KAMPALA – Uganda’s domestic revenue in the FY 2021/22 is projected to decline by UGX 116.5billion from UGX 21,809.7billion in FY 2020/21 to UGX 21,693billion. Of the total domestic revenue in FY 2021/22, UGX 20,131billion is projected to be raised from tax and UGX 1,562billion from non-tax revenue.
This was revealed by Civil Society Budget Advocacy Group (CSBAG) on Thursday 28 while sharing their perspectives on the National Budget Framework Paper (NBFP) for the Financial Year 2021/22, which was presented to Parliament for scrutiny in December 2020 by the Minister in accordance with Public Finance Management Act (PFMA) 2015 as amended.
“In FY 2021/22, the economy is expected to grow at 4.3% from a projection of 3.1% in FY 2020/21. Relatedly, inflation is projected to reduce to 4.4% in FY 2021/22, from 5.6% in FY2020/21 which lies within Bank of Uganda’s target of keeping inflation below 5%. This are positive trends given the fact that the economy is still experiencing effects of COVID 19 pandemic,” they said.
CSBAG noted that the expenditure projections for FY 2021/22 is highly consumptive, saying that in FY 2021/22, recurrent expenditure will account for UGX 18,576.35billion (54.5%) while development expenditure will account for UGX 15,499.97billion (45.5%).
“This is despite the fact that domestic revenue is expected to reduce, this will affect service delivery efforts to the citizens. Government should practice frugality as in the current FY by continuing to reduce non-priority expenditures as practiced in and support specific interventions that may lead to economic recovery and livelihoods.”
CSBAG’s full statement
We the members of the Civil Society Budget Advocacy Group (CSBAG) are gathered here today to share our perspectives on the National Budget Framework Paper (NBFP) for the Financial Year 2021/22, which was presented to Parliament for scrutiny in December 2020 by the Minister in accordance with Public Finance Management Act (PFMA) 2015 as amended.
The FY 2021/22 NBFP comes at a time when the world, Uganda inclusive, is still struggling with the COVID 19 pandemic and its effects. This is in addition to other disasters the country faced including locust invasion, floods, landslides, among others. We need to be reminded that COVID-19 and the disasters have increased spending pressures which has narrowed discretionary fiscal space for Uganda.
Ugandans need to be reminded that the FY 2021/22 NBFP is being considered amidst the country’s general elections. This process has distorted the timelines of the budget process at Parliament level. Whereas the PFMA, 2015 provides for at least a month for Parliament to consult, debate and consider the NBFP, this has been condensed to two days. This limits proper scrutiny of the budget as well citizens’ rights to input into the NBFP as Parliament has not provided a platform for stakeholders’ consultation. We hope this is reconsidered when Parliament is considering and approving the budget FY2021/22.
We commend Government on its stance to improve allocative efficiency as exhibited in FY2020/21 budget where over UGX 3Trillion was identified from consumptive expenditure was to be refocused to development expenditures as stated in the NBFP 2021/22. We hope this measure is maintained going forward.
We commend Government on the NDPIII which mainstreams a programmatic approach to planning and budgeting with clear targets and results.
FY2021/22 will be the first year of full operationalisation of this plan. Whereas this is commendable, we are concerned about the speedy transition with limited technical assistance and inadequate preparation of government agencies.
We call on MFPED and NPA to continue providing the necessary support to MDAs and LGs to allow for full transition and effective implementation of NDPIII.
In FY 2021/22, the economy is expected to grow at 4.3% from a projection of 3.1% in FY 2020/21. Relatedly, inflation is projected to reduce to 4.4% in FY 2021/22, from 5.6% in FY2020/21 which lies within Bank of Uganda’s target of keeping inflation below 5%. This are positive trends given the fact that the economy is still experiencing effects of COVID 19 pandemic.
The total resource envelope for FY 2021/22 is projected to increase by UGX 164billion ie from UGX 45,493.7billion in FY 2020/21 to UGX 45,658.2billion.
Domestic revenue in the FY 2021/22 is projected to decline by UGX 116.5billion ie from UGX 21,809.7billion in FY 2020/21 to UGX 21,693billion. Of the total domestic revenue in FY 2021/22, UGX 20,131billion is projected to be raised from tax and UGX 1,562billion from non-tax revenue.
