Last week the finance ministry issued the final instructing on how accounting officers should draw up their budget for the next financial year.
In “The second budget call circular on finalization of the budget
estimates for the financial year 2023/24,” secretary to the treasury Ramathan
Ggoobi drew the broad outline of the next budget, which has been bumped up to
sh50.87trillion from the previously announced Sh47.328trillion.
Despite the increase in spending Ggoobi said there will be no
borrowing in 2023/24, there will be no budgetary increases for any ministry,
travel abroad will be restricted to the president, vice president, parliaments
speaker and deputy, the chief justice and his deputy, the prime minster and principle
judge.
He went on to announce the suspension of any salary enhancements
in the public service, vehicle purchases, workshops and seminars among others.
"You could almost hear the affected public servants laughing
in their beer.
The indiscipline in public finance management of this government
is legendary and one can only wish Ggoobi luck...
The constraining of government expenditure is to ensure
resources to start construction of the standard gauge railway, fund small scale
solar funded irrigations investments, construction power distribution infrastructure,
capitalization of the Uganda Development Bank (UDB) and The Uganda Development
Corporation (UDC).
That being said the government’s intentions are noble, especially since they are trying to put the brakes on our extravagance, focus
on investments and will pay massive dividends in future.
It could have been worse. In Kenya across the border, interest
payments account in 2020/21 for 70 percent of their export receipts, while
Uganda’s total debt service obligations are less than 10 percent of our export
receipts, according to Stanbic Bank’s recent Macroeconomic Outlook.
In addition our eastern neighbour’s total interest payments as a percentage of tax revenue stood at 30
percent while ours was under 20 percent in the 2020/21.
While we fixate on our debt levels to GDP, which crossed the
psychological 50 percent mark last year, the more threatening figure is what
portion of budget is going to debt servicing. In the new budget sh23trillion is
going towards debt servicing against a budget of sh50.871trillion or just under
half the budget.
Everybody knows what happens to you today is a function of
something you did or did not do in the past.
Without diminishing the effect of the Covid-19 pandemic on
the economy, we are in this tight squeeze partly due to things we did not do in
the past.
The presidential directive especially on the railway is one
of those things we should have done along time ago. It should have been obvious
to me but a few years ago – before Covid, someone involved in the railway told
me that industrialization can not happen if we continue depending on the roads.
That the history of industrialization shows that railways and water transport
are major drivers of industrialization. I remember having flashback about the
Ruhr industrial region in Germany, named after the Ruhr river, that was used to
ferry coal, iron ore and steel, similarly The Great Lakes industrial region of
north America.
Interestingly to make resources available we are cutting back
on the consumption budget of the government.
"Observers have cried their voices hoarse arguing that the ever expanding public expenditure would catch up with us one day. I guess our day of reckoning is here...
Another project that comes to mind is the 600 MW Karuma dam.
Construction of the dam begun in 2013 and it was supposed to be commissioned in
2018, five years down the line and not a watt of power has been generated.
In a country where only a quarter of the population has
access to the grid, the demand for power can not be denied. People may argue
about effective demand – those who can pay for the power, but we know that
there is still suppressed demand – not to mention some industrialists can not
turn up here for lack of reliable power. So imagine if the 600 MW had come online
in 2018, government coffers would be richer from the experience – not only from
taxes from the operations but from all the new businesses that would have
spouted as a result. The current cash squeeze might not have been so bad.
"Part of the reason the Karuma dam is so delayed is the flawed procurement process. It was so bad that it took President Yoweri Museveni to decide who gets what in an almost Solomonic judgement that also involved Isimba, which is dogged by its on structural issues....
Go around any sector of he economy and you will hear tales
of woe, of things left undone, which have come back to haunt us.
Do we have the discipline to go through with the current
measures? I hope so.
