National budget: Govt to crack whip on reckless expenditures

Uganda will start rolling out a Shs 52 trillion budget that is heavily laden with debt obligations on July 1, hoping that a large portion of the money will find its way into the hands of many desperate Ugandans struggling to make ends meet.

Matia Kasaija, the minister of Finance, Planning and Economic Development, said Uganda’s public debt had shot to a record Shs 80.7 trillion, a sobering amount that has forced the technocrats at the ministry to devise means of chopping the country’s bloated expenditure bill.

The 2023/2024 budget ultimately offers Uganda’s ministry of finance a tricky balancing act where government has to borrow more money as it aggressively collects more tax revenue to finance a budget where the payment of debts takes up just under a quarter of the entire resource envelope. The government plans to borrow Shs 6.16 trillion and collect Shs 29 trillion in taxes.

Patrick Ocailap, the deputy secretary to the Treasury, says government is cautious and mindful of the country’s debt obligations.

“In the next financial year, we are reducing domestic borrowing because it is driving interest rates higher and at a faster rate. Next year, we are planning to borrow not more than Shs 3 trillion or thereabout. There is a deliberate action to reduce our domestic borrowing in order to minimize our debt burden,” he said.

Consequently, government shall minimize commercial borrowing from abroad, because it is quite expensive. The interest rates are not only going up in Uganda but also externally because countries are adjusting to the inflation pressures.

Ocailap stated that government will concentrate on areas of improvement in the absorption capacity of the loans so that delays in absorption should not be tolerated.

“There are inefficiencies in the system that we want to remove in order to realize the maximum benefit of that borrowed money and the maximum expansion of the economy,” he said.

REVENUE COLLECTION

Internal and external borrowing is the result of the country’s inability to raise money domestically to finance its budget.
Ocailap said, “Government is improving the efficiency of revenue collection, getting to know the taxpayers, putting those who are in the informal sector into the formal sector, not because we want to tax them but because we want them to participate in the economy in an organized manner. With that, we shall be able to expand the tax base and economic activity.”

On expanding the economy and taxation, Ocailap said the implementation of the Parish Development Model will increase production at the parish level, and at a household level. This will increase production and value addition. Speaking during the post-budget dialogue, Ramathan Ggoobi, the secretary to the Treasury, said, “Government is on track to restore fiscal discipline, while supplementary budgets have been reduced and they will be constrained further forward until they fit in the constitutional criteria.”

Ggoobi alludes to the increase in the supplementary budgets to the political economy, which fails to plan for what lies ahead.

“The supplementary budgets are considered for only those occasions that are unforeseeable like that of the Katonga bridge, which was swept away. Not supplementary to buy cars, or finish a building. It is indiscipline and we shall be asking the accounting officers to explain why they should remain in office if they go against government’s decision,” he said.

In the first half this fiscal year, Ggoobi said government learned that it can reduce domestic borrowing. It is painful because people expect money at a certain time, but we must learn to live within our means.

“We learned that we can raise revenue without levying new taxes whose burden tends to fall on the same taxpayers… The fiscal outlook of Uganda remains positive. The economy had remained resilient despite facing a spill of shocks; it is now on a steady recovery path. Government is committed to increasing revenue collections to support economic growth without excessive borrowing,” he stated.

Mumba Kalifungwa, the managing director of Absa Bank Uganda, stated that the stability and resilience of the financial sector is paramount for sustainable economic development.

“We appreciate the tireless efforts of the central bank towards ensuring that the financial sector is solid, and supporting initiatives to increase customer confidence in the sector,” he said.

He said as a private sector-led economy, Uganda’s economic growth is hinged on the strength and buoyancy of its private sector to create jobs, and increase incomes, thus contributing to the improvement in living conditions.