UMEME Buyback: Why Are We Rushing to the Bankers’ Table When Ugandans Are Holding the Cheque Book?

Uganda Today Edition: UMEME Buyback: Why Are We Rushing to the Bankers’ Table When Ugandans Are Holding the Cheque book?

By Apollo Buregyeya

The Ugandan government is poised to reclaim UMEME, the country’s electricity distributor, at a staggering price of UGX 700 billion that was substantially reduced to about 500 billion after the intervention of the Auditor General’s Office and Parliament. The chosen financing method? A commercial bank loan. However, just days ago, Ugandans voluntarily lent over UGX 1 trillion to the state through an oversubscribed treasury bond auction.

So why are we bypassing the people?

The Case Against Bank Loans

Commercial bank loans are akin to payday advances—short-term, high-interest, and rigid. They come with significant risks, including fluctuating interest rates and limited flexibility. On the other hand, treasury bonds provide a stable and long-term financing alternative. These instruments offer patient capital with extended repayment periods and predictable interest rates, eliminating the volatility that comes with commercial lending.

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Moreover, borrowing from banks has direct repercussions on Uganda’s private sector. When the government competes for credit, interest rates rise, reducing access to financing for businesses and entrepreneurs. The private sector suffers, and economic growth slows. But when government raises funds through treasury bonds, it strengthens the financial ecosystem by allowing pension funds, insurance companies, SACCOs, and even ordinary savers to participate in national development.

Transparency Matters

Another key distinction between bank loans and treasury bonds is transparency. Commercial bank loans are often arranged behind closed doors, with terms known only to a select few. Treasury bonds, in contrast, are auctioned publicly under the oversight of the Bank of Uganda and scrutinized by Parliament, ensuring accountability. There are no hidden clauses or shadowy agreements—only an open, regulated process.

The Forex Factor

A crucial but often overlooked detail is the currency of the loan. If the government borrows from a commercial bank, the loan will likely be in U.S. dollars. This exposes Uganda to foreign exchange risk: if the Ugandan shilling depreciates, the repayment amount skyrockets. Treasury bonds, however, are issued in local currency, shielding the country from external currency shocks.

The Bigger Picture: Economic Patriotism

Every shilling paid in bond interest returns to Ugandans. It funds education, expands businesses, pays rent, and fuels daily commerce. This is money that stays within the economy, strengthening national financial resilience. In contrast, commercial loan repayments mostly benefit foreign stakeholders, draining resources from the local economy.

The UMEME buyout is more than a financial transaction. It is a test of Uganda’s economic vision and sovereignty. Do we trust Ugandans enough to let them co-own the infrastructure they rely on? The people have already shown their willingness to invest in their country’s future. Now, the government must decide whether to embrace this homegrown capital or continue feeding financial institutions at the expense of national prosperity.

Ugandans are not just electricity consumers; they are potential co-investors in the grid. The question is: will we let them be?

Published by www.ugandatoday.co.ug, your trusted source for news and analysis

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