The Civil Society Budget Advocacy Group (CSBAG) has welcomed new austerity measures by the Government of Uganda as it seeks to contend with significant budget cuts.
The Ministry of Finance, Planning, and Economic Development, in its Second Budget Call Circular for Financial Year 2023/2024, says there will be no new borrowing next financial year.
It has also suspended purchase of new cars, pay rise and foreign travel for its officials, among others.
According to Mr Julius Mukunda, the executive director of CSBAG, the budget circular is responding to their hitherto calls to the government to spend within its means.
“I think the budget call circular is one of the kinds we have not seen in quite some time. First of all, it’s really responding to the current crisis we are in and also it is drawing from the lessons of the past, but at the same time it’s addressing the cries of civil society,” Mr. Mukunda said.
“We are in crisis because our debt is increasing while our revenues are not increasing at par. So, they came up and said ‘we need to stop borrowing new loans …. I think this is what any sane person should be doing because you are heading to a debt trap and you don’t want to arrive there quickly,” he added.
According to the budget call circular issued last Friday, overseas trips will only be allowed for heads and deputies of the Executive, Parliament and Judiciary – and other officials travelling for critical security, resource mobilization and case arbitration assignments.
“There will be no new borrowing next financial year and this shall continue over the short-to-medium term so as to minimize the share of Uganda Revenue Authority (URA) revenues being used to service debt in the medium term so as to make more resources available to finance critical development priorities of government,” Finance PS Ramathan Ggoobi wrote.
“Vehicle purchase is frozen in FY2023/2024 with the exception of the purchase of hospital ambulances, vehicles for medical supplies/distribution, agricultural extension services, security and revenue mobilization; spending on workshops and seminars shall be reduced by 50 percent …,” the circular reads in part.
The Budget Framework approved by parliament earlier this month provided for budget support of 2.4 trillion shillings and domestic borrowing of up to 1.6 trillion shillings while external project support would amount to 8 trillion shillings. The preliminary resource envelope for the year has since been adjusted upwards to 50.871 trillion Shillings.
However, it remains to be seen if URA collections can fund the budget.
According to the target set for Uganda Revenue Authority by the ministry of finance, the tax body is expected to raise 28.8 trillion shillings next financial year, with Shs2 trillion being from non-tax revenue. This means the government would have to look elsewhere to get the rest (about Shs22 trillion) needed to meet the spending requirements, and the natural option is always borrowing.
