Invisible hand: How disruptive can it be to national budgeting?  

Finance Minister Matia Kasaija arrives at Kololo before reading the budget last year. Mr Mukunda says “there is a higher force, beyond the Ministry of Finance, that influences how money is allocated”. Photo / File 

What you need to know:

  • The budget being a political document, some experts argue, cannot be devoid of influences, some of which result from a maneuver for resource allocation

Hardly has there been a financial year when the budget has been implemented according to plan. 

Over the last 30 years every budget has been influenced in a certain ways by either internal or external factors, or both.  

However, Julius Mukunda, the Civil Society Budget Advocacy Group (CSBAG) executive director, says the budget being a political document cannot be devoid of disruptions, some of which are a result of invisible maneuvering.   

“In every political process, there are invisible forces that shape how the budget is done,” he says. 

Mukunda has for more than 15 years advocated for budget transparency and accountability and it is this experience that he draws on to opine that; “there is a higher force, beyond the Ministry of Finance, that influences how money is allocated”.

For instance, he says the recent corrigenda, which revised the budget upwards speaks of a higher influence. 

The corrigenda, which is an additional budget document listing errors and corrections, allocated Bank of Uganda an additional Shs1.6 trillion, and 15 other expenditure items, including Shs20b reinstating a budget cut from the Office of the President, Shs110b for the Parliamentary Commission and Shs88.8b for Uganda Revenue Authority. 

“When you look at the corrigenda expenditure items and how they all got allocations without qualms, is an indication that the budget is not just a matter of the Ministry of Finance. There is a higher force that influences how money is allocated,” Mukunda says. 

More hands up 

So far, government can only finance up to 47 percent of the entire budget, which Mukunda says exposes budget implementation to external forces.

“The one who takes care of the other half is akin to the one who pays the piper, and therefore, calls the shots. [In other words] the one who provides the money for the rest of the budget decides what will be done,” he says. 

To put it in perspective, Mukunda says financiers, particularly those that “give us money on concessional terms” tend to influence how their money is used or allocated, noting that: “For example, it was on the insistence of the IMF that government cleared the Bank of Uganda debt.

Also revealing perhaps, is the fact that budget support has been diminishing over the years whereas money for project financing and loans has been increasing because development partners switched to project financing rather than budget support. 

Other influences

Beyond the financiers, the private sector, largely foreign, but with local interests, is increasingly influencing a redirection of budget resources. 

For instance, the International Specialised Hospital based in Lubowa has been able to wrestle massive resources from government. 

This is not an isolated project. There have been many others, in addition to financial sector players, that are sometimes determined to fight certain policies such as taxes to protect their revenues.  But to mitigate this, Mukunda says it is important to “strengthen our institutions that manage the budget like the office of the Auditor General and Financial intelligence Authority among other institutions and ensure their independence and impartiality.”

Just like Mukunda, the Jane Seruwagi Nalunga, a trade, tax and investment expert, believes there is an invisible hands that influences the shape and structure of the budget and how resources are expended.   

Ms Nalunga, also the Seatin executive director, says the budget is in many ways influenced by external factors, especially by debt servicing, which in many ways alters the shape of and outcome of the budget. 

In some ways, yes 

However, Bank of Uganda director research Adam Mugume, doesn’t entirely believe that there is invisible influence, because as he says, Uganda’s budget process is one of the most transparent that is based on the input of different government departments. 

However, he admits that “the challenges come from unforeseen domestic and external developments”, such as washed out of bridges and stronger exchange rate depreciation, as well as “over-ambitious revenue targets, including grants” which when they are not realised become shortfalls that could spill over into other arrears. 

Other disruptions result from the withdrawal of commitment from financiers, in which case government has to onboard to work on a project, which sometimes might be outside the budgeting cycle. 

For instance, after donors withdrew from funding the Kamwenge-Kabarole road, the government had to find resources to complete the project, which was a budget distortion to some extent.

However, Mugume says whereas financiers partly support the budget through concessional financing, they don’t dictate what government should do or not. 

The underlying principle is that, he says, government goes to financiers such as World Bank and IMF under particular conditions, the first of which is to ensure macroeconomic stability and generating economic growth that is inclusive. 

“They support government programmes, but do not come with their own. However, the financing they offer is limited and is based on the ‘same-shoe fits all’ kind of financing. 

“In other words, the parameters they use in the suitability of a project or financing can be the same for all countries in the same category, yet Uganda’s priorities could be different,” Mugume says.

“As regard the role of lobbyists in influencing the budget, especially through tax cuts and related incentives, he says this is limited in Uganda, “since the budgeting is transparent,” he says. 

With full disclosure of all relevant revenue information in a timely and systematic manner, influence and redirecting of the budget in the wrong way is eliminated. 

Like Mugume, Deputy Secretary to the Treasury Patrick Ocailap, says “there is nothing like “behind hand. What I know is there is a chance that we can experience a natural disaster or something unexpected, but when they occur we deal with it.”

Additionally, he says multilateral lenders such as the World Bank and IMF, are more open funding projects that they believe have a long-term impact on the economy. 

“We … with them as partners. The budget process is clear and priorities are arrived at after thorough consideration. The only unfortunate part is supplementary expenses that come with pressure,” Ocailap says.  

Issue of supplementary budgets and exemptions 

Corti Paul Lakuma, who is a senior research fellow and head of the macroeconomics department at the Economic Policy Research Centre, notes that: “I don’t think there is any overt action by forces, foreign or domestic, that clandestinely influence the budget”.

However, he notes that Uganda does not operate in a vacuum and therefore, a global agenda such as Sustainable Development Goals could inform budget allocations or movements in a certain direction.

He points out that the return of National Development Planning in the 2000s has seen the frontloading of transport and energy projects in developing countries, contributing in shaping national budget outlook.

On the domestic front, Lakuma says that party manifesto, interest groups, technocrats and politician all do strike a balance in designing a viable budget

However, on the other hand, the Makerere University Business School Economic Forum director Fred Muhumuza, blames supplementary budgets and tax exemption as the biggest distortions to budgeting, which if proper budget execution is to be acheived, must be reduced or stopped completely.