Projects exceed available funds in Shs49.9t budget
What you need to know:
- The House was, however, warned that the incoming financial year’s resource envelope—despite or in fact because of a Shs1.8 trillion year-on-year increment—will be largely constrained as the country looks to offset a bloated debt burden.
Lawmakers this week received Shs49.9 trillion budget estimates for the Financial Year (FY) 2023-2024 with a debate around the resource envelope scheduled to take centre-stage on Tuesday.
The House was, however, warned that the incoming financial year’s resource envelope—despite or in fact because of a Shs1.8 trillion year-on-year increment—will be largely constrained as the country looks to offset a bloated debt burden.
Mr Ignatius Wamakuyu Mudimi, the vice chairperson of the House’s Budget Committee, revealed that “the discretionary resource envelope reduced by Shs2.5 trillion due to the projected increase in the interest obligations and obligation to settle Bank of Uganda’s borrowing.”
According to Mr Mudimi, “the proposed resource prioritisation is very worrying and could indicate that our fiscal operations may not be sustainable in the long run.”
He premised this forecast on the fact that “debt-related payments continue to take the largest share of the budget.”
As one of the remedies, the parliamentary Budget Committee recommended that “domestic revenue mobilisation interventions should be aggressively strengthened as [the] government seeks external funding from development partners.”
The committee also reckons that “it will be necessary to put planning and budgeting on a more fiscally realistic path due to the current global economic challenges.”
The budget framework paper tabled this week also indicates that government projects lined up next year surpass the resources within government coffers.
Another anomaly is that the third national development plan whose goal, the committee noted, is “to increase average household incomes and improve the quality of life of Ugandans” is out of kilter with incoming development plans for FY 2023-2024. The lawmakers will on Tuesday demand that this be rectified.
The lawmakers on the Budget Committee also expressed concern over the excessive debt appetite showcased by the government.
“This trend in borrowing is characterised with higher domestic debt appetite that translates to crowding out the private sector from the credit market and consequently stifling private sector growth,” the budget framework paper report states in part.
It adds: “In addition, it should be noted that the growth rate of debt accumulation has been growing at an exponential rate while the growth rate of revenue has been growing at a much lower rate. This may suggest that our ability to service our debt in the medium term is untenable.”
Consequently, the Budget Committee suggested that “[the] government should balance support for economic recovery and sustainable public debt, while reducing reliance on domestic borrowing to alleviate crowding out [the] private sector.” As a remedy, the committee reckons “the reduced amount of expensive domestic borrowing and the prioritisation of concessional financing over the medium term will help keep debt sustainable.”