APPETITE FOR SUPPLEMENTARY BUDGETS IS A SIGN OF FISCAL INDISCIPLINE

Published by Patra K on

Appetite for supplementary budgets is a sign of fiscal indiscipline

Photo Courtesy of New Vision

As the 11th Parliament takes office on Monday 24th May 2021, it could start by dealing with the matter of the UGX 700 billion ($196.3 million) supplementary budget understandably to complete pending activities before the closure of the Financial Year 2020/2021. The financial year ends on June 30, 2021.

The beneficiary institutions for this supplementary budget include among others:

  1. Uganda National Oil Company (UNOC) – UGX 481 billion ($131.8 million) 
  2. Uganda National Roads Authority (UNRA) – UGX 101.9 billion ($27.9 million)
  3. State House – UGX 28 billion ($7.7 million)
  4. Ministry of Finance – UGX 2.6 billion ($ 0.71 million)
  5. Local Governments and other government agencies to plug the wage shortfalls – UGX 69 billion ($18.9 million).

These supplementary budgets have become persistent in Uganda’s budget management. Over the past 5 years, the government has been appropriating on average 5 supplementary budgets every Financial Year and there is no sign of relenting on this one. 

It has become clear that there is an issue of fiscal indiscipline and wasteful expenditure within the government that must be addressed. The secret known is that supplementary financing is preferred because it provides an avenue for avoiding scrutiny. This comes with the associated rush that prevents supplementary budgets from going through rigorous processes and scrutiny of Parliament. 

ACFIM studies reveal that supplementary financing in Uganda is riddled with fraud and blackmail. The growing appetite for supplementary financing is serving to defeat the very essence of budgeting.

It is hence logical to argue that the people responsible for planning in the Ministry of Finance Planning and Economic Development (MoFPED), have let down the Ugandan citizens. 

Reckless appropriation of supplementary financing is one of the things that the Public Financial Management Act (PFMA) sought to cure when it was first enacted in 2015. 

The Act limited supplementary financing only to emergencies that were unforeseeable, un-absorbable, and unavoidable expenses. 

Unfortunately, the PFMA was amended within hardly six months after its passage making it easier for government to access supplementary funding without approval or sanction of Parliament. This separated supplementary budgeting from contingency thus creating a loophole that allows the ministry of finance to appropriate supplementary budgets as and when it wishes.

There is a sense in which some technocrats in government develop budgets well knowing that there is a window of budget supplements, and this undermines the principle of budget predictability.

For example, when one examines the allocation of the UGX 700 billion supplementary budget to UNOC, UNRA, and State House among others, one struggles to figure out what falls under the unforeseeable, unabsorbable and unavoidable rule. Rather it is more of an act of fiscal indiscipline and perhaps also an indicator of failure in macro-economic management.

At a time when the country’s economy is yet to recover from the impact of the COVID-19 pandemic, and the debt-to-gross domestic product (GDP) ratio that has hit the 50% ceiling, Ugandans deserve to see some level of fiscal discipline exercised by the men and women entrusted with the responsibility on managing the macro-economic institutions.

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