Ensure that we don’t live above our means

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 issue: Expenditure

Our view: Clientelism and patronage that keep pushing the cost of public expenditure to disturbingly high levels both hardly help matters. This has led to duplication of roles following the creation of needless administration units.

The central bank’s latest monetary policy report, in its honesty, meticulously comes to the conclusion that Uganda spends more than it receives. And, perhaps more troubling, this current account deficit (CAD) has increased almost twofold across the past five years. Bank of Uganda’s June report is also less sanguine about the road ahead, with dwindling grants and new rules on coffee imports into the European Union (EU) primed to create an even more complicated situation.

The implications of this balance of payments outlook and, for good measure, the prognosis are at any rate sobering and must galvanise action. The problems are “obvious” and, predictably, so are the solutions.

Evidently, the fiscal rules that offer guidance on how much the government should borrow and spend have to be seriously reconsidered to guarantee the health of the economy. The measures currently considered seem so peripheral and, even, out of sync with the best practices. Along with the exports of gold and coffee, the central bank sees in the expected oil production the distinct possibility of whittling down Uganda’s trade deficit. Such success is, however, by no means assured.

As noted earlier, there are no guarantees that Uganda will effortlessly meet an EU law that will, starting 2025, ban outright importation of coffee that is remotely linked or traced back to deforestation. Also, we have previously seen how a red flag can take the wind out of the sails of gold exports. This was after the US sanctioned Alain Goetz and African Gold Refinery, a Uganda-based company, in 2022. Also, the strong headwinds that key projects like the East African Crude Oil Pipeline (Eacop) are facing cannot be dismissed out of hand.

If the government is shorn of the three previously mentioned productive resources, a cat could well be put amongst the pigeons. If it has not, already. This will further constrict what little, if any, fiscal headroom is left for the country’s budget wonks. Yet we believe all of this mess—and it is a mess—will be blunted considerably if our leaders choose to do the simplest of things: live within our means. It would also do the country a world of good if the war against corruption was decisively won.

The vice has contributed significantly to what is ailing our economy. The leakages that it has occasioned cannot and should not be reduced to a footnote. Moreover there has been a brazen move by state actors in the recent past to normalise a vice that is pernicious in its consequences.

Clientelism and patronage that keep pushing the cost of public expenditure to disturbingly high levels both hardly help matters. This has led to duplication of roles following the creation of needless administration units. Ditto the recently created entities tasked with subjugating the corruption monster. We cannot continue to be grimly determined to rake up a huge bill when all indications suggest that our fuel tank is empty.

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