How Will Govt Meet Shs42bn Pension Funding Gap Amidst Inefficiencies?

A recent special audit of Uganda's pension and gratuity payroll management has highlighted inefficiencies and areas for improvement, raising concerns about the country’s ability to meet a significant pension funding gap.

Commissioned by the Minister of Finance, the audit sought to validate the 72,285 pensioners and beneficiaries on the government payroll between the 2019/20 and 2023/24 financial years.

Of those validated, 84.8% were fully verified, while 14.2% failed to appear for verification.

The audit also uncovered 4,538 unlisted individuals, with 4,057 verified and included in pension estimates.

Despite these efforts, the audit revealed substantial overpayments—Shs11.393 billion in gratuity overpayments to 1,502 beneficiaries and Shs8.98 billion in pension overpayments to 2,193 individuals across various Ministries, Departments, and Local Governments.

Recovering these amounts remains uncertain.

Looking ahead to the 2024/25 fiscal year, Uganda’s pension and gratuity estimates project a need for Shs974.664 billion to cover 80,963 pensioners, including Shs74.245 billion for arrears and Shs33.732 billion for non-traditional pensioners.

This projection reveals a Shs42.894 billion funding gap compared to the revised 2023/24 budget of Shs931.77 billion.

Further complicating matters, the audit found that the total approved budget of Shs3 trillion for 62 MDAs and 176 LGs saw supplementary funding of Shs0.77 trillion, but Shs0.088 trillion (2%) was left unutilized.

With Shs0.38 trillion (10%) of the released funds unused, inefficiencies in fund utilization could exacerbate the pension funding challenge.

The government now faces the dual challenge of plugging this funding gap while addressing inefficiencies within the system.