Despite a government promise to pay about $41 million’s worth of debt to Ugandan suppliers on behalf of South Sudan, Kampala has to navigate a number of hurdles before any payment can be made.

Highly placed sources in the government say at least three major obstacles stand in the way of the promise made last year as distressed businesses turned to Kampala to seek relief.

A key challenge the officials reveal, is that to make the payment, the government requires parliamentary approval, which officials fear will not be easy to get.

Finance Minister Matiya Kasaija and his deputy David Bahati have told The EastAfrican in separate interviews that getting parliamentary approval is critical for any payment to be made.

“I need parliament’s approval,” said Mr Kasaija, adding, “I am still calculating how I will present it; I am not sure how parliament will react.”

On his part, Mr Bahati said, “We need to go to parliament first.”

Empty coffers

The other major obstacles are empty coffers and a heavy domestic debt. Mr Kasaija admitted that the two presented a problem.

“Where is the money? I don’t have it,” he said, before admitting that it could prove difficult to justify payment of debt incurred privately by a foreign government when billions are owed to domestic suppliers.

In last year’s budget, the government committed at least Ush6 trillion towards debt repayment in general but made promises to scale down domestic debt.

Officially, Uganda’s debt obligation stands at about 36 per cent of GDP, the bulk of which — about 20-25 per cent — is domestic borrowing and unpaid for services and supplies.

Many analysts say the actual debt obligation could be much higher and accuse both the government and some of the country’s major donors, especially multilateral financiers, of playing with the debt calculation models to arrive at an acceptable percentage that shows the country is in a safe zone and therefore able to incur more debt.

Rationale

But whatever the figures, officials fear parliamentarians will question the rationale behind the government’s keenness to take on another government’s debt obligations.

Mr Kasaija admitted that President Yoweri Museveni’s pledge to his South Sudan counterpart and to the affected Ugandan business community was a concern even internally.

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Mr Bahati said the $41 million debt represents only verified claims, meaning that the actual figure could go even higher.

The idea of bailing out distressed traders, many of whom blamed the outbreak of war and the subsequent failure of the Juba government to pay them for their woes, attracted animated debate, much of which was opposed to using taxpayers’ money to pay off this debt.

Too broke

South Sudan gained Independence in 2011 and became the world’s youngest country. However, it has been plagued by civil conflict. It broke away from Sudan after years of struggles by the peoples of the South who resisted the domination of the North.

However, political disagreements between President Salva Kiir and former vice president Riek Machar led to an outbreak of fresh fighting in December 2013.

War, a plunge in global oil prices and high levels of corruption compounded South Sudan’s problems, making it difficult for the young country to raise money let alone pay both domestic and foreign suppliers.

The EastAfrican understands that several delegations have been shuttling between regional and international capitals to negotiate ways to ease the financial pressures.

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In Kampala, South Sudan’s Finance Minister and Central Bank Governor are reported to have negotiated with the government to take over the debt, pay the traders so that supplies can resume to that country, while the debt becomes a government-to-government obligation.

However, Mr Kasaija said there is some hope for the Juba government and the Ugandan traders as negotiations with PTA Bank are ongoing and could offer a breakthrough.