The opposition in parliament has punched holes in the government’s 47 trillion shillings budget for the 2022/23 financial year, arguing that financing it will require more borrowing.
The government’s new revenue and expenditure plan is Shs 2.5 trillion higher than the current year’s budget.
Seven out of every Shs10 of the next budget will go to recurrent expenditure, which means three out of Shs10 will go to development.
With local revenue collection projected at 25.5 trillion shillings, the Leader of the Opposition in Parliament, Mr. Mathias Mpuuga, said the mobilization of resources to finance the budget for the coming financial year will increase the portfolio of the country’s debt.
The budget proposal for the coming year has been prepared in an environment characterized by high unemployment, an influx of refugees and the war in the Democratic Republic of the Congo.
He said the government had committed the country to unproductive public debt and wasteful spending amid poor prioritization of development strategies. This, he said, undermines the credibility of the budget process.
“The government has abdicated substantial ground in the provision of services to the private sector where survival is guaranteed only to powerful and privileged associates. Consequently, the majority of citizens lament in poverty amid soaring commodity prices and collapsing businesses,” he said.
Unrealistic resource envelope
Mr Mpuuga said while the URA is expected to raise an additional 3.12 trillion shillings, this is unrealistic given the fact that there have been persistent revenue shortfalls. Over the past two financial years, the URA has experienced revenue declines amounting to Sh3.59 trillion in 2019/20 and Sh2.37 trillion in 2020/21.
The government is also expected to increase domestic borrowing by 1.22 trillion shillings, which the opposition says indicates the government is struggling to attract concessional debt.
“The inability to clear domestic debt has become a strain on our economy reflected in the rolling debt. It is projected at Shs 8 trillion for the financial year 2022/23 from Shs 5.4 trillion to the “FY 2017/18. Not writing off debts but instead resorting to recycling is a recipe for a failing economy,” Mr Mpuuga said.
Figures from the Ministry of Finance indicate that debt management costs have risen from 8.58 trillion shillings in 2017/18 and are expected to reach 15.94 trillion shillings in 2022/23, an increase of 86%. Each year, the government incurs considerable sums in interest payments, commitment fees, debt management fees and amortization.
Mr. Mpuuga said that with such commitments, from the start, 33% of the proposed budget will not be available for service delivery, but instead will be used for the payment of partial debt commitments.
He proposed that a public debt repayment schedule be developed and tabled in the House to guide the progressive allocation of funds for debt clearance.
“Non-concessional borrowing should be reserved for value-added projects with strong social or growth impact. Efforts must now be put on the maintenance and rehabilitation of the developed infrastructure,” he said.
Uganda’s external and domestic debt stood at 73.78 trillion shillings as of December 2021, while contingent liabilities stood at 160 trillion shillings and domestic arrears at 4.65 trillion shillings. Outstanding advances from the Bank of Uganda amounted to 3,033 billion shillings.
Mr Mpuuga said this was a wider deviation from the total public debt stock of 73.49 trillion shillings declared by the government in December 2021, which excludes any debt guaranteed by the state. , with the exception of a tiny part which became a liability for the government in the event of default by the official. debtor.
“It also excludes domestic arrears and unpaid advances from the Bank of Uganda to the government. This is terrifying considering that on February 18, 2022, the government signed a Service Level Agreement with the Bank of Uganda which redefines advances to include debt provisioning. This is illegal and amounts to backdoor borrowing without parliamentary approval,” he said.
He said the country will pay interest of more than 5.5 trillion shillings in the 2022/23 financial year, compared to 2.4 trillion shillings in the 2017/18 financial year, which is an increase by 130%.
“This is coupled by external debt repayments which are projected at 2.4 trillion shillings in the 2022/23 financial year, rising from 589 billion shillings in the 2017/18 financial year. 307% These take the first call on revenue collection and reduce funds available for service delivery,” he said.
For him, while the Constitution and the Rules of Procedure of the Parliament empower the latter to approve all forms of loans and guarantees, its control mechanisms are so weak and harmful to the economy. He said parliament often focused on the intent of the loan and failed to give proper scrutiny to the terms of the loan.
Mpuuga also blamed the government for pushing the country to incur expenses on failed ventures including the Uganda International Hospital project in Lubowa. He said that so far, 348 billion shillings have already been spent, while 319 billion shillings are earmarked in the 2022/23 financial year for the non-progressive project.
“This equates to 22 abandoned hospitals valued at 30 billion shillings each or 606 abandoned health centers valued at 1.1 billion each,” he said.
“The government should lay on the table before the approval of the annual budget a list of all beneficiaries of contingent liabilities and the amount of guaranteed funds. The criteria for accessing and benefiting from government guarantees should be presented to Parliament before the start of the 2022/23 financial year to ensure transparency and fairness in accessing them,” he recommended.
The opposition policy statement also challenged how the unspent balance from the previous year is rolled into the next year. Mr Mpuuga said that in the 2020/21 financial year, there was 1.49 trillion shillings left as unspent balance. He said it is uncertain whether unspent balances will be reintegrated into resources to be spent in a new financial year.
He said that when approving the new budget, unspent balances are not reflected in the resource envelope and disappear into the void. “Due to the continuing uncertainty, it would be prudent for a special audit to be undertaken for the past 5 years to determine how unspent balances are used in a new year,” he said.
He said supplementary budgets have become a persistent risk of financial indiscipline because most supplementary requests are not sufficiently vetted by the minister responsible before being cleared and forwarded for approval by parliament.
He said that items rejected by parliament during budget approval are usually funded under the additional approval of 3% of the annual budget which does not require prior parliamentary approval.
“As a result, the Minister is usurping the appropriation powers of Parliament through subsidiary appropriations. Consequently, discretionary powers are diverted to the benefit of a few privileged voices. No wonder that over the last five years, the ministry, which must ensure a rigorous examination of additional requests, is the second largest beneficiary,” he said.
“The inability to clear domestic debt has become a strain on our economy reflected in the rolling debt. It is projected at Shs 8 trillion for the financial year 2022/23 from Shs 5.4 trillion to the 2017/18 financial year. Not writing off debts but instead resorting to recycling is a recipe for a failing economy”, Mathias Mpuuga, LoP.