IMF asks government to pass Public Finance Management Bill

Kampala- The International Monetary Fund (IMF) has urged government to pass the Public Finance Management Bill saying once passed, the Bill will help Uganda government ensure proper management of public funds and execute public spending based on the priorities in the budget.

Uganda continues to face the problem of public finance management, which has led to misuse and misappropriation of public funds channelled through the national budget.
However, IMF is hopeful that when the Public Finance Management Bill is passed into law, it will curb the trend of public finance mismanagement.

The call to pass the Bill comes after the IMF Mission team carried out the first review of its economic programme with Uganda government, Policy Support Instrument (PSI), that was approved in June.

In a document spelling out what the IMF mission team found out regarding the performance of Uganda’s economy under the current PSI, Ms Ana Lucia Coronel, the IMF mission chief and senior resident representative for Uganda said: “Swift parliamentary approval of the Public Finance Management Bill will be essential to improving budget execution and creditability and enhancing reporting and accountability of public finances.”

Meanwhile, Uganda’s economic growth rate has gained momentum of high recovery expected to hit 6.2 per cent this fiscal year following stability in the macroeconomic environment over the last one year.

“The economic outlook is favourable. With low inflation and higher growth, market confidence is set to induce some recovery in credit to the private sector. At the same time, significant investment in hydropower and road projects is expected to stimulate employment and help bring output closer to potential while addressing critical infrastructure bottlenecks,” Ms Lucia said.

Despite Uganda’s favourable economic outlook, the IMF Mission team cautioned that there are risks related to instability in the region, spending pressures, governance weaknesses, and capacity constraints in management and implementation of large projects, characterised by delays.

“We are seeing a situation where everyone is asking for more, however, government should prioritise. Spending should be within the approved budget by Parliament, and government should avoid supplementary budgets because the supplementary budgets are affecting the flow resources into development projects,” she added.

Advice to govt
She advised the government that while executing public expenditure, it should ensure that salaries are paid while at the same time avoiding accumulation of arrears and also find ways within the budget of funding the national Identity Card project.
Uganda’s domestic tax revenue to GDP ratio has remained stagnant over the last ten years, fluctuating between 12 per cent and 13 per cent.

“Tax collection in Uganda remains low by regional standards and needs to improve. This will require a thorough assessment of tax system to eliminate the numerous tax exemptions that have outlived their usefulness,” Ms Lucia said.

Regarding Uganda’s state of public debt, the IMF mission chief to Uganda said whereas the country’s external debt remains sustainable, government needs to limit domestic borrowing.

“In this year’s budget, government is borrowing domestically up to the tune of over Shs1 trillion by issuing treasury bills and bonds. In the next fiscal year, government should reduce the level of domestic borrowing to guard against domestic debt crisis,” she said.

About the IMF PSI

IMF Policy Support Instrument is designed to promote a close policy dialogue between the IMF and a member country, normally through semiannual Fund assessments of a member’s economic and financial policies.
The programme helps countries design effective economic programmes that deliver clear signals to donors, multilateral development banks, and markets of the Fund’s endorsement of the strength of a member’s policies.
Uganda qualified for IMF PSI programme in 2006 and has since then been designing economic policies based on IMF PSI
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