Civil society pokes holes in new shs72trillion budget

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Civil society pokes holes in new shs72trillion budget
CSBAG's Julius Mukunda and SEATINI's Jane Nalunga address journalists.

Civil Society Organizations have expressed concern over glaring gaps in the newly passed budget shs72.136 trillion .

The Finance Minister will later this week read the new budget to the public.

Addressing journalists on Sunday, Julius Mukunda, the executive director of CSBAG said the increase of the budget from shs52.7 trillion to shs72 trillion means more borrowing by government to be able to finance the budget which will have a great effect on the country and its citizens.

“This implies that 55.1% of the 2024/25 financial year budget will be financed by debt and 44.9% by domestic revenue.  Government plans to further increase debt by borrowing shs8.9 trillion domestically from commercial banks which move possess significant risks to private sector lending due to the heightened exposure of Uganda’s commercial bank assets to government debt and loans,” Mukunda said.

He noted that interest payments have returned to pre-pandemic levels after slump and are expected to increase to shs9.5 trillion from shs8.2 trillion while commitment fees from projects have surged by 44% to shs1112billion .

“These developments will compromise service delivery as a significant portion of the collected revenue goes to service debt. High interest payments on loans now consume a substantial portion of the budget and domestic revenues. The cost of servicing debt has placed Uganda in a situation of debt distress and heightened vulnerability to a debt crisis.”

Poor revenue spending

The CSBAG Executive Director said there is a poor revenue performance and limited absorption capacity which highlight a serious financial crisis for the government.

Mukunda explained that the shs2.1 trillion shortfall in revenue as of December 2023 , coupled with the shs1.8 trillion overspend in domestic borrowing paint a bleak picture for government’s financial management.

“The failure to collect sufficient revenue to meet targets not only puts a strain on the budget but also raises concerns about government’s ability to fund essential services and projects,” he said.

Mukunda added,” the low absorption rate of only 84% indicates inefficiencies in government’s spending processes. With shs2.3 trillion left unspent, it is clear that there are significant obstacles hindering the timely implementation of projects and utilization of allocated funds. This not only delays progress on critical infrastructure and development initiatives but also leads to a waste of taxpayers’ money.”

SEATINI Executive Director, Jane Nalunga said financial indiscipline characterized by overspending , unapproved and corruption scandals is another loophole in the country’s budget spend.

“There have been instances of irregular or unapproved expenditures such as the controversial service award to Parliamentary Commission of shs1.7 billion and the high profile corruption cases like the iron sheets scandal. Limited transparency and accountability in government spending and contracting processes have created an environment conducive to corruption,” Nalunga said.

She added,” Corruption and political interference have weakened key institutions, making it difficult to hold the corrupt accountable.”

Increase in domestic arrears

The SEATINI Executive Director said the 62% rise to shs7.6 trillion in domestic arrears is a worrying trend for the country.

Nalunga said it is worrying that government has only allocated shs200 billion to clear outstanding arrears which are in excess of shs7 trillion.

“While this is a drop in the ocean, it contradicts government’s strategy of promoting a private sector led economy. Delay in paying outstanding arrears affects the operations of man private sector businesses that supply the government, hindering their cash flows and limiting their growth, resulting in fewer job opportunities and lower tax revenue from both VAT and PAYE.’

The CSOs said that whereas government has increased the agro industrialization budget to shs1.6 trillion from the budget framework paper amount of shs1.2 trillion , this is still lower than that of financial year 2023/24 of shs1.8 trillion, implying a shs115.20billion.

“We also notice that the program is still heavily dependent on external financing. We implore government to consider adequate domestic financing of the agro industrialization program, especially on the component of extension services and post-harvest handling through supporting  farmers to improve food security, value addition and marketing of their agricultural produce,” said Agnes Kirabo, the Executive Director of the Food Rights Alliance.

Civil society asked government to restrain from abusing public finance management laws leading to leakage and wastage of public resources.

“We call for fiscal discipline , transparency and accountability  to ensure sustainable economic growth and development.”


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