Growing fiscal deficit is a cause for worry

Saturday July 11 2020

 

Every time the government starts to discuss a new Budget, Ugandans are told to take on the payment of more taxes.

The government, its agents such as parliamentarians and the Uganda Revenue Authority always tell citizens that even if an increase in tax means people have to live frugally, it is in the interest of building our country together.

But the government is not interested in living frugally, as we heard from the World Bank this week. According to the World Bank, Uganda’s fiscal deficit, which is the difference between the total government expenditure and its current revenue, is growing too fast.

The fiscal deficit in the current Financial Year will stand at nine per cent, which is so much higher than the three per cent that would indicate responsible budgeting and expenditure on the part of government.

That the difference between the government’s revenue and its expenditure has grown this high, when the ministry of Finance promised us just two years back to have reduced the fiscal deficit to three per cent in the 2020/2021 Financial Year is not surprising, since the extravagance these days is routinely thrown in our faces, with no fear of consequences.

An example of such extravagance is the announcement this week that Cabinet has approved five parliamentary seats for the elderly.

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This is in a country with a median age of 15 years, but when the President, Vice President, Prime Minister and Speaker of Parliament all fall in the category of the elderly since they are all above the official civil service retirement age.

The decision to have the elderly represented in Parliament, even if they are over represented in policy making institutions, comes less than a week after the launch of seven new cities.

The new cities also mean we can expect extra administrative costs and another group of parliamentarians. Parliament is also considering 15 new constituencies which were introduced just last week by the Executive.

In defence of this process, the Executive claimed they are bringing services closer to the people. Yet according to the World Bank, Uganda’s development budget is very low.

This means that the Uganda government spends most of the money on maintaining big salaries and allowances for politicians and the politically connected, while ignoring investment in the development that the taxpayer is often urged to sacrifice for.

The government instead invests our taxes in buying new cars for the ever growing number of politically connected. When the money is not going to the politically connected, it is stolen.

But we can expect that the taxpayer will be asked to tighten their belt even further. The growing fiscal deficit means more borrowing and even higher interest rates that Ugandans have to pay in future.

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