The Uganda Government plans to receive budget support totalling to 1.81 billion US dollars– approximately Shs 6.8 trillion in the 2018/2019 financial year.
This represents 23 percent of the Uganda Shillings 29.2 trillion projected total budget for the next financial year. This budget support represents a US dollar 100 million decrease from the 1.91 billion budget support that government received during this financial year.
The largest portion of the budget support – US dollars 1.77 billion will go to externally financed projects. A total of 330.2 million dollars is categorised as grants, 683.5 million dollars as concession loans, 759.8 million dollars as non-concession loans, 246.9 million dollars as hydro power project loans and US dollars 512.9 million has been classified as others.
US dollars 40 million has been further classified as budget support for Highly Indebted Poor Countries (HIPC) and US dollars 40 million as revolving debt. Revolving debt refers to the debt that a country can borrow from the lender immediately after paying pending debts.
“In the next financial year 2018/19, budget support is projected at US$ 40 million and remains broadly at the same level over the medium term while projects support is expected to amount to US$ 1,773.4 million in financial year 2018/19,” the budget framework paper says.
It further states; “Project support is projected to decline in the following three years and is estimated at US$ 786.4 Million in financial year 2021/22. The decline in project support over the medium term, in part reflects the planned completion of some of the huge infrastructure projects like Karuma and Isimba which are expected to be finalized in December 2018. In addition it is due to unpredictability of this mode of budget financing and the difficulty in securing long term commitments from project financiers.”
A key challenge for external assistance in the recent years, the budget framework paper notes, is that the low disbursement for the various projects and programmes funded by different multilateral agencies, which is an indication of capacity challenges and a lack of preparedness on behalf of the implementing agencies.
The same challenge is echoed by Makerere Business School economist Ramathan Ggoobi, who argues that borrowing to finance infrastructure projects is not a problem but capacity to absorb the borrowed money. “We must increase our capacity to consume what we borrow. Sometimes, we borrow before we are ready to start project implementation. This requires improved project appraisals so that by the time we borrow, we are ready to start work,” he says.
Ggoobi notes that the government should focus on specific projects rather than starting many mega projects at a go. “We have to be orderly when planning projects,” he argues.