A plan for Uganda to establish a National Information and Communication Technology (ICT) Network backbone have hit a wall after Parliament rejected the "high" interest rate on the loan from China.

While meeting the Minister of ICT, Dr Ham Muliira and that of Finance Dr Ezra Suruma, the Parliamentary Committee on the National Economy demanded that the government explains the rationale for a 2 per cent interest rate ($2.12 million) to be charged on the $106m for the national ICT backbone project over 20 years. They demanded to see the details of the agreement before sanctioning it.

"We took this loan with good intentions but the rate is too high compared to other loans. We would have gone to the World Bank, which is at 0.75 per cent. We want to see the agreement before we can proceed with this request," Butambala MP Ibrahim Kadunabbi, the Committeee Chairperson said.

The loan is meant to help government rollout ICT systems and services throughout the country. Through the project ICT facilities are expected to trickle down to the grassroots. But according to the committee the rate at which the Chinese lent Uganda was too high.

But Dr Suruma defended the deal, saying that the 2 per cent rate is below market terms and that within the agreement there is a grant component. "It is not true that the 2 per cent is high. In any case we have other loan requests, which are far high than this ICT backbone loan. The Interest rate aspect should not be a problem," Mr Suruma said.

However, the Committee reminded Dr Suruma that it is the National Economy that handles government loan requests and that they have handled requests with even 0.5 per cent rate.

"We do not want to borrow today and fail to pay back tomorrow. If there are other Banks which can give us loans at a lower rate why do we insist on 2% which is high," Mr Kadunabbi asked.

However, Dr Suruma defended the interest rates. "With a long grace period of 20 years, the 2 per cent is not so high. The best customer borrowing in dollar terms will borrow at 5 per cent but ours is cheaper," Mr Suruma said.

The government wants Parliamentary approval to get a $106m loan from the Chinese Export-Import Bank to build the national backbone infrastructure. But Daily Monitor has learnt that a Chinese company, Huaiwei Technologies, has started out the job even before Parliament approves the loan request.

Mulira said that the completion of the national ICT backbone would compete with the current link provided by the two national operators, MTN and Uganda Telecom. This would also help to expedite the institution of a national network for delivery of Internet through a network linking higher education and tertiary education institutions in the country.

"With the completion of the project, commercial Internet Service Providers (IPS) in the country would find it cheaper to business in cost friendly manner which would in turn attract users. Our aim is to increase ICT usage in the country," Muliira said. The MPs said they hoped to have cheaper and faster connectivity all over the country for voice, data and video. "As MPs we want our people to appreciate ICT," they said.

The Monitor