No budget manoeuvring, warns Muhakanizi

By John Odyek

Keith Muhakanizi, the permanent secretary of the ministry of finance, planning and economic development has said he has taken a strong position so that “manoeuvering” of the sh18.6 trillion national budget would be stopped.

"Many countries have moved to long term and multi-year budgeting. Funds are committed to long term projects and you cannot just wake up and move money away from them," he said.

Muhakanizi, also secretary to the treasury, said this during the fifth annual high level policy dialogue on the budget at Sheraton Kampala Hotel.

It was organised by the Advocates Coalition for Development and Environment (ACODE) under the theme 'Budgeting for inclusive growth amidst global economic turbulence'.

"Leaders, MPs, presidents must know that we no longer have room for flexibility in fiscal policy if we have to deliver long term projects. This is not well understood by governments and Parliament. There is no room for increasing consumptive expenditure like pay rises like the one for MPs".

‘Outputs instead of outcomes’

The permanent secretary explained that Uganda's external debt stock of US$ 7.4b (sh23trillion) was 26.5% of the GDP, standing at US$24.8b (sh77.3trillion), which was sustainable. He said this was below the sub-Sahara average of 30% and well within the 50% threshold recommended by the International Monetary Fund (IMF).

"People think at a certain point you stop borrowing, if you don't borrow, you would not have banks.”

On the misuse of public funds, he said the new Public Finance and Accountability Act 2015 states that an accounting officer who has been found to mismanage public funds by the auditor general will lose their job.

Muhakanizi said with improvements in the release of salaries, public servants should deliver better services and not give excuses of ‘no salary no work'.

"Delivering outputs instead of outcomes is what Africa is suffering from. You give money but there are no roads.”

He accused the civil society of being weak in demanding for accountability for the use of public funds.

Meanwhile, Prof. Augustus Nuwagaba, a former Makerere University economics lecturer, has cautioned Ugandans against spending unnecessarily on imported products at the expense of local products, saying it can cause an imbalance in the economy.

‘Not our uncles’

Nuwagaba, a consultant on economics, making the keynote address, said this habit was “strangling” the Ugandan shilling because large volumes of foreign exchange have to be used to import the foreign goods which cause the shilling to suffer depreciation.

He added that that Uganda's imports US$507.50m (sh1.6trillion) were more than the exports US$225.32m (sh702b).

Nuwagaba said: "Why buy door shutters from Malaysia. Why shop for tomatoes in supermarkets imported from South Africa. Those people are not our uncles. If you go to supermarkets in Europe you cannot find bananas, water melon, sorghum from Uganda yet they are the best," Nuwagaba said.

The professor quoted Europeans saying that Ugandans don't know how to package that is why her products are not on their markets.

"It is because we don't have guarantees for export and permission to export – that is why we can't take Uganda's products there [European and American supermarkets].”

Nuwagaba added that the banking and telecommunication sectors were more financially powerful yet they employ few people compared to the agricultural sector which employs the majority of Ugandans who are living in poverty.                                                 

According to him, financial sector liberalisation has created a few rich and powerful individuals but has excluded small and medium size firms. He urged Uganda to borrow a leaf from China where an agricultural bank was created by raising money through the stock exchange and therefore the shares were locally owned.

He explained that there has been more concern about Uganda's external debt while forgetting about the rising domestic debt, and that increased domestic debt meant government borrowed treasury bills which have the effect of increasing commercial bank lending rates.

Uganda's domestic debt stood at US$3.10b (sh9.6trillion) in February 2015 compared to US$1.4b (sh4.4trillion) in June 2014.

"We should not fear external borrowing as long as it is used for the right purpose. We assume the borrowed money will be used to build industries, dams, roads, railway which will create jobs," Nuwagaba said.

Arthur Bainomugisha, the executive director ACODE said if the budget was well managed Uganda can sail through the turbulent times of falling oil prices.

He said it was high time the government increased fund allocation to the local governments. "The issue of funding for local governments is critical if we are to democratically decentralize.”

Local governments receive only 19% of the national budget; the balance goes to the central government. Local governments are demanding for an increase to at least 38% of the national budget.

Dr Patrick Birungi, director planning National Planning Authority (NPA) said the fall in oil prices will have positive and negative impacts on the economy.

Birungi cautioned that the transmission mechanism for low oil prices in Uganda was too slow, but it should lower transaction costs and increase economic activities, adding that the declining prices could dampen investment in the sector and affect employment creation.