With domestic revenue covering only 47.5% of the total budget for FY 2021/22, the rest of the budget is to be funded through other avenues such as domestic borrowing (UGX 2,483.8billion), external financing (UGX 8,574.9billion), and budget support (UGX 3,662.1billion), which is unsustainable. Therefore, we call upon Government to prioritize domestic revenue mobilization by continuously improving efficiency of revenue administration, modernisation and enhancement of institutional and human resource capacities. In addition, URA and UCC needs to develop and adopt a tax framework suited to regulate digital taxation in a bid to increase tax base.
We note a significant increase in the country’s public debt stock, which was at UGX 63.35Trillion as of October 20202. External debt constitutes 67 %( UGX 42.76 trillion) while domestic debt constitutes 33 %( UGX 20.59 Trillion).We observe that that Government of Uganda is projected to spend 10.86 percent (UGX 4,960.47billion), on interest and, the ratio of debt service to domestic revenue is projected to increase beyond the 20 percent threshold set for debt sustainability in FY 2021/22 and the medium term. There is need for Government to reduce its spending and exhibit prudent management of public loans to enhance return on investments.
Expenditure projections for FY 2020/21
We note with concern that the expenditure projections for FY 2021/22 is highly consumptive. In FY 2021/22, recurrent expenditure will account for UGX 18,576.35billion (54.5%) while development expenditure will account for UGX 15,499.97billion (45.5%). This is despite the fact that domestic revenue is expected to reduce, this will affect service delivery efforts to the citizens. Government should practice frugality as in the current FY by continuing to reduce non-priority expenditures as practiced in and support specific interventions that may lead to economic recovery and livelihoods.
The Governance and Security programme is to take the largest share of the budget amounting to UGX 7,717.59 Billion (16.9%) followed by Human Capital Development UGX 7,043.86 (15.43%), Integrated Transport Infrastructure & Services programme will receive UGX 5,968.80 Billion (13.07%) whereas Agro Industrialization will receive UGX 1,509.26billion (3.31%).On the other hand, the programmes with the least allocations in FY2021/22 will include; Digital Transformation UGX 101.77 Billion (0.22%), Mineral Development UGX 80.57 Billion (0.18%), Manufacturing UGX 52.76 Billion (0.12%) and Community Mobilization and Mindset Change UGX 35.35 billion (0.08%). Overall, the 18 NDPIII programs will take up 64.7% of the total budget and 35.3% will cover other statutory obligations.
Agriculture is the backbone of Uganda’s economy and sustained the population especially during COVID 19 lockdown. The agro industrialization program is projected to receive only 3.3% of the total national budget even with inadequacies in financing areas such as National Food and Agricultural Statistics Systems that has a funding gap of UGX 6 billion. We are concerned that the NBFP is not responding strongly to the effects of COVID – 19 as it does not indicate ways of revamping the economy, promoting digital transformation especially in promoting e-learning, and providing a stimulus package to areas like agriculture and trade. Moreover, COVID-19 has proved that digital trade is critical in revolutionizing trade and services in Uganda and the EAC region. Therefore, we call upon Government to establish an enabling digital environment and address the funding gaps in the agro industralisation Subprogramme.
Local Government financing
Although Local Governments are at the forefront of providing services directly to citizens, 87.4% of the FY 2021/22 budget is projected to remain at the Centre (UGX 25,803.94billion) and only 8% (UGX 3,734.91 billion) will go to Local Governments. This is a reduction by UGX 413.94 billion from UGX 4,148.85 billion in FY 2020/21, which is inadequate and is likely to stifle service delivery and actualization of planned interventions. We note that the funding for Local Government interventions has consistently been reducing over the years as witnessed in 9.1% in FY 2020/21 and 9.5% in FY2018/19. Government has continuously failed to decentralize the budget to match the decentralization policy expectations which will continue to exacerbate regional inequalities and equities. We therefore call upon Government to ensure that resource allocations for service delivery at Local Governments be fully decentralized to LGs as mandated under the Second Schedule of the LGA (CAP 243)
Other CSO concerns
Non-existence of the Charter of Fiscal Responsibility to cover FY 2021/22). Whereas Section 9(3) of the PFMA 2015, as amended requires the Minister of Finance to prepare a budget framework paper in consistency with the NDP and the Charter of Fiscal Responsibility, the FY 2021/22 NBFP falls short of consistency with the Charter of Fiscal Responsibility. It is noted in the FY 2021/22 NBFP that a new Charter of Fiscal Responsibility is yet to be completed, which means it may not be feasible to evaluate the FY 2021/22 NBFP against it. We call upon the Government to fast track the development of the Charter of Fiscal Responsibility so that the budget for FY 2021/22 is in line with the new charter for the period FY 2021/22 to FY2025/26 as required by the law.
