Inside the Opposition’s budget plan for Uganda

The Opposition in Parliament has punched holes in government’s Shs47 trillion budget for the 2022/23 financial year, arguing that its funding will require more borrowing.

The government’s new revenue and expenditure plan is Shs2.5 trillion higher than the current financial year’s budget.

Seven in every Shs10 of the next budget will be go to recurrent expenditure, meaning three in Shs10 will go to development.

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With local revenue collection projected at Shs25.5 trillion, the Leader of the Opposition in Parliament, Mr Mathias Mpuuga, said mustering resources to bankroll the coming financial year’s budget will increase the country’s debt portfolio.

The proposed budget for the coming financial year has been prepared in an environment characterised by high unemployment, influx of refugees and the war in the Democratic Republic of Congo.

He said government has committed the country to non-productive public debt and wasteful expenditure amid poor prioritisation of development strategies. This, he said, undermines the credibility of the budgeting process.

“Government has abdicated substantial ground in service delivery to private sector where survival is guaranteed only for the powerful and privileged associates. Consequently, majority of the citizen are wailing in poverty amid sky rocketing commodity prices and collapsing businesses,” he said.

Unrealistic resource envelope

Mr Mpuuga said while URA is projected to collect an additional Shs3.12 trillion, this is not realistic given the fact that there have been persistent revenue shortfalls. For the past two financial years, URA has experienced revenue shortfalls amounting to Shs3.59 trillion in 2019/20 and Shs2.37 trillion in 2020/21 financial years.

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Government is also expected to increase domestic borrowing by Shs1.22 trillion, which the Opposition believes is an indication of government finding it difficult to attract concessional debt.

“The failure to clear  domestic  debt  has  become  a stump of  our  economy  reflected  as  debt rollover.  It is projected at Shs8 trillion in FY2022/23 rising from Shs5.4 trillion in FY2017 /18. Failure to clear debt obligations but rather resort to recycling is a recipe for a failing economy,” Mr Mpuuga said.

Figures from the Finance ministry indicate that debt management costs have risen from Shs8.58 trillion in 2017/18 and are projected at Shs15.94 trillion in 2022/23, an increment of 86 percent. Annually, government commits hefty figures in interest payments, commitment charges, debt management fees and amortisation.

Mr Mpuuga said with such commitments, from the onset, 33 percent of the proposed budget will not be available for service delivery, but instead, it will be utilised for payment of partial debt commitments.

He proposed that a public debt repayment schedule be developed and laid before the House to guide phased appropriation for debt clearance.

“Non-concessional borrowing should be reserved for value-addition projects with a high social or growth impact return. Effort should now be placed on the maintenance and rehabilitation of developed infrastructure,” he said.

Uganda’s external and domestic debt stood at Shs73.78 trillion as at December 2021, while contingent liabilities amounted to Shs160 trillion and domestic arrears Shs4.65 trillion. Outstanding advances from Bank of Uganda amounted to Shs3.033 trillion.    

Mr Mpuuga said this is a wider departure from the total public debt stock of Shs73.49 trillion reported by government as at December 2021, which excludes all publicly guaranteed debt save for a minute portion that has become a liability to government upon default by the responsible debtor.   

“It also excludes domestic arrears and unpaid Bank of Uganda advances extended to Government. This is terrifying given the fact that on February 18, 2022, government signed a Service Level Agreement with Bank of Uganda that redefines advances to include debt provision. This is illegal and tantamount to back door borrowing without approval of Parliament,” he said.

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He said the country will pay interest of more than Shs5.5 trillion in FY2022/23 up from Shs2.4 trillion in FY2017 /18, representing and increment of 130 percent.

External debt repayments

“This is coupled by external debt repayments that are projected at Shs2.4 trillion in FY2022/23 rising from Shs589 billion in FY2017 /18. An increment of 307%. These take first call on the revenue collection and reduces funds available for service delivery,” he said.

To him, while the Constitution and Rules of Procedures of Parliament empower the latter to approve all forms of borrowing and guarantees, its scrutinising mechanisms are so weak and damaging to the economy. He said many times Parliament focuses on the intention of the borrowing and fails to undertake adequate scrutiny of the terms and conditions of the borrowing.

Mr Mpuuga also faulted government for pushing the country to incur expenses for failed undertakings, including the proposed International Hospital of Uganda, Lubowa.  He said so far, Shs348 billion has already been spent while Shs319 billion is earmarked in 2022/23 financial year for the non-progressive project.
“This is equivalent to 22 foregone hospitals each estimated at Shs30 billion or 606 foregone health centre IVs each estimated at 1 .1 billion,” he said.

“Government should lay on table before approval of the annual budget a list of all beneficiaries of contingent liabilities and amount of funds guaranteed. The criteria for accessing and benefiting from government guarantees should be presented to Parliament before the start of FY2022/23 to ensure transparency and fairness in their access,” he recommended.

The Opposition policy statement also took issue with how the unspent balance from previous financial year is incorporated into the next financial year. Mr Mpuuga said in 2020/21 financial year, Shs1.49 trillion remained as unspent balance.  He said it is uncertain  how  the  unspent  balances  are reintegrated  into resources that are to be expended  in a  new  financial  year. 

He said while appropriating the new budget, the unspent   balances are not reflected in the resource envelope and disappear in a vacuum. “Due to the continued uncertainty, it would be prudent that a special audit is undertaken for the last 5 financial years to ascertain how the unspent balances are utilised in course of a new financial year,” he said.

He said supplementary budgets have become a persistent risk of financial indiscipline because most of the supplementary requests are inadequately scrutinised by the  responsible minister before authorising and forwarding them for approval by Parliament.

He said items rejected by Parliament during budget approval are usually funded under the supplementary approval of 3 percent of annual budget that do not require prior Parliamentary approval.

“As a result, the minister usurps the appropriation powers of Parliament through subsidiary appropriation. Consequently, the discretionary powers are misused to benefit a few privileged votes. No wonder for the last five financial years, the ministry that ought to ensure stringent consideration of supplementary requests is second major beneficiary,” he said.

Wastage of resources: 

“The failure to clear  domestic  debt  has  become  a stump of  our  economy  reflected  as  debt rollover.  It is projected at Shs8 trillion in FY2022/23 rising from Shs5.4 trillion in FY2017 /18. Failure to clear debt obligations but rather resort to recycling is a recipe for a failing economy,”  Mathias Mpuuga, LoP.