Ugandans to Pay Extra Shs 162bn in Taxes for Umeme Loan
kakooza Peter
Friday, March 21, 2025
Uganda’s Parliament has approved a government plan to borrow US$190 million (about Shs 699.938 billion) from Stanbic Bank to buy out Umeme, the power distribution company. This decision was made even though the Parliament’s Committee on National Economy and the Auditor General had advised against it.
The Committee report, read by its chairperson John Ikojo, recommended halting the loan until the Auditor General could confirm the actual amount that government owes Umeme.
“Given that the Auditor General has not determined the final buyout amount and considering the period remaining to come to the end of LAA, the Auditor General expeditiously reconciles with ERA and UEDCL to determine the final UMEME buyout cost and submit to Parliament to guide approval of the loan request. Given the above observations, the Committee recommends that the Government proposal to borrow up to Euro equivalent of USD 190,988,556 from Stanbic Bank for the UMEME buyout be halted until the report of the Auditor General is presented to Parliament,” Ikojo added as he read the Committee report.
Ikojo told MPs that the amount government wants to borrow—US$190 million—is far more than what Umeme hasn’t recovered, which is US$127.66 million (Shs 467.863 billion).
“Electricity Regulatory Authority (ERA) indicates that their initial estimate of the Umeme buyout amount in September 2023, communicated to the Ministry of Energy was US$225.75 million and it has since reduced to US$127.66 million in March 2025,” he said.“The amount keeps changing based on the additional investments made by Umeme and recoveries from the end user tariffs. The total estimated investments by Umeme as approved and verified by ERA amount to US$746.798 million inclusive of US$10.84 million to be invested by end of March 2025. The total amount recovered by Umeme US$625.22 million leaving a balance of US$127.66 unrecovered,” he added.
Ikojo revealed that Ugandans will pay a total of US$235.41 million over five years, meaning US$40 million (about Shs 162 billion) will be paid in interest.
“The present discounted value of the loan of USD 213.37 million is higher than the nominal value of the loan USD 190.988 million. This implies that the total future payment of the loan is costlier than the proposed amount to be borrowed in present terms. The total future payment of the loan will amount to USD235.41 million after the loan period of 5 years. The loan is Commercial since its grant element (-11.7%) is significantly lower than the concessional limit of 35%,” he said.
He also said Umeme had initially asked for Shs 864.791 billion as compensation.
“In line with the Lease and Assignment Agreement, Umeme submitted a claim of US$ 235,978,667 (Shs 864.791) which is above the US$225.75 million earlier estimated by the Ministry of Energy and Mineral Development. The draft special audit report for end of the Lease and Assignment Agreement between Umeme and UEDCL has estimated the buyout amount at USD 190,988,566.”
During the debate, MP Denis Oguzu raised questions about other funding options that government ignored. He asked why the money couldn’t come from the Escrow Account, where Umeme has been depositing rent and income, or the Liquidity Facility mentioned in the Umeme licensing agreement.
“In the Leasing and Assignments Agreement, there is an account called the Escrow Account on which Umeme has been paying rent and other incomes. To date, nobody in this country knows what that account is holding and yet this same agreement provides that if there are any obligations, they can be paid from that account,” said Oguzu.“There is what we call Liquidity Facility in the Leasing and Licensing Agreement. What that facility does, if Government isn’t ready to meet any obligations to Umeme, the guarantee under that Facility can actually be evoked. Up to now, we can’t understand why we have chosen to do borrowing when the option,” Oguzu wondered.
However, some lawmakers supported the government’s plan to borrow. MP Abdu Katuntu criticized those who signed the Umeme deal years ago.
He said that those who negotiated the Umeme deal on behalf of Ugandans were incompetent, adding that if government must borrow the money, pay Umeme off, and the company exits Uganda’s power sector.He said that if money is not paid on time (March 31, 2025), it will attract interest on it.
The Attorney General, Kiryowa Kiwanuka, warned of even heavier interest charges if payment delays.
“If we fail to pay by the 31st of March, it will be 10% (interest) for the first 30 to 45 days, 15% from 46 to 90 days, and 20% after 91 days,” the Attorney General said.
Finally, despite the objections, the Speaker Anita Among called for a vote, and the majority—mainly from the ruling NRM party—approved the loan request.
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