Parliament’s Public Accounts Committee (PAC) has recommended the censure of minister of Finance Matia Kasaija for misleading government in obtaining $200m Preferential Trade Area (PTA) loan ‘by false pretense’.
PAC further recommended that the Secretary to Treasury, Keith Muhakanizi also be relieved of his duties for superimposing his authority during the processing of the said loan.
The recommendations to parliament are carried in the PAC report on the acquisition and utilization of the $200m PTA loan. The report was tabled before parliament yesterday, Wednesday afternoon by PAC chairperson Angelline Osegge.
PAC last year probed the utilization and disbursement of the PTA loan, in which ministry of Finance is accused of failing to disburse the money to the rightful beneficiaries even after the money was released by PTA Bank.
The loan proposal had originally been rejected by parliament on 7th January 2016, but ministry of Finance changed the objective of the loan, emphasizing medical supplies to get the required parliamentary approval on April 26, 2016.
The money was also meant to finance a shortfall in domestic revenue that was projected at Shs 288 billion for FY 2015/2016 and substitute domestic borrowing to the tune of Shs 280 billion.
The loan was also meant to ease finance expenditure pressure, resulting from the exchange rate depreciation in FY 2015/2016. Despite the loan approval and acquisition, National Medical Stores (NMS) to date is yet to get the Shs 156 billion from the loan to purchase drugs.
Since 2011, NMS is faced with a financing deficit of Shs 68 billion caused by fluctuations in foreign exchange which has inadvertently affected medical supplies in government health facilities.
“The minister of Finance, Planning and Economic Development by false pretense impressed upon parliament in the justification for the loan approval stating the critical area for funding was medical supplies by NMS, the finance minister thus received the money fraudulently” reads part of the conclusions of the committee report.
Osegge told parliament that although Finance had received the funds, they had not released the Shs 68 billion to NMS as earlier on claimed by the ministry. And that even after more loan funds were released, the concerned beneficiaries were neither informed nor given the funds.
“In a letter to the Speaker of Parliament of 15th March 2017, the minister of Finance lied that the necessary contracts had not been provided by NMS to enable the necessary funds to be disbursed. The minister did not reply to the letter of the governor of the Bank of Uganda rejecting the loan proposal despite the concerns clearly raised,” further reads the committee report.
In a letter dated February 2, 2016, Bank of Uganda governor Emmanuel Tumusiime Mutebile advised Finance minister Matia Kasaija and the Secretary to Treasury Keith Muhakanizi not to proceed with the borrowing.
“I understand that you are intending to re-submit to parliament the request for authorization to contract a revolving loan facility of $200 million from the PTA Bank. I would strongly recommend that you do not proceed with this proposed borrowing,” read part of Mutebile’s letter seen by this publication during PAC’s investigation.
In his letter, Mutebile listed four reasons why ministry of Finance did not need to proceed with the loan, saying that the primary motivation for contracting the PTA Bank loan was to stabilise the exchange rate in the face of temporary shocks. Mutebile in his letter said that the balance of payments problems facing the economy were not purely temporary.
Mutebile further said that the temporary balance of payments facility which was then envisaged in the PTA Bank loan, was not the appropriate tool for addressing economy problems. The governor also noted that the Central Bank always intervenes in the foreign exchange market to stabilize short-run volatility whenever it is warranted.
“The BOU has more than sufficient foreign exchange resources to support these interventions; our reserves currently amount to $2.8 billion and we do not require additional resources mobilized from the PTA Bank loan for this purpose,” Mutebile said.
But despite this technical advice from the governor, the ministry went ahead to convince parliament to approve the loan whose disbursement to the beneficiaries is still being questioned.
Muhakanizi on Spot
The PAC report pins Muhakanizi saying that he lied to the committee when he claimed that the loan was received to stabilize the exchange rate with the consent of the Bank of Uganda.
The report notes that the accountant general Lawrence Semakula objected to the loan proposal through a letter written to Muhakanizi indicating that the loan was not favorable because of its high interest rate.
PAC says that domestic borrowing would have been cheaper than the 4.6% per annum interest paid on the PTA loan in addition to other costs of borrowing.
“For lying to parliament and for superimposing his authority portrayed by insisting on the loan acquisition against strong advice in writing by the governor Bank of Uganda, the accountant general and the director of Economic Affairs and superintending gross diversion of public funds, Keith Muhakanizi should be relieved of his office.” reads part of the committee recommendations.
Osegge told parliament that Muhakanizi who doubles as a former chairman of the board of directors of the PTA Bank insisted on acquiring the loan despite the emphatic objections from the governor Mutebile, accountant general and director of Economic Affairs.
The committee wants the Inspector General of Government (IGG) to further investigate Muhakanizi for possible conflict of interest, collusion and connivance considering that he aggressively insisted on acquiring the loan with prior knowledge that he was a former board chairman of the PTA Bank. PAC wants the IGG’s report on the findings to be submitted to parliament within 60 days from the date of the adoption of the report.
Osegge also recommended that parliament directs that the $200 million loan be recovered, re-consolidated and applied for the sole and full purpose for which parliament approved the loan.
Following the presentation of the report, Deputy Speaker Jacob Oulanyah noted that the committee had made serious recommendations, and that since Muhakanizi was not an MP and therefore unable to defend himself, Kasaija should be given chance to give his defence before debate on the report starts.
Kasaija then pleaded that parliament allows him up to Tuesday next week to present his defence and evidence.
“This is a matter which I want to be given an opportunity to explain thoroughly and fully, and I would like that we get good time, I bring all the evidence, I bring all the facts. Where I have faulted, I will apologise, but where I’m sure I have done what I ought to have been done, I will be firm.
Oulanyah then deferred debate on the committee report to Tuesday next week.