The former chairperson of the Parliamentary Committee on Agriculture, Robert Migadde, has slammed a government proposal to place a Shs100 billion maize stabilization fund with commercial banks.
The government last week resolved to disburse Shs 100 billion to middlemen to buy maize and stabilize prices that have dropped to Shs 200 a kilogram.
While announcing the intervention, the Finance Minister noted that the money will be taken from the Agricultural Credit Facility at the Bank of Uganda, through about 23 eligible commercial banks.
Funds will be accessible to all interested traders in the maize business, who have requisite storage, cleaning and drying facilities.
The funds attract an interest rate of 15% per annum.
However the Buvuma County MP, Robert Migadde, argues that entrepreneurs have always found it difficult to access this Agricultural Credit Facility, and the 15% interest rate makes it unattractive for grain traders.
Migadde further observes that if the government had revived cooperatives, it would have found it much easier to disburse the Shs100 billion.
In the end, the farmer that the government intends to bail out will receive Shs500 per kilogramme of maize grain which, although doubles the current prevailing market prices, is still less than what each kilogramme fetched last year.
The downside of the arrangement, some economists suggest, is that when the prices stabilise over the next six months, the rates could rise beyond or double the Shs500-per-kilogramme price tag and silo owners would turn to supply and profit from stocks they would have bought on the cheap on tax payers’ back.