Uganda has been paying more than Shs 70 billion annually in commitment fees on loans over the past six years, according to the newly released Auditor General’s report.
A commitment fee is a charge imposed by lenders on unused credit lines or un-disbursed loans. The report reveals that over the last six years, Uganda has paid a total of Shs 469.778 billion in such fees.
Annual commitment fee payments: 2018/19: Shs 87.766 billion; 2019/20: Shs 78.558 billion; 2020/21: Shs 79.117 billion; 2021/22 Shs 77.524; 2022/23: Shs 72.909 billion; 2023/24: Shs 73.904 billion.
If Uganda saved the Shs 70 billion lost to commitment fees on undisbursed loans, they would build 1,400 classrooms (Shs 50M each), pay 5,800 teachers (Shs 1M/month), fund 30,000 scholarships (Shs 2.3M each), construct 7 hospitals (Shs 10B each), tarmac 35km of roads (Shs 2B/km), support 7,000 startups (Shs 10M each) and train 100,000 youth.
According to Auditor General Edward Akol, the continued payment of commitment fees is increasing government expenditure on debt repayment, attributing the costs to government inefficiency in loan absorption.
“I noted an increase in un-disbursed loans amounting to Shs 1.890 trillion, representing a 12.95% increase from the closing balance of Shs 14.6 trillion in FY 2022/23. This resulted in the payment of commitment fees totaling Shs 73.904 billion during the year under review,” Akol stated.
Government’s Response
Ramathan Ggoobi, Secretary to the Treasury, explained that the government is implementing a Project Implementation Management System (PIMS) to enhance project readiness and improve the absorption of funds.
The Auditor General urged the Ministry of Finance to identify and resolve bottlenecks hindering the smooth implementation of projects and programs to increase loan absorption rates and reduce unnecessary expenditure on commitment fees.
