Opinion
The real challenges facing the national budget
Publish Date: Jun 16, 2014
newvision
  • mail
  • img

By Warren Nyamugasira
 
Every year mixed emotions of euphoria and anxiety surround the reading of the budget. 2014/15 budget is no exception.  
 
Experts were assembled to analyse every aspect of the budget as the minister brought it to the nation and the world in full glare of the media, honorables and Excellencies, some of whom, used the opportunity to take a nap.
 
Miles of space were dedicated by the papers, television and radio stations to help the readership and listenership understand the implications of the budget provisions. This euphoria, however, should not mask the real challenges Uganda faces in trying to strike a balance 
 
The biggest challenge of all is size of the “cake”. Maria Kiwanuka can only distribute what resources the relevant authorities can mobilise.
 
A national budget is a plan to raise and allocate resources. At this stage, when the minister reads the budget, resources, particularly domestic revenues are mere estimates of what the government hopes to raise in the course of the year.  
 
In the recent past, including the financial year just ended, there have been revenue collection shortfalls, which the Government accommodates by cutting budgets and through additional borrowing or as is more likely to be the case, a combination  of the two.
 
The Government also receives donor support in form of grants and loans at less than the commercial interest rates and can borrow at market rates, if there are strategic investments that the Government must undertake. 
 
Whichever way one looks at it, the national cake is small, even minuscule when compared to the range of needs and interests that have to be satisfied. Inevitably this means that priorities within priorities have to be made and this cannot be a public affair.
 
For example, well before the budget was read, the President had already indicated where the FY2014/15 budget priorities will be – in infrastructure, agriculture and education. Beyond that, we know that there are other priorities such as defence and security, public administration and others.
 
For years, there have been calls by a cross-section of Ugandans for reductions to be made in these expenditure centres in favour of education, health and agriculture but such calls have always fallen on deaf ears. 
 
This financial year’s budget is facing a double dilemma: serious shortfalls in domestic revenue collection and donor cuts in aid.
 
Yet, the publicly announced intention of the Government is to increase the budget from sh13trillion of FY2013/14 to 14.2trillion for FY2014/15. In the face of falling revenue collection and aid cuts, two options are open to the Government. First is to levy new taxes.
 
The Presidential Advisory Committee on the budget has already recommended areas to tax, including processed milk products, land sales, fuel and paraffin, sugar, private schools and women’s wigs as well as computers. Member of Parliament, Geoffrey Ekanya muted a tax on mobile phone calls but it was quickly shot down by fellow MPs.
 
As such there is bound to be uproar over new taxes as many Ugandans think they are already over-taxed. Speaking on behalf of the opposition, the Democratic Party president had already warned the Government “against increasing the already high tax burden on Ugandans by introducing new taxes”.
 
While Keith Muhakanizi, the highest civil servant at the Ministry Finance, has vowed to go through with some of the new tax measures, we know that if they threaten 2016 votes, political economy considerations will kick in, particularly because we know that taxes levied in response to revenue shortfalls tend to be collected recklessly.  
 
The fate of the Graduated Tax, which was summarily removed for political expediency, is still fresh in people’s memories.
 
As an alternative, of course we know that government will increase its borrowing, despite warnings by civil society to “tread carefully on accumulating more debt”.
 
Another challenge is the dilemma of a two-speed economy. In Uganda, the informal, unregistered and untaxed sector is still dominant and is booming.
 
However, the elite do not really understand how to woo the drivers of this sector in order to bring them into the club of tax-payers. Sitting in Kampala and proposing to the President what to tax and what not to tax is an exercise in futility.
 
New thinking is required, may be taking advantage of the forthcoming formulation of the second National Development Plan, to find ways to make players in the informal sector make their requisite contribution to growing the national cake. Churches collect billions from this sector every week; cultural institutions collect “bricks” from actors in the same sector.
 
Why can’t the Government do the same? May be time has come to take civic education seriously to help every Ugandan citizen, individual and corporate, to appreciate that to enjoy rights and freedoms, one must also honour their obligations and responsibilities. 

The writer is an economist
 
RELATED STORIES

 

The statements, comments, or opinions expressed through the use of New Vision Online are those of their respective authors, who are solely responsible for them, and do not necessarily represent the views held by the staff and management of New Vision Online.

New Vision Online reserves the right to moderate, publish or delete a post without warning or consultation with the author.Find out why we moderate comments. For any questions please contact digital@newvision.co.ug

  • mail
  • img
blog comments powered by Disqus
Also In This Section
Commend Bigirimana for his fight against corruption
I wish to start my article with a quote about corruption from Frank Serpio: The fight for justice against corruption is never easy and never will be. It exacts a toll on ourselves, our families, our friends and especially our children. In the end, I believe as is in my case, the price we pay is we...
Act cautiously on UPDF allegations in Somalia
On the November 6, 2014, one daily newspaper carried a story of UPDF officers who have been suspended for suspected ‘sexual’ offences while on tour of duty in Somalia....
Importance of agriculture
Promoting Agricultural entrepreneurship among the youth” was/is this year’s theme for the 2014 /2015 Miss Uganda pageants....
Utilize sms technology to enhance service delivery in Uganda
The short message service (sms) is a text messaging service component of phone, web or mobile communication systems. It uses standardized communications protocols to allow fixed line or mobile phone devices to exchange short text messages....
Every child in Uganda deserves a quality education
Highly skilled human capital, or put otherwise, “skills per capita” of a country, is one of the surest preconditions for achieving development goals. It is needless to emphasise that high quality human capital is positively correlated with a country’s productivity....
Agriculture Police, are they really necessary?
The minister of Agriculture, Animal industries and Fisheries, Tress Bucyanayandi, when launching the national seed board was reported last week in the New Vision to having confirmed that Police has agreed to form a special unit for agriculture to help the ministry in enforcing veterinary quarantine...
Should workers be subjected to a 4% Health Insurance Tax??
Yes
No
Can't Say
follow us
subscribe to our news letter