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How govt will finance Shs72 trillion Budget

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Finance Minister Matia Kasaija arrives at Kololo Independence Grounds during the Budget reading in 2022. The vast bulk of the Shs72.1 trillion 2024/2025 Budget will be financed by proceeds from the taxman. PHOTO | FILE

The government will look at six areas as sources of funds for its fiscal year (FY) 2024/2025 Budget, the Finance Ministry has told lawmakers.

The House learned during a marathon plenary session on Thursday that the vast bulk of the Shs72.1 trillion budget will be financed by proceeds from the taxman.

The Uganda Revenue Authority (URA) has been tasked with collecting just shy of Shs32 trillion.

This represents a nearly Shs2 trillion bump from what the taxman was asked to collect during the FY2023/2024 Budget.

The government will look at domestic debt refinancing for a new loan or debt instrument that has better terms to the tune of Shs19.8 trillion.

Domestic borrowing, including from the central bank, will help the Treasury stitch together just under Shs9 trillion.

The resource envelope for the 2024/2025 Budget will also benefit from local government revenue to the tune of Shs293.9b billon and Shs115.3b from oil revenue.

The government will also rely on external financing sources. The Treasury expects to get Shs1.3 trillion via loans and grants in budget support. It also hopes to get Shs9.5 trillion via loans and grants in project support.

The Shs72.1 trillion Budget will run under the theme “Full monetisation of Uganda’s economy through commercial agriculture, industrialisation, expanding and broadening services, digital transformation and market access.”

In the majority report tabled on Thursday night, the House Budget Committee indicated that “[the] government designed a new strategy to grow the economy ten-fold from the current base of $49.5b in [the] FY 2023/2024 to $500b in the next 15 years. Implementation of this strategy will start in FY2024/2025.”

It was also stated that in the course of implementing the said budget, “[the] government will continue implementing its fiscal consolidation strategy in the FY2024/2025 with a goal of placing the economy on a long-term fiscal sustainability plan, including debt sustainability in line with the Charter for Fiscal Responsibility.”

“This will entail enhancing domestic resource mobilisation efforts, reducing wasteful expenditures by repurposing large public administration budgets, improving efficiency across government, strengthening e-government processes, improving efficiency in the execution of projects and public investments, among others,” the report further adds.

Minority report

The shadow Finance minister, Mr Ssemujju Nganda, was joined by two other lawmaker—Mr Lulume Bayigga and Mr Karim Masaba—in authoring a minority report that raised four qualms. The three lawmakers opine that the Shs72.1 trillion Budget is not compliant with the law, promotes reckless borrowing, has bloated public administration expenditure, and supports continued investments in risky ventures.

“On March 28, the [junior Finance minister Henry Musasizi] tabled an appropriation Bill with a total budget of Shs58.3 trillion. He also presented draft estimates totalling to Shs60 trillion. Today, May 16, a corrigenda worth Shs13.7 trillion was laid on the floor of Parliament, revising the Budget to Shs72.130 trillion,” Mr Ssemujju told Parliament as he read out the minority report.

He added: “These modifications prevented the [government ministries, departments, and agencies] from submitting detailed work plans, procurement plans which in turn obstructed the Budget committee’s capacity to make well-informed financial decisions contrary to Section 13 of the [Public Finance Management Act].”

The minority report also took exception to what it classed as “excessive borrowing.” It noted that the government “is seeking to borrow Shs25.5 trillion to finance the Budget, which represents 43 percent of the total resource envelope. The shadow Finance minister proceeded to note that “the NRM government has budgeted for Shs160 billion for donation in the 2024/2025 Budget.” President Museveni, he observed, “”will spend Shs77 billion on community outreach programmes under the vote of item donation.”

Mr Ssemujju consequently called for the restoration of fiscal discipline.

Supplementary budgets

During the enactment of the current National Budget (2023/2024), the government committed to ending the fiscal indiscipline of supplementary budgets. An analysis of the fiscal year that ends in less than two weeks, however, shows that the government’s appetite for supplementary budgets just keeps growing.

In the current FY, the government has presented supplementary budgets of close to Shs5 trillion. This includes two worth more than Shs1.3 trillion that were passed in the past fortnight. On May 15, the House was presented with a Shs288.6b supplementary budget. Of the latest supplementary budget, Shs1.4b has been earmarked for post Non-Aligned Movement (NAM) activities, Shs152b for the construction of Hoima City Stadium, Shs132.6b for buying shares in the East African Crude Oil Pipeline (Eacop) and Shs2.5b for Uganda Blood Transfusion Services. 

While Parliament’s Budget Committee attempted to stall the passing of the Shs288.6b supplementary budget on May 15, citing procedural issues, Speaker Anita Among, who chaired the proceedings, on May 16 made the case for the supplementary.