Poor Public Investment Management (PIM); we note that the continuous delay in project implementation has not only cost Uganda low returns but has also led to wastage of public resources. According to the World Bank report (2016), for every dollar invested in Uganda’s capital infrastructure only USD 0.7 have been generated. Relatedly, the delayed adoption of the Electronic Government Procurement (e-GP) which is a key procurement reform aimed at revolutionizing government operations and consequently improve efficiency in the procurement function has led to continuous procurement malpractices and delays in public projects. We therefore call upon MoFPED to expedite the finalization of the National PIM Policy and the National Public Investment, and Monitoring and Evaluation Manual.
Secondly, the PPDA needs to fast-track the full rollout of the implementation of the e-procurement strategy in all Government entities to improve efficiency and transparency.
Full operationalization of Contingencies Fund. With the increasing calamities the country has faced lately, we are concerned that Government has to date not fully complied with operationalizing the Contingencies Fund. Section 26 of the PFMA 2015 (as amended) requires that an amount equivalent to 0.5% of the appropriated budget of the previous Financial Year be allocated to the Contingencies Fund. We observe that government has not made any financial commitment to fulfil this requirement despite the fact that the country continues to be ravaged by disasters. We therefore call upon Government to strictly adhere to Section 26 PFMA 2015 (as amended), which requires an equivalent to 0.5% of the previous FY appropriated budget to be allocated to the Fund.
Lack of counterpart funding for the UGIFT program. Over the years, failure to provide counterpart funding for the externally funded projects has resulted into under absorption of borrowed funds amidst accumulation of interest on the same. The government is commended for the implementation of the Uganda Government Intergovernmental Fiscal Transfer (UGIFT) Program that is aimed at boosting funding of the health and education sectors. The outbreak of the COVID – 19 pandemic and its effect on social service delivery especially health and education services has necessitated allocation of adequate funding. However, the required funding to implement the UGIFT program has not been provided. Therefore, Government needs to provide counterpart funding to facilitate the smooth implementation of the UGIFT program.
Passing and implementation of the National Health Insurance Scheme Bill. The outbreak of the COVID-19 pandemic has shown the need to improve on the country’s health system. This is because the pandemic greatly affected household income generation due to the decline in business and economic activities. As part of increasing resource mobilization for the health sub programme as well as cushioning households from unnecessary out of pocket expenditures, there is need to expedite the passing and implementation of the National Health Insurance Scheme Bill to build a resilient healthy population.
Enforce directive on planning and budgeting to gender issues: The ongoing COVID – 19 pandemic has disproportionately affected certain sections of society including women, learners who are not going to school for a full year, PWDs, people living with HIV/AIDS. This has been witnessed with increased cases of Gender Based Violence (GBV), people out of business, PWDs who are unable to access and use e-learning materials. We are concerned that this will increase the gap in gender and equity attainment. We call upon government to invest in social protection packages for vulnerable groups to contain the inequality gap. We commend government on directing MDAs and LGs to mainstream GBV in their plans and budgets, and call upon Parliament to enforce this directive as it considers the NBFP.
Need to ascent to the Local Content Bill 2019: we note that unlocking investments and Private sector growth requires implementation and operationalizing of the Local Content Policy, and other related legal and institutional framework such as a Local Content Monitoring Committee. However, we are concerned that the President is yet to assent to the Local Content Bill 2019. We therefore call upon the President to assent to the Local Content Bill to support implementation of the Buy Uganda Build Uganda (BUBU) policy.
As CSOs, we call on Parliament to give more opportunity to different stakeholders to participate in the budget consultation process. The 2 days allocated for consultations is not adequate. In addition, Parliament should ensure the budget FY2021/22 is people centered and aimed at addressing the critical concerns of an ordinary citizens.
In addition to this, we call upon government to consider addressing the issues raised in the statement above.
……………..because every shilling counts!!