Uganda increases Budget to Shs58 trillion

The government wants to increase spending by more than 10 percent in the 2024/2025 fiscal year from Shs52.7 trillion to Shs58.3 trillion amid concerns of funding cuts and alleged abuse of spending rules.     

On Thursday, junior Finance minister Henry Musasazi tabled in Parliament budget estimates for the 2024/2025 financial year indicating a Shs5.64 trillion increase. This prompted a section of legislators to argue that the Executive is intentionally ballooning the budget to increase the amount allowed to them to spend without parliamentary approval.

According to Article 156(2) (b) of the Constitution and Section 25 of the Public Finance Management Act, Parliament’s approval is not needed for supplementary expenditures that do not exceed three percent. However, Article 156(2) (b) of the Constitution and Section 12 of the Budget Act stipulates that expenditures within this three percent limit must still be reported to Parliament.

Mr Muwanga Kivumbi (Butambala), who chairs the House Public Accounts Committee, told Parliament that an analysis of the past five financial years shows the government does not use more than Shs45 trillion. This claim is also backed by the Auditor General’s report for the financial year ending 2022.

“They balloon the budget and give a yield on the three percent, and they do a secondary appropriation of their own on day one, July 1, disregarding the budget process,” Mr Kivumbi said, adding, “In economic modelling, it is imprudent for any agency for specific planning to come up consistently with a figure that is over and above your traditional performing level. They apply the three percent on an artificial figure, which will give them around Shs1.5 trillion, which they will sit in another meeting, they call it repurposing or suppressing, and take on the role of budgeting, including items we have traditionally rejected.”

Per Mr Kivumbi’s claims, a Shs58 trillion budget will make available Shs1.74 trillion to the Executive to dispense within the three percent rule.

Curious allocations
Last year, the Finance ministry disbursed Shs839.881 billion to various organisations, including some sectors for which lawmakers had refused funds in the current budget. The ministry cited concerns about their financial sustainability for taxpayers. A portion of this allocation fell within the three percent rule.

The government reversed Parliament’s budget cuts by allocating Shs247.8 billion, covering areas such as salary enhancement for the Uganda People’s Defence Forces (UPDF) at Shs90.1 billion and additional expenditures totalling Shs501.9 billion. Specifically, Shs42 billion was designated for the Uganda Police to fulfil contractual obligations related to CCTV equipment and to procure security vehicles for judges. 

Additionally, Shs86.4 billion was allocated by the Finance ministry as the government’s contribution to the Munyonyo Commonwealth Resort in preparation for the Non-Alignment Movement (NAM) Summit, despite Parliament’s rejection due to uncertainty about the government’s shareholding in the resort. 

Furthermore, funding was directed towards several projects previously flagged by the House. Notably, Atiak Sugar Factory received Shs274.1 billion for the purchase of government shares, while Shs26.15 billion was allocated for the acquisition of shares in Abubaker Technical Services and General Supplies Ltd.

“We receive budget figures that have no relationship with what we finally spend. Three percent of Shs58 [trillion] is not the same as three percent of Shs45 [trillion]. It is a matter that touches on the probity of the Ministry of Finance and how it can easily mislead Ugandans,” Mathias Mpuuga (Nyendo-Mukungwe) said.

Mr Ramathan Ggoobi, the Finance Ministry Permanent Secretary/Secretary to Treasury (PSST) did not, by press time, respond to our request to comment on the concerns by the legislators.

Legislators, who under the Appropriation Bill as per article 156 of the Constitution are charged with the allocation of resources, also accused the Finance ministry of undermining their powers. PSST Ggoobi particularly came under fire after allegations that he said the House plays a negligible role in the budget process.

“Members have been very keen in attending sectoral Committees to consider the budget but whatever we approve does not come to reality. Since the PSST made that statement, I do not see why we are spending our time going into the budget,” Nathan Byanyima (Bukanga North County) said.

Parliament called for an amendment to the necessary laws, and the Budget Framework Paper to tame the unilateral changes in the figures. Minister Musasazi said the processes for the changes would be effected starting July. 

Priorities
There have been growing concerns that a growing budget does not translate to proportionate development. Going by the trends of the past five years, there is likely to be more funds channeled into debt repayment and statutory expenditure than development.

The discretionary budget has been shrinking as debt, primed to breach the Shs100 trillion mark this year, soars. In the Shs52 trillion Budget Framework Paper tabled in December, Shs24 trillion was to be spent on debt repayment, while the discretionary resource had reduced by Shs3.470 trillion to Shs21.73 trillion. The same had fallen by Shs24b in the 2022/23 financial year.

“What suffers is the development side. We are beginning to look at doing what cannot wait. For instance, if it is a road and we think it can wait, we stay; instead of doing tarmac, we can do first-grade marram and maintenance,” an official from the Finance ministry said earlier.

Mr Musasizi disclosed that the government’s priority areas in the incoming financial year will include peace and security, road maintenance and construction of a few strategic roads, and construction of the standard gauge railway, as well as electricity transmission and utilisation of existing energy stock.  

Others are investments in wealth creation initiatives, investments in social sectors like education, health and water, as well as manufacturing.

Mr Musasazi also tabled five tax Bills, including the Excise Duty (Amendment) Bill, 2024, the Stamp Duty (Amendment) Bill, 2024, the Tax Procedures Code (Amendment) Bill, 2024, the Value Added Tax (Amendment) Bill, 2024, and the Income Tax (Amendment) Bill, 2024 through which the government hopes to raise funds to finance the budget that should be passed in June.

Funding concerns
When the World Bank announced that it is suspending new funding to Uganda over the enactment of the Anti-Homosexuality Act (AHA), Mr Musasizi said the government would revise the national budget.

This did not happen and instead, in the financial year about to end, the country went on a borrowing spree. The World Bank is yet to lift its suspension. Different government officials have however hinted at a near resolution of the talks with the international lender.

The case in which rights activists are challenging the AHA, and which sources say might be pivotal to a World Bank decision, has been awaiting judgment before the Constitutional Court since December 2023. On Tuesday, the Health Minister, Dr Jane Ruth Aceng, revealed that development partners have asked Uganda and other countries with high malaria burden to take charge of the fight through increased domestic funding.

Budget trends
2024/2025:      Shs58t

2023/2024:      Shs52.7t

2022/2023:      Shs48.1t

2021/2022:      Shs44.7t

2020/2021:      Shs45.5t

Measures
In November 2023, the Finance ministry proposed six measures aimed at reducing the cost of debt service. 
    
These initiatives include: limiting supplementary requests to critical areas for the economy and security; emphasising the effective implementation of the Domestic Revenue Mobilisation Strategy to enhance domestic revenue collection capacity; postponing new borrowing except for strategic sectors like oil and gas; mineral development; tourism; agro industrialisation; and the knowledge economy. 

Furthermore, the scope of fiscal consolidation would be expanded to include expenditure allocations in projects and streamline routine activities of government ministries and departments. 

Efforts to halt leakages of public resources, starting with a cleanup of the payroll and subsequent verifications in education institutions and project performance, were also highlighted.   
     
The ministry also stressed the importance of expediting the implementation of the Public Investment Financing Strategy to access new sources of financing.