With the entire country continually alarmed at the growing debt levels, we are yet to see the implementation of a policy that balances the budget deficit and reduces the national debt. Meanwhile, recent media reports indicate that Uganda is again to borrow Shs2.4 trillion to fund the national budget for this ongoing financial year 2019/2020.
Half of this money is reportedly to be obtained from Stanbic Bank Uganda, while the other half is to be obtained from the Trade Development Bank. The Finance Ministry cited "a projected revenue shortfall of Shs1.87 trillion in this year's national budget", plus an additional expenditure requirement worth Shs1.43 trillion "for classified expenditure". Basically the entire budget shortfall amounts to Shs 3.3 trillion. Given the known collection capacity of Uganda Revenue Authority, this basically means that someone drafted a national budget 2019/2020 that knowingly exceeded the projected revenue. What about starting with financial discipline and living within ones means? Because what some of us are seeing is that the national budget has turned into a fictional document. The briefcase presented to the media for photographs might just be containing someone's lunch and home-made juice. Meanwhile Ugandan taxpayers and their children and grandchildren will be left to repay this new loan as well. For the record, the two Banks are charging Ugandans Shs79.9 billion as "Arrangement fees", with Stanbic Bank and Trade Development Bank charging 1.75 per cent and 1.5 per cent of their respective total loan sums. One might ask what the hell is "Arrangement fee"... if not an opportunity to fleece more money from the taxpayer for no reason after already charging interest. In the framework paper for financial year 2020/2021, the Finance Ministry also sets a new tax revenue target of Shs21.54 trillion up from Shs20.4 trillion in the current financial year to enable financing of the 2020/2021 budget. Now if we already failed to reach the previous target, what are we doing putting an even higher target? And while as a country we are wallowing in national debt upto our necks, another Shs6.93 trillion in new loans is projected for the next financial year already. While approximately Shs7billion has been earmarked in the budget for repaying old loans. One doesn't have to be a genius to noticed the similarity between the amount of new loans for next year and the amount budgeted for repaying old loans. It is the infamous debt trap. The vicious cycle where we are now basically taking new loans to repay the old ones. It sounds like running a pyramid scheme. Clearly this cannot be a healthy habit to live by, be it an individual, home economics, an enterprise, or a nation. It actually sounds like corruption being ahead of the game. But as if that was not enough, we are simultaneously engaging in massive unbudgeted activity that is draining the same national budget every financial year. This combo symbolizes either poor financial planning, or plutonium-grade politically-related corruption in broad daylight, or both. In the 2019/2020 financial year alone, Parliament reportedly approved loans to a tune of Shs6.15 trillion, and according to the daily Monitor newspaper, "more loan requests are still under scrutiny by the National Economy Committee of Parliament. Meanwhile, where in the national budget is the implentation of a debt management/debt reduction plan? The local media also says: "Although Uganda's debt to GDP ratio of 41 percent is still below the International Monetary Fund (IMF) recommended threshold of 50 percent, there is a danger when the national debt is compared to state revenue. This particular ratio stands at 54 percent." Finally someone is starting to look in the right direction in regards to what is any country's true debt management capacity and not the quack debt-to-GDP ratio. I have always said we should be looking at a countries debt versus it's Gross national Income, and it's reserves. With the Central Bank currently seeking recapitalization as if it is a commercial bank, this is the clearest indication that the country's state finances and fnancial sector are in the red. It is also proof that we have an irrational debt management policy and zero reserves, therefore we should definitely be reducing, not increasing the public debt in order to safeguard economic growth for the short term, mid term and long term. What further compounds this situation, the finance ministry recently revealed that accounting officers in the various ministries, government departments and districts are breaching their own guidelines on loan application by applying for multiple loans from various banks and other money lenders in the name of government. Sometimes to cater for their daily expenditure and other demands. While there is purportedly a government regulation that established a 50% maximum threshold for loans in relation to respective departmental budgets, this limit has reportedly been completely abused and surpassed, and now government accounts seem to be in a state of anarchy. Remember that commercial Banks offer loans with interest per annum. However, money lenders average the same rate but per month. I leave it to Ugandan's to study how any government department will ever get out of such entanglements and fnancial conundrums, plus its broader implications to not only government service delivery, but also the local economy. One can quickly imagine the rot in local accountabilities per department and per Ministry. Obviously this is the kind of administrative environment that the corrupt would deliberately maintain. By the end of June 2019, the public was told that Uganda’s national public debt amounted to $12.43b (about Shs45.8 trillion) of which external and domestic debt accounted for $8.27b (Shs30.5 trillion) and $4.16b (about Shs15.3 trillion) respectively. But with such developments of poorly documented and illegal/unauthorized borrowing by government accounting officers around the country, we should expect that the actual national debt is most probably far worse, and the situation extremely more rotten than donors and the people of Uganda can ever imagine. By Hussein Lumumba Amin Sunday 11/01/2020. Kampala, Uganda. Resent news article on latest government borrowing: www.monitor.co.ug/News/National/Government-borrow-Shs2-4-trillion-fund-budget/688334-5374794-ldvlbu/index.html
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