Kampala, (UG): Parliament of Uganda last week approved the Budget Framework Paper with a total of Shs52.7 trillion budget for the Financial Year 2024/2025.
The budget which is Shs14 billion lower than the current budget was approved with warnings of an “impact” on service delivery as statutory expenditure, including debt repayments, eats into funds available for development, among others.
Despite the government setting an overall goal of accelerating economic growth to at least 7 per cent, legislators raised concerns about a mismatch between government pledges and where huge sums of resources are often directed.
A report by the Budget Committee of Parliament into the Budget Framework Paper (BFP) indicated that the total government resources available for development projects and service delivery has reduced by Shs3.4 trillion from Shs25.2 trillion in the current financial year to Shs21.7 trillion.
This means, a total of Shs30.9 trillion, which is 59 per cent of the budget, will go to non-discretionary expenditure, which includes salaries and debt repayment.
Nearly Shs17 trillion has been budgeted for debt repayment. A total of Shs200b has been allocated for domestic arrears, Shs1.3 trillion for domestic debt repayment while Shs7.6 trillion will go to interest payments.
Going by the programme-based budgeting, human capital development, governance and security, and integrated transport infrastructure and services take the lion’s share of Shs9.3 trillion, Shs7.4 trillion and Shs5.8 trillion, respectively.
Inside the next financial year’s budget, Parliament has been allocated Shs945b, administration of justice Shs432b and agro industrialisation Shs1.6 trillion.
Similarly, sustainable petroleum development will take Shs1.3 trillion, private sector development Shs1.8 trillion, regional development Shs1.03 trillion, community mobilisation and mindset change Shs35b, while tourism development has been allocated Shs248b.
As the headwinds of the passing of the anti-homosexuality law continue, Shs2.75 trillion has been projected to come in support from external partners, which has led to an increase in domestic borrowing of 21 per cent.
Some sectors most affected by the fall in external funding include health, whose budget has been reduced from Shs4.86 trillion to Shs4.24 trillion.
Government in its strategy is aiming to focus on areas that will drive development, including implementation of the Parish Development Model and other programmes on wealth creation, agro-industry, oil and gas production, tourism and leveraging Internet use.
How govt plans to raise money
According to the Parliament report, the Uganda Revenue Authority (URA) is expected to collect Shs29.9 trillion in tax and non-tax revenue.
Additionally, government projects to get Shs28b from budget support, Shs4.1 trillion for domestic borrowing and Bank of recapitalisation, Shs8.8t for project support (external financing), Shs9.4t for domestic refinancing (roll-over) and Shs287b form local revenue for local governments.
There were concerns, however, of the government overestimating its domestic collections and external financing, with the Ministry of Finance putting the public debt at Shs86.7 trillion while the Auditor General in his report to Parliament says it is at Shs97.4 trillion and the Bank of Uganda puts it at Shs88.8 trillion.
Finance State Minister in charge of General Duties, Mr Henry Musasazi told parliament that the public debt currently stands at Shs86.7 trillion excluding court awards, domestic arrears such as utilities, rent, goods and services, and pension among others, owed by the government.
“There is a big difference between what we borrow to finance the budget and what someone out commits to provide goods to the government. From the layman’s language, they all are debts, that’s why the Auditor General is considering them …if you want the official figures on public debt, it is the Ministry of Finance,” Musasizi said.
Uganda on a ticking time bomb
Despite the differing numbers, the committee report unanimously pointed to the time bomb that borrowing has become for the country.
“Debt levels continue to increase and could reach unsustainable levels in the medium term. Debt to GDP has increased to about 52.7 per cent, which is above the 50 per cent sustainability threshold. This has also come with other additional challenges like an increase in interest payments, which have reduced the available fiscal space for development expenditures. We, therefore, recommend that government should gradually scale down on domestic borrowing because of its negative effects on private sector credit,” the Committee report states.
“We need to speak about public debt, as your clamouring to find space and time and we crack the animal called public debt and how we are borrowing; otherwise we are in a deep hole,” Mr Muwanga Kivumbi (Butambala) said.
“If the Ministry of Finance says our debt is sustainable, that is something we can debate, the Ministry of Finance can come and tell us what makes it sustainable,” Mr Tayebwa said.
Mr Joel Ssenyonyi, the Leader of the Opposition in Parliament, blamed the government’s failure to plug the haemorrhage of resources through corruption and fiscal indiscipline for the continued budgetary shortfalls that then lead to unnecessary borrowing.
“We sometimes sanitise this by giving it flowery names; corruption, misappropriation…but these guys are thieves, these people taking taxpayers money,” he said.
Programmes with highest funding
- Agro Industrialization Shs1.6t
- Mineral Development Shs31b
- Sustainable Petroleum Dev’t Shs1.06t
- Manufacturing Shs105b
- Tourism development Shs248b
- Natural Resources, Climate Change, Land and water Mgt Shs419b
- Private Sector Development Shs1.8t
- Sustainable Energy Devt Shs1.3t
- Integrated Transport Infrastructure and services Shs5.8t
- Urbanisation and Housing Shs77b
- Digital Transformation Shs173bn
- Human Capital Development Shs9t 9.3t
Additional Reporting by Monitor
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