Budget objectives hang in balance as final quarter sets in

Low budget performance. With eight months so far gone, a number of projects have not been implemented which points to the fact that the 2012/13 budget might also under perform.

With just three months to the end of the 2012/13 Financial Year, there are fears that set budget targets will not be met. Different factors continue to hurt budget implementation thus tagging it to an average performance so far.

These factors include the 30 per cent aid cuts by donors preceding the corruption scandal at the Office of the Prime Minister (OPM), URA’s failure to meet revenue targets and a tight monetary policy.
Other factors include the continued increment in the costs of project implementation due to a volatile business environment among other factors.

However the Ministry of Finance is optimistic that the 2012/13 budget has performed better and will soon get better on the assumption that donors, who last year withdrew, funding of about $263 million, would soon change their mind.

Recently, Mr Keith Muhakanizi, the deputy secretary to the Treasury said; “The performance of the budget is about 50 per cent compared to parliament’s approvals. In the first quarter our expenditure has been normal. Between now and June we expect to see continued growth.”

Ministries Prosper spoke to are equally optimistic, insisting that they are on track to achieve most of the set targets.
Mr Tress Bucyanayandi, the minister of Agriculture told Prosper that while his ministry’s budget was below desired levels the ministry is using the available funds to implement set targets.

“We have received about 65 per cent of our budget. We are cashing out more in areas of increasing agriculture production and productivity. Our absorption capacity has equally been good,” he said.
Additionally, Mr Abraham Byandala, the Works minister notes that most of the ministry’s projects are on course.

“We continue to receive money to funds for several of our projects. Most of these are funded by the government whereas others are jointly funded by development partners. We are working on about 1,900 kilometers of road surfaces,” Mr Byandala says.

However, in an interview, Dr Lawrence Bategeka, a senior research fellow at Makerere University told Prosper that whereas the budget had entered its last quarter, its performance remains unimpressive.
He notes that the two core principles of - resource mobilisation and revenue collections continue to be unimpressive pushing the budget into a deficit which has been compounded further by government profligacy in comparison with incomes.

“URA registered a decline in trade and tax collections due to global market volatilities and poor agricultural harvest,” Dr Bategeka says.
He adds that the recent aid cuts left the budgetary performance in a tight spot, yet there are no signs that they would reverse their decision soon.”

Thus he says it is prudent that the government borrows from the central bank in order to finance its deficits as well as implemen pending projects, without a further accumulation of its debt.
Far still, Mr Geoffrey Ekanya, the Finance shadow minister believes that budget performance would be below 60 per cent as most of government’s projects have failed to be implemented due to lack of funds

“We passed this budget well aware that there were not enough funds. The government is currently dependent on the belief that donors will resume, which if it happens would be good news to the economy,” he says.

“It should also be noted that even with a drop in inflation, fuel prices and other costs of budget implementation continue to move northwards, devaluing the available resource envelope.”
For instance he says funds that were allocated for the development of a 100 kilometre road can’t at the moment complete the same road.
Going forward, Mr Ekanya says Uganda needs to abstain from poorly planned budgets characterised by unrealistic yet short term targets.
“In the last 10 years we have failed to meet budget targets with the decade characterised by underperformances resulting from the fact that budgets are driven by political ambitions rather than acts on the ground.”

Pro-people budget
After presenting the 2012/13 Shs11.1 trillion budget, the ministry of Finance was praised for coming up with a pro-people and private sector centered budget focusing on priority sectors including health, infrastructure, and human capital development, improving business competitiveness and service delivery.
With headline inflation standing at 3.4 per cent in February, Uganda continues to recover from a volatile environment that had been characterized with high inflation, high interest rates and low productivity.
In October 2011, inflation rose to 30.4 per cent one of the highest rates since 1994.

The high inflation was attributed to a combination of factors resulting from supply shocks mainly in the agriculture sector and uncontrolled government spending during and after the Feb 2011 general elections.
Whereas inflation has fallen to 3.4 per cent, prices of goods continue to be high coupled with low agricultural productivity and the rising rate of unemployment.

Many Ugandan roads remain in a sorry state with most areas becoming inaccessible especially during rainy seasons.
However, it now remains to be seen how the government can fast-track its operations, avail funds as well as ensure that the remaining chunk of the 2012/13 budget is implemented by end of this financial year.