Is it time for Govt to revise expenditure?

by Christopher Kiiza
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In December last year, the Minister of State for Finance Minister in charge of General Duties, Henry Musasizi tabled before Parliament, the budget estimates/ the national budget framework paper for the financial year 2024/25, amounting to 52.722 trillion shillings.

The 2024/25 financial year budget estimates indicate a 14 billion shillings government expenditure decline compared to the budget for the financial year 2023/24. However, the 2023/24 budget which was 52.736 trillion shillings has since increased to 56.2 trillion shillings following the passing of the supplementary budget of 3.5 trillion shillings by parliament on November 29, 2023.

The 2024/24 national budget framework paper has been released at a critical juncture for the country as it faces significant economic challenges that include among others; the sharp increase of the public debt which has put a significant strain on the country’s finances.

The recently released Auditor General’s Report of FY2022/23 shows that the total public debt as at June 30, 2023 amounted to a staggering 96.168 trillion shillings. This amount comprises Domestic Debt Stock of 43.696 trillion (45.4%) and External Debt Stock of 52.472 trillion shillings (54.6%).

In just one year, the debt has increased by 9.329 trillion (10.74%) compared to the previous year’s debt of 86.839 trillion as at June 30, 2022.

In addition, the economy has grown from 132.09 trillion shillings in FY 2018/19 to 184.895 trillion in FY 2022/23, indicating an increase of 52.805 trillion shillings (39.98%). However, this also means that the public debt is growing at a rate that is much higher than the GDP.

Civil Society Budget Advocacy Group (CSBAG) – a coalition of civil society organizations says that the “worrying” trend of debt increase is due to the Government’s increased expenditure, which has exceeded the domestic revenue, thus leading to a fiscal deficit. 

“As our debt stock is increasing, our domestic revenue is not meeting the targets, but in order for us to meet the obligations of paying debts, it is increasingly eating away on the money which would have been available for ordinary services like health, education, roads and others. That is a concern that we need to take note of,” says Jeff Wadulo, the Programme and Policy Advisor for CSBAG.

Recurrent Expenditure VS Development Expenditure: What is Govt’s Priority?

Recurrent expenditure refers to regular, ongoing expenses incurred by a government or organization such as salaries, utilities, and maintenance costs. On the other hand, development expenditure refers to investments made in projects and initiatives aimed at fostering long term growth such as infrastructure development and education programs.

The Public Finance Management Act (PFMA) 2015 provides for expenditures in the supplementary budgets that are unabsorbable, unavoidable, and unforeseeable. However, over the years, the public has witnessed Parliament approving supplementary budgets which do not meet the 3 criteria for supplementary financing as stated in the PFMA 2015.

For instance, Parliament passed the recent supplementary budget of 3.5 trillion shillings on November 29, 2023. However, approximately 2 trillion of the 3.5 trillion shillings was towards recurrent expenditure, with a large proportion set towards addressing shortfalls in expenditure, including teachers’ salaries.

CSBAG says that this not only shows abuse of the supplementary provisions but also indicates poor planning practices within Government Ministries, Departments and Agencies (MDAs).

CSBAG terms it as “Fiscal Indiscipline through Supplementary Budgets.”

“We have always had an issue of a developing country having a bigger part of its budget in wage and non-wage (recurrent expenditure) rather than development [expenditure], and yet, the state of our infrastructure is in a sorry state. Compare, if Uganda was a very big construction project, and then you have wages which is 7 trillion shillings and recurrent expenditure which is about 70% of our budget, then you have about 15% development [expenditure]. It is like hiring people to construct your house but the costs of construction in terms of labor and the materials you need to use is much higher than the capital costs that you will put in. It does not make a lot of sense,” says Jeff Wadulo, the Programme and Policy Advisor for CSBAG.

He adds: “Uganda at this point needs much more money in infrastructure development. We do recommend that proper planning must be carried out across all government agencies departments to strike a balance between allocations for recurrent and development budgets which will also tone down on the need for supplementary budgets.”

The need for government to revise its expenditure is key given that the country has suffered a shrinking donor support following the move by the World Bank to suspend funding various big projects, and the poor performance of the tax revenue collection.

By November 2023, relative to the Uganda Revenue Authority (URA) targets, the cumulative outturns for total net tax and non-tax revenue collections amounted to 8,017.5 billion shillings of which net URA tax revenue amounted to 7,487.3 billion and NTR amounted to 530.3 billion with corresponding shortfalls of 320.3 billion and 126.3 billion, respectively.

CSBAG Concerns in the FY 2024/25 National Budget Framework Paper

The Civil Society Organizations are concerned about the Increased government expenditure biased towards recurrent expenditure.

“We recommend that Proper planning must be carried across all government agencies and departments to strike a balance between allocations for their recurrent and development budgets which will also tone down on the need for supplementary budgets,” the statement by CSBAG reads in part.

CSBAG is also concerned about the Insufficient enforcement mechanisms to control domestic arrears which increased from 4.65 trillion shillings in 2021 to 7.55 trillion shillings in 2022, according to the Auditor General.

The Government has proposed allocation of 217 billion shillings in the FY2024/25 budget for clearing arrears, but CSBAG says it is inadequate to reduce the growing stock of domestic arrears effectively.

“In fact, at the going rate, it would take government 35 years to clear the current stock of arrears, assuming that no more arrears will accumulate. Uganda needs to address these enforcement gaps and improve mechanisms for controlling domestic arrears. Without timely and proper resolution, the arrears will continue to impede economic growth and adversely affect the private sector’s contribution to the country’s development.”

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