan is suspicious.
“At the time of borrowing in 2020, this insurance scheme was not there. How come it is being brought almost four years later? What happened?” Baba asked.
Hon. Allan Atugonza (Indep., Buliisa County) questioned the competitiveness of the loan request saying it would become expensive to government in the long run.
“We are seeing a trend of Sinosure where people get loans that look competitive and they get contracts, and thereafter come with such a request. If you [Ministry of Finance] put this Sinosure request together with the cost for the other loan, are they still the lowest bid?” Atugonza asked.
Committee Chairperson, Hon. John Bosco Ikojo asked the minister to explain why the interest on the loan is also being insured.
“I want to ask the Ministry of Finance to appraise Members of Parliament about the whole process of Sinosure, because it poses a lot of question marks. It has taken five years since the loan was approved; to ask for the insurance, s creates a lot suspicion,” Ikojo said.
Katikamu County South MP, Hon. Hassan Kirumira said the grace period for payback of the loan of five years was short, noting that government would commence paying the premiums before the project has been implemented.
The Commissioner, Development Assistance and Regional Cooperation at the Ministry of Finance, Juvenile Muhumza said the request for the premium delayed to be presented due to extensive engagements with EXIM bank.
“After the loan had been approved by Parliament, we requested the Attorney General to clear it for signature. When he went through the agreement, he found a number of things that he thought were unfavorable. So for the last three to four years, we have been discussing with China EXIM Bank in an attempt to remove some of these unfavourable clauses,” Muhumuza said.
The loan that was approved in 2020 was meant for extension of electricity to industrial parks in Kampala, Soroti, Jinja, Kasese, Mbale, Karamoja, Mbarara and Tororo districts.
Source:Parliament of Uganda