Monday, June 18, 2012

The FY 12/13 Uganda Budget, the Devil is in the Details!!

Owing to the prevailing economic situation today and for the last 18 months, the theme of this year’s budget, Priorities for Renewed Economic Growth and Development is rather ambiguous. It is debatable whether the budget in its current architecture shall deliver any substantial economic growth in the short term and or form the foundation for economic development in the long-term. For starters, it is a deficit budget! The planned expenditure is Ugx 10.88 trillion while the total Revenue and Grants are estimated to be at Ugx 8.65 trillion (Ugx 7.25 trillion from URA, Ugx 160 billion from Non-Tax Revenue and Ugx 1.24 trillion from Grants (AID)). It is clear, with grants, the deficit stands at Ugx 2.24 trillion, and at Ugx 3.47 trillion without grants. Government plans to cover the revenue shortfall by borrowing the Ugx 2.24 trillion of which Ugx 1.25 trillion (55%) will be sourced from foreign and international market players, while the remaining Ugx 990 billion (45%) shall be sourced locally. With the recent policy pronouncement and tax amendment of increased withholding tax on treasury bills and bonds, we wait to see whether investors, mainly institutions both local and foreign will still have appetite to invest in government debt. The government may not raise all the funds it needs to plug the deficit and in effect some ministerial work plans and projects planned for in the budget may and won’t be implemented.

The other fundamental question is whether this budget really endeavors to achieve economic growth and development as enshrined in its theme. Ugx 2.14 trillion is estimated to be spent on wages and salaries for the over 300,000 civil servants!! This is equivalent to 20% of the planned total expenditure, and 25% of total revenue from URA and grants. Of the planned Ugx 10.88 trillion total expenditure, Ugx 5.58 trillion (51%) will go to recurrent expenditure e.g. wages, non-wages, statutory, and interest payments for both foreign and domestic loans acquired by government. Only Ugx 5.28 trillion (49%) of planned total expenditure will be spent on Development Expenditure. Ugx 2 trillion, 38% of planned Development expenditure shall be on Donor Funded Projects, while ugx 3.28 trillion (64%) shall be Domestic Development Projects. The total recurrent expenditure on wages, non-wage, statutory and interest payments on government loans is 75% of the estimated total revenue to be collected from URA and Non-Tax Revenue. This implies that without grants and donor support, we would be left with a paltry of Ugx 2 trillion for our development expenditures on socio-economic transformation projects! It is clear we are banking a lot on donor support and grants (AID) for implementation and funding of our development programs and that exposes us to downside risks of the Eurozone crisis and international financial systems.

The government has prioritized the following sectors to form the basis for socio –economic transformation; Roads, Energy (Electricity), Water, Agriculture and Education. The Roads sector, managed by Uganda National Roads Authority has been allocated Ugx 1.28 trillion, for this financial year. Of this Ugx 795 billion (62%) is from Donor Funded Projects while Ugx 450 Billion (35%) shall go to Domestic Development Road Projects. The remaining Ugx 35 billion (3%) shall cover the wage bill and non-wage recurrent expenditure at UNRA. Again we are seeing a lot of Donor Support at the heart of our infrastructure development programmes clearly indicating we are still exposed to possible shocks from the Eurozone and global financial markets. Secondly, the funds for these projects may not be released in time by the donors thus work plans won’t be implemented on schedule and within desire time frames.

The other worrying paradox in the FY12/13 budget is the allocations to two ministries – Agriculture and Education. It is agreed that over 75% of Uganda’s 34 million people work and survive on agriculture though it’s largely subsistence. Since time immemorial, the argument has been made for us to tap into our competitive advantage of good climate, vast arable land etc. to develop our agricultural sector and be the food basket of the East African Region and probably the Great Lakes Region too! However, we seem to be putting even our meager resources on the non-productive ventures like USE and UPE, continuously churning out half-baked students and pupils with minimal literacy and numerical skills. Better resource allocation and utilisation would foster better agricultural production and thus improve on household incomes and social-economic well-being. The Education Sector was allocated Ugx 1.62 trillion for this financial year. Over 882 billion (54%) of this will be spent on wages and salaries for teachers , lecturers in universities and other education institutions, civil servants at the ministry and education service commission. Another Ugx 373 billion (23%) was allocated to Non-Wage recurrent expenditure on rent, utilities, vehicles, conferences, office logistics, fuel etc. This leaves a paltry Ugx 362 billion (23%) for development programmes that ought to drive better standards and quality in the Education sector.

Strangely, the whole Agricultural Sector has been allocated Ugx 378 billion only for the FY 12/13. This is equivalent to Non-Wage Recurrent Bill (rent, utilities, fuel, office logistics, training, travel, vehicles, and conferences) in the Education Sector. It is clear we are putting our minimal resources into non-productive and consumption ventures. This is the paradox that this year’s budget and more budgets to come throw in our faces. Unless we engage radical and robust structural reforms in the public service to reduce the cost of public administration, our budget, which should be one of the fundamental tools for development planning, programme implementation, monitoring and evaluation, shall always be a ritual that does not resonate with the aspirations of the wider Ugandan Society.

Agaba Rugaba

Socio –Political Commentator