In his latest report the Audit General drew a painful picture of how our domestic arrears are doubling every five years with no effective action to slow down this accumulation or pay them off.
The Auditor General John Muwanga in his report of the year
that ended in June 2023 said domestic arrears continued to mount by 16 percent
annually, inexplicably and illegally.
“Some accounting offices are concealing domestic arrears and
paying for arrears which previously were not disclosed nor budgeted for,”
Muwanga reported.
“In other instances, the arrears disclosed are not properly supported
by evidence of goods or a service. I further observed that some entities have
entered in to multi-year commitments without parliamentary approval.”
In simple English officers are paying for ghost products and
services, hiding legitimate claims on government while paying the fictitious
ones and committing government to debts without proper approvals.
The net effect of this, is that what government owes to suppliers has nearly tripled to sh10.5trillion in 2022/23 from sh3.335 trillion in 2018/19, with no corresponding growth in revenues. During the same period URA collections grew by just over 50 percent to sh25.2trillion from sh16.6trillion. Just by that simple calculation it is inconceivable that government will ever fully pay these domestic arrears.
The worst offenders are Kampala Capital City Authority
(KCCA) who in the last year’s domestic arrears jumped almost tenfold, followed
by the works ministry, prisons and the finance ministry. That is ironic because
the finance ministry is supposed to be overseeing and implementing the
discipline around accumulating domestic arrears.
This is a scary situation than is being acknowledged by the government.
So I have a friend who does business with government. They
owe him a few billion shillings for work that has been done and certified. His
business is on its knees because between government not paying him, URA is
baying for his blood, as is his bank. To survive he has been forced to regress
into informality. He has adopted two sets of books, cut back on his official
payroll and basically insists on being paid in cash and not through the formal
financial system.
It does not take a rocket scientist to see what will happen
if his methods are replicated across hundreds or even thousands of companies.
URA will huff and puff but will find little love in the
private sector. That is not a threat but a promise.
It is so bad, that many banks are refusing to discount government
invoices. Previously if a business man won a deal he could take an invoice he
had made to government and borrow against it in the bank. Now banks don’t want
to touch that “counterfeit” paper with a ten-foot pole. Businesses are slowly grinding
to a halt.
This is an unsustainable situation. Our taxes come from
private companies and individuals. With businesses struggling they will close
down altogether costing jobs in the companies and among its suppliers.
What the Auditor General was describing up there was
corruption in very many words. Despite a policy and new blood in the ministry
the interest groups around this racket are so firmly entrenched they can openly
defy Ramathan Goobi’s best efforts to bring some sanity to the system. Isn’t it
just a matter of time before he throws up his hands in defeat or joins them
anyway?
"There is even a scarier scenario. That these interest groups that are a law
unto themselves, have actually captured the state...
Ebola is particularly dangerous parasite because it feeds
off the host and when they die abandon them for a new host. When it is feeding
off the host it has no thought of coexistence, it just feeds off the host in disregard
of the hosts continued life.
That is what the Auditor General is reporting is happening
in the Uganda government. That the corrupt are feeding off the state without regard
for whether it will continue to exist. In fact when every one else is
tightening their belts, these leeches are accelerating their eating and to hell
with everything.
This cannot end well, especially if good people decide to
join in the plunder.
While it may sound drastic you just have to look across the
border to Kenya to see what happens when a rapacious clique takes over the
state and bend it to their own over the national intersts. For all intents and purposes,
they are going back to Structral Adjustment Programme (SAP) -- raising taxes,
cutting subsidies and privatizing public enterprises to qualify for much needed
cash.
All this because revenue inflows have long been surpassed by
government expenditure. If corruption was tackled decisively you would be
shocked how dramatically government expenses would collapse.
And this is not just macroeconomics. As a proxy of economic activity
mobile money transactions in Kenya last year for the first time in 17 years. The small man is feeling the pain in a very real way.
God forbid that we find ourselves back in SAPs because of
our indiscipline. But how improbable is that given what we know?
