Experts urge govt to review budget framework paper

With only two months left to the 2020/21 budget reading, experts have urged government to review and make changes to the budget framework paper in light of disruption caused by Covid-19.

Speaking to accountants during an online meeting organised by Ernst & Young in collaboration with Institute of Certified Public Accountants of Uganda (ICPAU), Mr Geoffrey Byamugisha, the Ernst & Young country leader, said government has no choice but to revisit the budget framework.

“Government may need to go back and look at some of the proposals that they had put forward. There is no choice given the developments that have come up as a result of Covid-19. The best thing to do is for government to go back and look at some changes,” he said.

On his part, Mr Allan Mugisha, Ernst & Young executive director, tax, said no one has budgeted for Covid-19 yet it has far reaching implications in terms of expenditure and failure by government to raise incomes to bridge the financing gap.

“We are expecting a widening deficit and as the President indicated in his speech, he is discussing with the World Bank and International Monetary Fund to see what [sort of] support they can [offer],” he said.

Uganda’s budget for the 2020/21 financial year is estimated to be Shs39.6 trillion.

In the budget, the biggest allocations will go to the Ministry of Works, interest payments, education, Security and Ministry of Energy.

Budgets for sectors such as agriculture and health were instead trimmed. For instance, the health sector budget was proposed to be cut to Shs1.5 trillion from the Shs2.5 trillion in the 2019/20 financial year.

Ministries of Trade, Science, Technology and Innovation and ICT are indicated as the sectors with the smallest allocations.

Finance State Minister David Bahati, told Daily Monitor that whereas they were struggling to find a win-win, they will continue to invest in areas that seek to maintain food security.

“There will be increased investment in Uganda Development Bank to ensure increased manufacturing of, especially health materials we have been importing. At the moment, we are taking advantage of the silver lining from this situation which is to mobilise and boost our domestic capacity to encourage import substitution and export promotion,” he said.

Cross-cutting impact

Covid-19 has had cross-cutting implications in the health and business sector, which has created a ripple effect in the economy.
In addition, the trickledown effect from businesses may pose a threat to tax collection which was expected to draw in slightly more than Shs20.4 trillion.

Already, Uganda Revenue Authority had recorded a deficit of more than Shs600b in its half year performance.

It is now expected to collect more than Shs10.4 trillion in the second half of the 2019/20 financial year to meet its revenue target collection.