Government must address the challenge of failure to spend money by implementing agencies if it is to achieve targets outlined in the 2023/23 national budget. According to Mr. Corti Paul Lakuma, the EPRC head of macro department, the government is committing a lot of resources – some of which borrowed – to agencies that are struggling to spend.
“You don’t need to be allocated money when you can’t spend it,” Lakuma said during a pre-budget television analysis. “And it is not just spending but spending with results”. Several government agencies still return allocated money to the treasury despite having immense problems like lack of clean water, unstocked health facilities among others. This points to poor planning or lack of the right personnel to plan and implement key initiatives.
On June 15, the government presented Shs 52.7 trillion budget for the financial Year 2023/2024. Minister of Finance Matia Kasaija announced the year’s budget theme to be “Full Monetisation of Uganda’s Economy through Commercial Agriculture, Industrialisation, Expanding and Broadening Services, Digital Transformation and Market Access.”
Kasaija announced that Uganda’s economy is projected to grow at 6% in financial year 2023/2024, and over the next five years, the economy is projected to grow at an average of 6.5-7% per year.
Mr. Lakuma said the big question now should be how this high growth is going to benefit ordinary people.
“The Ministry of Finance still has a lot of work to do beyond just registering high economic growth. There should be deliberate policy to ensure that everyone benefits from the high growth, whereby everybody has something in their pocket and has something to take back home,” Lakuma told Daily Monitor in a post-budget interview.
This year’s budget comes immediately when the country is trying to put two shocks — Covid-19 and Ebola — behind its back for businesses to move forward. Many businesses still need to be held to recover. Things don’t seem to be looking good. Kasaija announced that commercial bank lending interest rates have increased slightly to 19.3% in April 2023 from 18.8% in April 2022. This will impact investment and employment as businesses pull back.
Mr. Corti Paul Lakuma (R), the EPRC head of Macro department, discussing budget on UBC TV on Thursday. Photo/EPRC
“To reduce the cost of money for the private sector, Government has taken a deliberate policy to reduce domestic borrowing which is a major driver of commercial bank lending rates,” he said in a nod to indicate that government will cut down on the appetite to issue treasury bills and bonds, instrument where government borrows from domestic market. This means that banks will be able to look at local businesses for lending without having to compete with the government.
Mr. Lakuma lauded this move as an attempt to give space to local enterprises to access credit.
Kasaija said government has also provided long-term and affordable capital through the Uganda Development Bank, Emyooga, the Agricultural Credit Facility and the Small Business Recovery Fund to large, medium, small, and micro enterprises which is to the tune of Shs 2.77 trillion to date. While good, there are serious questions on how these initiatives have been run. Much of that money has not been disbursed as needy enterprises fail to meet the conditions to access the money.
The minister also said that the size of the Ugandan economy is estimated at Shs. 184.3 trillion (US$ 49.4 billion), compared to Shs. 162.9 trillion (US$ 45.6 billion) last year.
The concern remains on the level of indebtedness and whether Uganda will be able to service the loans. Uganda’s public debt stood at Shs. 80.8 trillion (US$ 21.7 Billion) as at end December 2022. The money spent on servicing debt has increased and Minister Kasaija rightly observes: “The increase in the debt service cost was due to external commercial and domestic borrowing. This takes away money from the budget which would have funded other government priorities such as health and education.” Analysts have said government must be disciplined going forward and borrowing must be limited to priority areas.