Ugandan Economists Condemn Govt Debt (mis)Management and (non)Accountability

Ugandan Economic Activists have raised grave concern over government financial discipline they saying is a threat to economic stability and service delivery to citizens.

Addressing journalists about their detailed reflections on the findings of the Auditor General in the Audit Report of financial statements for government ministries, departments and statutory bodies for the financial year 2024, activists from the Civil Society Budget Advocacy Group (CSBAG) observed that ills, including external debt management issues, irresponsible public borrowing, irresponsible public investments, poor accountability or none at all, poor corporate governance, procurement irregularities wasteful expenditure and abuse of supplementary budget provisions remain big problems.

At the presser held at their offices in Ntinda yesterday (Sunday), CSBAG Executive Director Julius Mukunda said there was need for the various offices to adhere to processes and also be held accountable.

At the budgeting level, the organization noted abuse of the provision for supplementary funding.  Supplementary funding is provided when government requests for additional funds on the understanding that the regular budget is depleted before close of the financial year and there are unfunded priorities to undertake.

In addition to shs 52.73trillion that was appropriated for the regular budget, government requisitioned and had approval of shs 8.93trillion, shooting the budget for the financial year 2023-2024 to 61.66.  However actual expenditure totaled to shs 48.682trillion.  

“The significant discrepancy clearly indicates there supplementary funding was unnecessary, thereby undermining the integrity of the budgeting process,” Mukunda noted, adding that some government departments were allocated money where there was no proof of requisitioning for it or having the concerned minister sanction as required by the law.

Efforts to get a comment from Mr Ramathan Goobi, permaent secretary ministry of Finance, Planning  and Economic Development were futile as he did not take this reporter’s calls.

Flanked by his deputy, Carol Namagembe and economists Kenneth Asiimwe and Pascal Muhangi, Mukunda observed Uganda continued to grapple with losses owing to poor debt government borrowing and debt management.

Some of the losses, he said emanated from taking loans without planning, leading to incidents where the country pays huge penalties on undisbursed loans.  The penalties come in form of commitment fees on top of interest on debt.   Huge amounts are also paid in form of debt servicing.   In some of the cases government takes loans for activities whose time frame expires before the loan is fully disbursed – a sign of lack of planning.

Examples in case include the Mbarara – Masaka Transmission line (Euro 34.888 of Ug shs 146.53billion) and the Kampala City Roads Rehabilitation Project  (US $165.843 or 630.2billion) whose project implementation time expired before full disbursement.    According to the Office of the AG, there were high levels of “project unpreparedness leading to delays, cost overruns, unmet objectives and increased burden on tax payers.”

The OAG found 15 out of the 49 loan funded projects had no feasibility studies.   Out of Uganda shillings 11.837trillion allocated, only 7.285trillion was disbursed.

According to the Auditor General, undisbursed loans for the financial year 2023/4 amounted to shs 1.89 trillion attracting a penalty of 73.904billion in commitment fees.  The cumulative figure for the period 2018 – 2024 is 469.778 billion in penalties.

This happens when debt servicing costs continue to escalate.  In 2023/4 debt servicing stood at 20.99% of domestic revenue, representing an increase from 17.72 for the financial year 2021/2.   The figures abuse the 12.5% ceiling of the Charter of Fiscal Responsibility 2021-2025 which government committed itself to, to enhance mid-term fiscal strategies and also ensure the country’s public debt and balances are sustainable.

Mukunda called for criminal sanctions where there is negligence or out-right abuse to ensure the officers, be it at the centre or local governments adhere to procedures and processes.

According to the OAG’s report there were irregularities occasioning loss.  Payments to the tune of shs 4.134,430658/= on projects in 11 districts were lacking were either lacking documentation, had contractual breaches or wrong figures compared to work plans.

The Electoral Commission did not account for shs 4.32 billion while the Uganda Bureau of statistics could not account for shs 4.7billion.  “No wonder they (UBOS) failed to produce for the country a credible national census report,” Mukunda retorted.

Mukunda also picked up the OAG public investments made in initially private enterprises or entities, which he termed as risky.  The OAG found shs 930.53billion was cumulatively invested in private firms “without following proper procedures.”

UGX 723.4billion reportedly went to Dei-Biopharma Ltd, a drug and vaccine undertaking without a valuation report and accompanying due diligence while another shs 207.3billion was invested to salvage (construction firm) ROKO.  The latter investment was executed before parliamentary approval.

Mukunda expressed concern over losses incurred to government in form of uncollected revenues and tax exemptions.   These he said undermined government ability to collect enough revenue to deliver public services.  They included shs 439billion in unpaid mineral rent fees by mining companies, shs 68.84billion in uncollected taxes on gold exports amounting to shs 11 trillion, incorrect classification of imports for animal feeds among other revenue collection gaps.