Ms Among, who had earlier thanked members of the First Family, including President Museveni, his wife and Education minister, Janet Museveni, and their son, who is also the Chief of Defence Forces (CDF), Gen Muhoozi Kainerugaba, for the completion of the Mandela National Stadium, Namboole, warned Uganda could lose the opportunity to host some of the 2027 Africa Cup of Nations (Afcon) games if part of the funds for the construction of a stadium in Hoima City were not availed by passing the Shs288.6b supplementary.

Mr Ssemujju themed the government’s unending requests outside the approved budget as “kiosk supplementaries.”

“Ten days ago, we passed a supplementary, then after you come with another one, saying wait, ‘we have another one.’ If you were my ministers, each one of you would be in Luzira [prison],” Mr Ssemujju snapped.

Attorney General Kiryowa Kiwanuka defended the funding to Eacop and the Hoima stadium through a supplementary budget saying, for example, the government was required at the last minute to shore up equity for the Eacop project.

Shs1.1 trillion subvention

Before the Shs288.6b, Parliament had approved a Shs1.1 trillion supplementary budget expenditure. The biggest beneficiary of this supplementary budget was the controversial Dei Bio Pharma Ltd, which received Shs578b in taxpayer cash. Others include the Finance ministry (Shs37b), State House Classified (Shs19b), Kampala Capital City Authority (Shs13.6b), local governments (Shs43b) and the Agriculture ministry (Shs9b). 

The appetite for supplementary expenditure also raises questions on Uganda’s spiralling public debt, with most of the supplementaries requiring the government to accumulate public debt through borrowing to fund the supplementary expenditure.

In December 2023, Parliament approved several loans, including the borrowing of Shs3.1 trillion from local commercial banks to fund the Shs3.5 trillion supplementary budget. A significant portion of the funding for supplementary budgets is sourced from borrowing, external funding, reallocating funds, withholding releases from various allocations, and generating additional revenue through taxes and appropriations.

Unheeded warning

In January 2013, Auditor General John Muwanga counselled the government to review its priorities every FY in order to avoid seeking budgets that cannot be fully funded. The government has also faced accusations of setting unrealistic budgets in order to raise the amount covered within the three percent supplementary limit.

Section 25 of the Public Finance Management Act (PFMA), 2015 as amended by Section 1 of the Public Finance Management (Amendment) Act, 2015 operationalises supplementary expenditure as provided for in the Constitution. It caps the amount that can be expended within the meaning of Article 156(2) of the Constitution to three percent of the approved budget.

This means if the government has a Budget of Shs40 trillion, it can only spend Shs1.2 trillion without requiring prior approval of Parliament but if the Budget is Shs60 trillion, the government can spend Shs1.8 trillion, which is Shs600 billion more.

In January, Mr Ramathan Ggoobi, the Permanent Secretary and Secretary to the Treasury (PSST), revealed that he had blocked requests worth Shs3.5 trillion from various ministries, departments, and agencies as part of efforts to stem the appetite for supplementary budgets. 

Last year, Mr Robert Kyagulanyi Ssentamu, the leader of the National Unity Platform (NUP) party, alleged that each lawmaker, including those from the Opposition, were paid Shs100 million to approve the Shs3.5 trillion supplementary budget and some loans. House Speaker Anita Among dismissed these claims as “diversionary.”

The funds, approximately Shs55.6b, were channeled through State House classified expenditure.

Where the money will go

The majority report green-lit by the House on Thursday night shows that the government plans to dedicate Shs592.08 billion to handling persistent floods, heavy traffic congestion and the poor road infrastructure within Kampala. A fraction of that amount will also be spent on catering for un-signalised junctions, provision of street lighting, as well as improving the drainage systems in Kampala.

At least Shs34.017 trillion of the entire Shs72.1 trillion will be channelled towards payment of the country’s public debt. The Budget report also indicates that Shs1.27 trillion will be spent on the construction and upgrade of national roads and bridges, with Shs20b ring-fenced for the rehabilitation of the 72km Kampala-Jinja Highway stretch.

Elsewhere, Shs2.221 trillion is lined up to kick-start the construction of the Standard Gauge Railway (SGR). A portion of the said funds is expected to go towards the acquisition of land spanning 260 acres in the eastern districts of Tororo and Mayuge.

In the health sector, Shs57.8 billion has been set aside to cater to and/or boost the government’s fight against Covid-19 and also cover emergency preparedness in case Uganda suffers another pandemic. At least Shs569 billion is for the purchase of essential medicines and health supplies for all health centres, general hospitals, regional referral hospitals and national referral hospitals.