Budget won’t deliver middle income status, experts say

Kampala. With the allocation process already underway, civil society budget and policy experts say the next National Budget (2018/19) will not deliver the much sought-after middle income status.
Uganda’s target is to attain a lower middle income status by 2020. For this to be realised, the population will have to earn not less than Shs3.5m annually. This means that every month, all Ugandans, including children who are not working should, on average, be earning at least Shs290,000.

According to the budget specialists, such a monthly income is a distant dream due to the prevailing poverty levels, unemployment and the surging national debts.
“With a resource envelope of Shs29 trillion and a projected GDP growth target of 5.5 per cent, the National Budget Framework Paper (NBFP) 2018/19 highlights the fact that Uganda is unlikely to achieve its aspiration of a middle-income country by 2020,” Civil Society Budget Advocacy Group (CSBAG) executive director Julius Mukunda, said last week in Kampala.

He continued: “In view of the issues that have been raised above, government needs to rethink its approaches and come up with innovative measures to redeem the country’s growth prospects if we are to achieve a better life for all Ugandans.”
However, while sharing the insights on the NBFP for the 2018/19 financial year, Mr Mukunda who was representing the CSOs under the CSBAG, commended government for maintaining a stable macro environment.

This, he said, has been exhibited by low inflation, stable exchange rate and adequate forex reserves.
At the same time, the statement presented by Mr Mukunda on behalf of the CSOs noted that the Uganda National Housing Survey for FY 2016/17 indicated that prosperity for all initiative remains a challenge as 10.1 million people continue to wallow in poverty.

The budget process, as enumerated in the framework paper, comes at a time when government is faced with issues such as civil service salary pay strikes, pests and disease infestation and up to 11 million Ugandans are facing food insecurity.
This is in addition to the high interest rates, rampant land evictions and refugee influx.

Uganda Revenue Authority (URA) tax revenue projection for the next financial year (FY) 2018/19 is Shs15.5 trillion. To achieve its domestic revenue target, government intends to undertake revenue reforms that will ensure closure of loopholes in the tax laws, and enhance tax administration efficiency and facilitate tax payer compliance.

Among these, government will strengthen business intelligence to detect noncompliance and implement valuation controls.
In the FY 2018/19, government also plans to have URA as the only entity collecting all revenues both taxed and untaxed.

Worth noting is that there are no new revenue sources highlighted by the government and the tax body apart from administrative areas that seek to further strain the existing narrow revenue sources.

In the FY 2018/19 government plans to spend Shs29 trillion of which only Shs12.7 trillion will be available for service delivery excluding budget and project support, debt repayments and domestic refinancing.

“This means that government shall finance only 43.5 per cent of the needed spend to service delivery without any external support,” reads the statement presented by Mr Mukunda.

Red flag
About Shs2.7 trillion of the next budget will be spent on paying interest rates to local and external loan obligations and this will be the second largest proposed allocations in the FY 2018/19 budget.
This allocation accounts for 12.3 per cent of the total allocation available for sector expenditure. It is second after works and transport and as such has a profound negative effect on the resource outlay.

“We observe with concern that the increasing expenditure on interest payments from Shs2 trillion in FY 2016/17 to now a proposed Shs2.7 trillion is steadily crowding out expenditure on social sectors,” Mr Mukunda said.
Notably, most of the economic sectors are not on course to realise the National Development Plan indicators.
This being the 4th year of implementing the five-year NDP II implies that Uganda is less likely to achieve the middle-income status dream by 2020.

To redeem this situation, there is need for expediting the mid-term review for the NDP II and a catch-up strategy drawn to endeavour realisation of the aspiration of the national plan.

It is also imperative for government to move beyond gender and equity certification of budgets to tracking implementation and evaluating effects of the stated interventions on reducing the gender and equity gaps in the country. Penalties for non-implementation should also be enforced to enhance compliance by Ministries, departments and Agencies as well as the Local Governments.

The Office of the Auditor General (OAG), report noted an increase in domestic arrears over the period of three years from Shs1.3 trillion in 2014/15, to Shs2.2 trillion in 2015/16, and Shs2.9 trillion in 2016/17.

These arrears contravene section 21 (2) of the Public Financed Management Act (PFMA), 2015. Government contingent liabilities have also increased to Shs7.4 trillion, up from Shs6.5trillion reported in the previous year.

These liabilities indicated that over 90 per cent is because of the legal proceedings lodged against the government.
“We note that these liabilities are not included in the NBFP FY 2018/19 which contravenes section 13 (9) (c) of the PFM Act 2015.

“It was also noted that multi-year commitments worth Shs81 billion were not backed by Parliamentary approvals, contrary to Section 23 of the PFMA 2015. All these developments are risks to the budget for the FY 2018/19,” reads the CSO statement.

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