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Why financing Uganda's budget remains a far-fetched dream

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Added 24th January 2018 02:36 PM

Interest rate payments on loans for the coming financial year will be the second most prioritised area for the Government after transport and works.

Why financing Uganda's budget remains a far-fetched dream

Interest rate payments on loans for the coming financial year will be the second most prioritised area for the Government after transport and works.

FINANCE

By Richard Ssempala

Over time, we have heard the President saying: "Uganda is on a move to fully finance her national budget". From the available National Budget Framework Paper (NBFP) for Financial Year 2018/19, the dream seems still far from realisation.  

The report points out different sources in which the government intends to source its financial resources for the financial year 2018/19. Among them are both private and external borrowing. It should be noted, however that, the country is currently faced with many social economic challenges stretching from salary strikes by civil and some private sector workers to drought in many parts of the country. There are un-accounted for killings such as the recent Bukomansimbi tragedy on the New Year 's Eve a few all of which whose solutions are dependent on financial and economic soundness of the country.

The NBFP stipulates that the Government is to run a budget of about sh29.274 trillion of which only sh12.744 trillion (43.5%) will be available for service delivery. This  excludes the budget and project support, debt repayments and domestic financing.  In terms of external funding, the government intends to borrow money on both concessional and non-concessional terms.  It is projected that about sh5.2trillion ($1,443.3m) is going to be sourced from external lenders. "Painfully," non-concessional loans will be taking the largest share of about 52.64 % of the total loans. Notwithstanding this, the Government intends to borrow domestically about sh940b.

Even though for years, the government has defended Uganda's debt to be at a sustainable level i.e. below the 50% threshold, the distress from debt is currently felt by all Ugandans. For instance, in the same NBFP for the next year 2018/19, interest rate payment to local and external loans obligation is projected to be sh2.7 trillion which is about 12.3% of the entire budget.  In fact, interest rate payments on loans for the coming financial year will be the second most prioritised area for the Government after transport and works. 

Different Annual Auditor General's reports for years have highlighted a number of anomalies in utilisation of borrowed funds. These include unspent funds, procurement related delays in the implementation of projects and compensation challenges, among others. In fact, according to the 2017 Annual Auditor General's report, the people of northern Uganda missed the construction  of  Ajeleck, Opot and Ojanal bridges due to improper management of the project by the concerned officials, which resulted in returning of unspent sh6b to Islamic Development Bank.

The government, in the financial year 2018/19, ought to reconsider all processes in which funds are sourced, critically scrutinise the terms attached to loans, and above all, consider which projects are viable to be financed by borrowed funds. There is also a need to trim down excessive expenditures by the Government as pointed out by the Auditor General and Internal Security Organisation report last year.

In the interest of citizens, the Government should ensure strict mechanisms of approval for any expenditures before they are incurred. Where there are skilled staff in a ministry, it is un- economical to hire consultants, where there are ambassadors abroad, it is suicidal to send delegates from Uganda for a foreign trip.

We have ministerial conference rooms and halls, is it economical to opt for hotels? By integrating these, citizens will see value in the taxes they pay and probably will increase on the domestic resources available for financing rather big government projects.

The writer is a research associate with the Uganda Debt Network

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