Ugandans united in protest against 2024/2025 budget

If ever there was a national budget passed by parliament that has united Ugandans and caused them to loudly question the government’s skewed allocation of funds, it is the budget for the financial year (FY) 2024/2025.This widespread displeasure among tax-paying countrymen has risen from the dark-sided money grabbing schemes that were broadcast by different exhibitions on social media which exposed high-ranking government officers nicking public funds.What adds fuel to the rage of taxpayers is government’s unresponsiveness to the haemorrhage of public funds, and its introduction of new taxes to collect more funds while assigning larger sums of money to the censurable officers and their institutions. All at the expense of improving public facilities such as schools, roads and hospitals which took a stunted part of the national budget.A few of the standout components of the 2024/2025 national budget are: The current budget passed by parliament is Shs 72.130 trillion [$18.9 billion] compared to Shs 52.736 trillion [$13.8 billion], the previous financial year. This spells an increase of Shs 19.394 trillion [$5.1 billion].The total proposed budget nominal public debt to GDP for FY 2024/2025 is 50.1 per cent. However, the objective is to reduce it to below 50 per cent of GDP by FY 2025/2026.This is highly unlikely as government continues to finance fiscal deficits mainly by maxing out its domestic borrowing limits. Case in point, during the first half of FY 2023/2024, government exceeded its planned target of domestic borrowing by Shs 1,820.36 billion [$478.9 million]. This trajectory of excessive borrowing isn’t about to change; neither will interest paid on loans, both domestic and external, subside in the near future.On the brighter side, when government borrows domestically without restraint through its fixed income instruments — bonds and treasury bills, it boosts the primary market making it lucrative for investment since the yields of its debt instruments will be high as government seeks out more funds.On the flip side, domestic borrowing is going to cause banks to increase interest rates as the government will be competing with the public for funds because governments borrow from banks too. In that case, banks would rather lend to government than individuals because with government, the default risk is low.This implies that as long as government borrowing domestically increases, so will interest rates, which isn’t good news for local businesses in need of low-cost credit.The budget estimates for the upcoming financial year brought to light the dwindling domestic revenue collections by Shs 867.91 billion [$228.3 million] in FY 2023/2024.Revenue collections from international trade transactions fell by Shs 656.5 billion [$172.7 million] as a result of the underperformance of value added tax [VAT], excise duty, and withholding tax, all on imports. On this note, local businesses and mass importers should buckle up for an uncompromising tax collection regime in the coming financial year as government looks to cover the loopholes in revenue collection.This is further aggravated by a plunge in total grants in the last financial year by Shs1,210.52 billion [$318.5 million]. It’s highly unlikely that grants to Uganda will increase as the country continues to blitz international media with corruption stories. Therefore, the government is going to be looking inwards to bridge the gap caused by this deficit through borrowing, mostly domestically, and taxation over and above what is expected.Parliament through the budget it passed, confessed to sitting out on its sanction of appropriating money every financial year from the petroleum fund to the Petroleum Revenue Investment Reserve [PRIR] to be invested in accordance with the Petroleum Revenue Investment policy as issued by the minister of Finance in consultation with the secretary to the Treasury.As is, the budget report states that the petroleum fund had a balance of Shs246.7 billion [$64.9 million] at the start of FY 2023/2024 with the balance increasing to Shs 345.7 billion [$90.9 million] at the end of December 2023 as no withdrawals were made from the fund as required by law for parliament to appropriate.This conveys the impression that money that could be invested is lying idle in the fund. It also indirectly signals that the government would rather borrow, tax and seek charity through grants than invest its money!Accomplished investment banker, founder of Uganda Securities Exchange, and one-time chairman of National Social Security Fund [NSSF] Uganda — Geoffrey Onegi-Obel reiterated this by confirming that, “the failure to effect mandatory investment is a reflection of our addiction to having cash available where we can see and touch it”.He continued to assert,: “The budget is managed on a cash basis as a matter of policy — something that was forbidden thousands of years ago by the bible in the Parable of Talents which tells us to invest and not hold cash,” implying that, Uganda’s budget-making process is old-fashioned.Onegi-Obel advises that government should instead focus on the National Development Plan / Strategy series. On a better note, the budget report passed by parliament in May 2024 highlighted the above-the-target performance of direct domestic taxes which was 3.4 per cent higher than the target for the FY 2023/2024.This was attributed to higher-than-anticipated collections of Pay As You Earn [PAYE], presumptive tax which is tax charged on operators of small businesses, rental income tax, tax on bank interest and treasury bills and bonds. Paul Lakuma Corti, senior research fellow and economist at Economic Policy Research Centre [EPRC], had this to say about the recently passed budget.“We cannot deny that the corrigenda [addition] to the budget came as a shocker even when there are justifications provided for it. There are questions on how we are going to raise that money”.“The Shs 20 trillion addition is going to affect government’s fiscal consolidation agenda of curtailing unnecessary expenditure. “The agenda was to mobilise resources domestically through taxation, and leveraging other sources of revenue while simultaneously cutting down on consumables such as conferences, workshops, cars, which aren’t needed immediately”.“The reforms within fiscal institutions have been working but the corrigenda is going to cause distortions in the fiscal consolidation which the government had brought under control,” he said.REDUCING DEBT-GDP RATIOOn the government achieving a target of reducing total public debt to below 50 per cent of GDP in the next financial year, Lakuma remained optimistic, paying regard to the robust economic growth, and the expansion of the economy to nearly $50 billion, interjecting that achieving a quantum of 50 per cent of total debt-to-GDP wouldn’t be such a problem.He went further to highlight that the recent downgrading of Uganda’s bonds by Moody’s global rating agency from B2 to B3, undermines the credibility of the budget and quality of the bonds.“Once the quality of bonds is affected, the government will pay a higher interest rate to those who invest in them, increasing the cost of government borrowing,” Lakuma summarised.Long story short, credit is going to be expensive for government, the private sector; and the statement: ‘money is lost’ that Ugandans loosely throw about is going to carry a tonne of weight in the next financial year which starts in [email protected]{loadposition inarticle}