Unsatisfactory! Uganda’s score on budget compliance

Saturday May 26 2018

A road in Kampala under repair. NMG

A road in Kampala under repair. The National Planning Authority says key projects have not been allocated sufficient funds. FILE PHOTO | MORGAN MBABAZI | NMG 

By CHARLES M. MPAGI
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Unsatisfactory! This is the harsh score Uganda’s National Planning Authority (NPA) has given government’s budget compliance in its latest audit.

With an overall weighted average of 54.0 per cent, the budget was found to be inconsistent with the National Development Plan II, the Charter for Fiscal Responsibility as well as the National Budget Framework paper.

Everything that could go wrong with the budget went wrong, according the NPA chairman, Dr Wilberforce Kisamba-Mugerwa.

“The weak level of budget compliance to the NDPII is mainly due to weaknesses in planning,” he noted.

The budget macroeconomic targets significantly differ from those of NDPII while the budget release performance and absorption was low.

NDPII is the second in a series of six five-year plans to help Uganda achieve its Vision 2040 of becoming an upper middle-income country. The Charter for Fiscal Responsibility seeks to help the country achieve sustainable fiscal balances and contain its public debt, while the National Budget Framework Paper shows the link between development policies and spending.

Persistent poor performance over the past three years has put the country’s ambitious drive to achieve lower middle income status by 2020 in jeopardy, the NPA notes. Uganda is also unlikely to enhance its fiscal expansion before the East African Community convergence criteria is operational.

Key projects

“The EAC convergence puts a limit on the fiscal deficit to three per cent. The failure to take advantage of the window is likely to lessen Uganda’s competitiveness within the bloc,” notes the NPA.

“The country has to fasttrack the implementation of key projects such as the standard gauge railway before this window of opportunity closes.”

Though advocates of borrowing which is now at 40.1 per cent of GDP, the NPA warns that this has not benefitted core projects which were to be the main drivers of public debt. Where the projects have benefited, performance is poor and most are behind schedule.

But the bigger threat is on management of the debt where high interest rates are choking allocations to key sectors expected to drive growth and improve competitiveness.

“Interest rate payments and the nature of debt financing are a cause for concern. Currently these payments are second to works and transport in total budget allocation,” said NPA.

The authority notes a disconnect between the intent of budget and the actual budget allocations.

“The Financial Year 2017/2018 was intended to deliver on industrialisation for job creation, however, the means to achieving this in terms of interventions and resource allocations are inadequate. Key NDPII priorities such as scaling up value addition and collective marketing; establishing an integrated steel and iron industry; zonal agro-processing; re-establishment of co-operatives to support value addition and revitalising the Uganda Development Bank have not been allocated sufficient funds.”

The authority notes that the budget concentrates more on the expenditure side but is weak on how revenue will be innovatively mobilised from domestic resources.

Also highlighted are land compensations “which are crowding out the impact of infrastructure projects and slowing their implementation.” For example, government is spending at least Ush1 trillion ($270 million) which could have constructed at least 300km of paved road.

For example, the 53-kilometre Entebbe Express Way, China funded and built paid out Ush308 billion ($82.5 million) in compensation alone, which is equivalent to 100km of paved road.