Health workers attend to a patient. The allocation to Human Capital Development, where the health sub-programme falls, increased by Shs422 billion from Shs954 billion in FY 2023/2024 to Shs996b, which is 26 percent of the total budget. PHOTO | FILE
Resources expected to finance the government budget in the Financial Year (FY) 2024/2025, about two weeks away, amounts to slightly more than Shs72.1 trillion.
Of this amount, domestic revenue will contribute Shs32.3 trillion, which is about 45 percent of the overall national budget. The budget support will contribute to Shs1.3 trillion, about 2 percent of the estimate of government revenues and expenditures for the coming financial year. And domestic borrowing will contribute Shs8.9 trillion, accounting for slightly more than 12 percent of the total budget.
Additionally, domestic debt refinancing which is essentially initiating a new contract, often at better terms than a previous one, to pay off a loan, will amount to Shs19.8 trillion, translating to 27.5 per cent of the 2024/25 budget, and project support will contribute Shs9.5 trillion, making up about 13 per cent of the budget.
This implies debt will finance 55 per cent of the FY 2024/25 budget, while domestic revenue will finance nearly 45 percent of the total FY2024/25 budget.
By all accounts, this is an ambitious budget. Not many people were happy with the limited time given to the legislators to scrutinise and debate the additional Shs14 trillion presented through the corrigenda, increasing the budget from Shs 52.7 trillion to Shs 72.1 trillion.
Civil society organisation under the Civil Society Budget Advocacy Group umbrella are concerned about the sharp rise in the national budget figures. Already global rating agency Moody’s has downgraded Uganda’s credit rating from B2 to B3, signaling Uganda as a risk in the eyes of the multilateral lenders and international financiers. With reduced external financing, narrow fiscal space, and a soaring public debt, budget implementation is likely to suffer.
Budget losers
Uganda’s public debt stock peaked at Shs97.4 trillion, as per the Auditor General Report, December 2023. The IMF forecasts that Uganda’s public debt will increase to approximately Shs110.6 trillion by the end of FY2024/2025, which is a worrying signal as it raises concerns about the sustainability of Uganda’s debt.
The country’s current Debt to GDP ratio, which indicates the country’s ability to pay back its debts is 53 percent, exceeding the World Bank’s benchmark of 50 percent, implying the likelihood of defaulting could be high. Despite this status, in FY2024/25 the government plans to borrow an additional Shs8.9 trillion domestically from commercial banks. High-interest payments on loans now consume a substantial portion of the budget and domestic revenues. Interest payments are set to increase to Shs9.5 trillion in FY2024/2025 from Shs8.2 trillion in FY2023/24.
Additionally, commitment fees from projects under review surged by 44 percent from Shs77.5 billion in FY 2021/2022 to Shs112.018 billion in FY2022/23. These developments will compromise service delivery as a significant portion of the collected revenue goes to service debt.
A preliminary performance review of the FY2023/24 budget by a team of CSO budget experts, reveals that Uganda’s tax revenue collections fell short of the half-year target by Shs876 billion Additional shortfalls from grants and non-tax revenues blew up the shortfall to about Shs2.1 trillion, which was financed by domestic borrowing of Shs1.3 trillion, higher than the planned target of Shs1.3 trillion by Shs1.8 trillion.
The Shs2.1 trillion shortfall in revenue as of December 2023, coupled with the Shs1.8 trillion overspend in domestic borrowing, paints a bleak picture of the government’s financial management. The failure to collect sufficient revenue to meet targets not only puts a strain on the budget but also raises concerns about the government’s ability to fund essential services and projects.
Dwindling donor support: Uganda’s persistent financial indiscipline has led to a decline in donor support, jeopardising critical development aid. For example, the World Bank in 2022 withheld a $1.5 billion loan to Uganda because of concerns over corruption and mismanagement of public funds and for passing the Anti-Homosexuality Act (AHA).
The EU reduced its development aid to Uganda by 20 percent because of concerns over financial mismanagement and lack of transparency. The US government withheld funding for various development projects in Uganda, such as AGOA, citing concerns over corruption and fiscal irresponsibility.
