Uganda’s Treasury is seeking to readjust its budget plans and also borrow money from China to fund the Northern Corridor infrastructure projects, which President Yoweri Museveni committed to implementing this financial year.

The EastAfrican has learnt that in its $5.5 billion 2014/15 budget, Uganda, unlike its partners Kenya and Rwanda, did not set aside money for the construction of the standard gauge railway (SGR), electricity transmission lines and the regional commodities exchange that President Museveni signed onto, and which implementing partners are to work in sync.

While in Kigali at the beginning of July, President Museveni, along with his counterparts Paul Kagame of Rwanda and Kenya’s Uhuru Kenyatta agreed that Uganda would start the construction of the Malaba-Kampala section of the SGR by October.

The Heads of State agreed that if Uganda began later than this date, it would affect the other countries’ capacity to meet the March 2018 completion deadline.

Uganda is now talking to the government of China for funding for the Malaba-Kampala section of SGR which is expected to cost Ush4.5 trillion ($1.7 billion).

State Minister for Works John Byabagambi told The East-African that he was “working day and night to seal a financing deal” for the SGR with the Chinese government, but admitted that it is likely to be outside the October deadline. 

“It is difficult to meet the deadline considering that we don’t have financing yet,” he said.

Although Jim Mugunga, the spokesman for the Ministry of Finance, said Uganda is committed to implementing the SGR project in line with the presidents’ directive, and that Treasury would work towards ensuring this happens, it is not clear how it is possible without borrowing and asking parliament to approve a supplementary budget.

But an official in the Ministry of Finance who requested anonymity said Ugandan bureaucrats only agreed to the October deadline “to please President Museveni, but there was no intention of delivering on this target,” adding that the money for the SGR is likely to be made available in the next financial year.

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The official argued that it is a long process before Uganda completes negotiations for the loan with the Chinese government as it involves getting approvals from the Parliamentary Committee on National Economy.

“At the minimum, the parliament process takes 45 days,” the official said.   

Equally, while the process of setting up the commodities exchange is expected to start in November, officials at the Ministry of Trade say this was not provided for in the 2014/15 budget.

Uganda, Kenya and Rwanda are also expected to contribute $2 million for a study meant to address the standardisation of regional interconnection of transmission lines. The study, whose funding is also not provided for in the Uganda Electricity Transmission Company Ltd budget, has to be concluded by April 2015.

The three countries have to also finance the move by Kenya’s Ministry of Education, Science and Technology to procure a regional skills audit for the SGR at a cost of $420,000.

With no budget allocations to cover these projects, borrowing is the only option, yet technocrats in the Ministry of Finance as well as economists are jittery over Uganda’s borrowing spree and its effect on economic growth.

“I am hoping the government won’t have to implement these projects within this financial year because it would mean escalating our fiscal deficit,” said George Bogere, a research fellow in charge of budgeting at the Advocates Coalition for Development and Environment.

In the 2013/2014 financial year, Uganda’s fiscal deficit stood at -9.1 per cent from -5.6, way above the desirable figure which the Ministry of Finance says should be -5 per cent, a fact that could have played a role in the country’s reduced economic growth.

Uganda’s economy grew at a rate of 4.7 per cent compared with 5.8 per cent in the previous financial year.

The reduction in growth is attributed to low investment by the private sector in a year when the fiscal deficit increased and government borrowed heavily from the domestic market.