All these, according to expert analysis by professionals in CSOs and private sector examining the budget, means a toll on the coming budget.
Domestic arrears increased by 62 percent from Shs4.65 trillion in FY 2021/2022 to Shs7.55 trillion in 2022/2023. Of concern is the meagre allocation of only Shs200 billion to clear outstanding arrears in FY2024/2025 standing at Shs7.55 trillion.
Delay in paying outstanding arrears affects the operations of many private sector businesses that supply the government, hindering their cash flows and limiting their growth, resulting in fewer job opportunities and lower tax revenue from both VAT and PAYE. This move contradicts the government’s strategy of promoting a private sector-led economy, reads the report titled: Perspectives on the Approved FY 2024/25 National Budget
The report whose theme is: Making Sense of the Approved Uganda Budget for 2024/25. Do we care anymore? notes that the agro-industrialisation budget is not only still heavily dependent on external financing, but its budget will reduce to Shs1.6 trillion from Shs1.8 trillion in FY2023/2024, implying a budget reduction of Shs115 billion.
There has also been a decline in budget allocation for Butabika Hospital from Shs22.7 billion to Shs22.2 billion, given the increasing burden of mental health conditions and overwhelming numbers of patients, coupled with weaknesses in mental health management by lower-level health centres, is something that needs a rethink.
Winners
In the next financial year 2024/2025, the top five discretionary expenditures for the government are Human Capital Development with a total allocation of Shs9.6 trillion, followed by Governance and Security at Shs9.1 trillion, Integrated Transport Infrastructure and services at Shs5.1 trillion, Development Plan Implementation at Shs2.3 trillion and Private Sector Development with Shs2 trillion.
The bottom five discretionary expenditures for the government include Mineral Development, with Shs41.6 billion; Community Mobilisation and Mindset Change with Shs70.4 billion. Public Sector Transformation allocation is Shs200 billion; Manufacturing Shs 207.3 billion, and Digital Transformation with Shs230.9 billion.
On the expenditure side, the government has allocated a significant amount of funds that Ugandans can access to stimulate economic growth and development. These funds are aimed at boosting household incomes, private sector development, commercialisation of agriculture, and human capital development.
For example, the government is investing in programmes such as PDM, Emyooga, UDB, Women and Youth Enterprises, Agriculture Credit Facility, social security for the elderly, and inclusiveness of disabled people, among others. This according to Mr Julius Mukunda, a budget analyst, is a commendable move.
The allocation to Human Capital Development, where the health sub-programme falls, increased by Shs422 billion from Shs954 billion in FY 2023/2024 to Shs996b, which is 26 percent of the total budget.
Commendable priorities for health in FY2024/2025 include the construction and equipping of the Uganda Heart Institute with Shs57 billion, the infrastructure development of the Uganda Cancer Institute with Shs38 billion and Shs20b for rehabilitation, and the construction of general hospitals.
Also, the apportionment of Shs569 billion for essential medicines and health supplies for all centres, general hospitals, and regional and national referral hospitals is commendable.
Uganda Blood Transfusion Services (UBTS) allocation from Shs22.3 billion in FY2023/2024 to Shs33.9 billion, which aims to boost human resources and operationalise the new blood banks in Soroti, Hoima, and Arua are good gestures. And so is Kawempe Hospital from Shs22.7 billion in FY 2023/2024 to Shs24.3 billion
Under education, Shs4 billion budget allocation was made for supporting 38 primary schools and Shs11.2 billion for secondary schools to implement Universal Primary and Secondary Education Programmes. There is also Shs14.3 billion for renovating and expanding facilities in 36 secondary schools.
There has been an increase in the budget for the natural resources, environment, climate change, land and water programme from Shs 417 billion in FY 2023/24 to Shs682.6 billion in FY 2024/2025. Despite the budget for the Contingency Fund for FY2024/25 being only Shs169 billion against the required Shs263.7 billion, which is 0.5 per cent of the previous financial year. This deficit will affect the government’s ability to address the adverse effects of climate change, such as flooding, heat waves, and landslides, which lead to loss of life and destruction of property.
