CSO Statement on the Proposed National Budget Priorities

CIVIL SOCIETY BUDGET ADVOCACY GROUP
PRESS STATEMENT-FOR IMMEDIATE RELEASE
EVERY SHILLING COUNTS:
Civil Society Statement on the Proposed National Budget Priorities for FY 2015/16
Released at a Press Conference held at the Civil Society Budget Advocacy Group offices
in Ntinda, Kampala, Uganda on 2nd April 2015
PREAMBLE
We the Civil Society organisations under the Civil Society Budget Advocacy Group (CSBAG),
appreciate Government’s effort for releasing the National Budget Framework Paper for the
financial year 2015/16 on Wednesday 25th March 2015, as per Section 9 (v) of the Public Finance
Management Act, 2015. Through the Budget Framework Paper, Government’s overall policies
are ideally translated into the Annual Budget and budget implementation.
As key stakeholders in and contributors to the socio-economic transformation of Uganda, we reaffirm that the Budget Framework Paper for FY 2015/16 is critical given as it marks the first
year of implementation of the 2nd National Development Plan (NDP II) for Uganda. The Budget
Framework Paper resource projections and indicative expenditure allocations also determine
who wins and loses, amongst the institutions and citizens of Uganda.
POSITIVES ABOUT THE NATIONAL BUDGET FRAMEWORK PAPER
As CSOs, we recognize and appreciate the following;
1. Enacting the Public Finance Management Act, 2015: We would like to appreciate
government efforts in finally enacting the Public Finance Management Act, 2015. We
strongly believe that once this law is operationalized and implemented accordingly, public
finance management and practices will be enhanced, value for money promoted and there
will be enhanced oversight function from Parliament. It is also our appreciation that this law
was given due attention and that the reforms proposed in this Act will go a long way in
enhancing public finance management practices.
2. Enhanced Ministry of Finance partnership with Non-State Actors; In view of
Objective X and Articles 17 and 38 enshrined in the 1995 Constitution of Uganda on civil
society engagement with the State, we would like to strongly appreciate Ministry of Finance
Planning and Economic Development (MoFPED) and several Local Governments, for
enhancing partnership with us as non-state actors, particularly under our CSBAG fraternity
in budget monitoring and service delivery tracking.
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In FY 2014/15, for instance, our Civil Society input and feedback on budget implementation
from samples across the country have on a quarterly basis not only been presented but also
well received by the Ministry of Finance. Such relationship and feedback into the national
rim of planning and budgeting processes, will ultimately register citizens’ participation,
improved service delivery and make corruption harder to sustain in Uganda.
3. Timely release and access to Budget information; We applaud Government, especially
through Ministry of Finance on the consistent, timely release and increased access to Budget
information during the financial year 2014/15. The launch of the budget website, the CSO
Participation in consultative meetings, the timely uploading of budget information and
attendance of CSOs at quarterly fund releases are testimonies to this. We implore all other
Government institutions to learn from Ministry of Finance and do the same, for increased
citizens’ budget monitoring and feedback on Government implementation and service
delivery outcomes.
4. Budget reforms; We further appreciate the ongoing budget reforms such as the Outcome
Oriented Budget System (OOB) which will greatly strengthen the current output oriented
budget system and facilitate the linkage between budget outputs and outcomes, key
performance indicators at both at local and national levels. It also allows itemized costing for
each vote function and budget performance information.
5. OOB for improved alignment of key Government investment plans; We further
welcome Government plans to embark on full implementation of Outcome Oriented
Budgeting. This will strengthen direct linkage between resource allocation and final outcomes
of Government strategic interventions. We believe that this time round, the NDP II
priorities will be smartly and consistently aligned to Annual budgets, Sector Investment Plans
and Charter of Fiscal Responsibility, thus limiting diversion of resources- away from
realization of annual plans and budget underperformance.
6. Management of inflation; We recognize Government effort in managing inflation so far,
given the inflation targeting and the benefits of monetary policy thereof implemented since
July 2011. FY 2014/15 has witnessed inflation as low as 1.6% in February 2015- 1.9% March
2015 according to UBOS. Overall, headline inflation has been below the target of 5%.
Inflation, nonetheless, has persistently increased on account of effect of drought on
agricultural prices.
To enhance the above achievement, we expect Government to put in place mechanisms for
agriculture sector support to guarantee steady food production and supply throughout the
Financial Year. Away from rain-fed agriculture, investing in parish-level micro irrigation
schemes using the already widely available appropriate technologies, regional food storage
facilities and dependable meteorological data are critical.
7.
Considering previous challenges faced by Local Governments like low revenue collection,
over reliance on central government, poor service delivery, we applaud government for
considering to review the fiscal decentralization strategy to address the above challenges.
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This will be done by determining definite share of transfers to local government out of the
national budget, reviewing grant allocation formula and supporting local government to
improve their local revenue enhancement strategies. We commend government for this
effort as it will improve effectiveness in delivering services at Local Government level.
8. Collaborative efforts to enhance Tax: GDP revenue collection; We further recognize the
need for urgent Government effort for improved revenue generation through completion of
reforms under Kampala City Council Authority-Uganda Registration Services BureauUganda Revenue authority as we reduce the informal sector; and move towards full
elimination of tax holidays and incentives to be sustained throughout the next financial year.
Even then, we expect URA to invest in more reliable IT systems and system audits against
illicit financial flows, full operationalization of Financial Intelligence Authority and clear
Bank of Uganda policy guidelines on regulation of mobile money platforms. Such efforts will
complement one another in minimizing fraud and more efficient tax collection towards 25%
GDP: Tax ratio target under East African Community.
PERTAINING CHALLENGES:
Despite the achievements, as alluded to above, we members of Civil Society under the Civil
Society Budget Advocacy Group (CSBAG), wish to register some of the major challenges that
continue to riddle budget implementation and desired economic management and service celery
outcomes in Uganda.
1. Depreciating exchange rate; The exchange rate of the Ugandan shilling against the US
Dollar is at its worst over the last thirteen years (1 USD: 2903)1 . The weak regulation in
Uganda’s foreign exchange market under the pretext of a floating exchange rate regime and
the continued moral persuasion by the Bank of Uganda as a medium of administering the
monetary policy regimes continues to face challenges.
Recommendation:

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To enhance some of the macro-economic variables, towards a stable exchange rate, a
policy shift away from full liberalization of the currency market should be
considered in next FY 2015/16. This should be with a view to a quasi-free foreign
exchange market that minimizes a free entry and exit of major currencies such as the
USDollar. Regulations on the volume of forex that can be exchanged repatriated or even
held as cash at any one time be instituted– the cases of South Africa and Ethiopia may be
instructive.
Enforce local transactions in Ugandan economy in UGX;the act of charging for services
provided in Uganda in US Dollar is worsening the already bad forex situation in Uganda.
The increasing habit of using a dollar ad a medium of exchange in a Ugandan economy
makes the Ugandan foreign market very susceptible to volatility. Bank of Uganda should
Bank of Uganda Statistics
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enforce the Uganda shilling as a medium of exchange and this will go a long way in
restraining the pressure exerted on the dollar locally.
2. Poor GDP growth against NDP I targets; Over the last five years of NDP I, Uganda has
managed to register only 5.5 % GDP growth against the NDP I projection of 7.2%. This is
partly a result of poor planning and implementation of Government projects and
prioritization. In the next period of NDP II in general and FY 2015/16 in particular, we
expect strategic Government investment in key growth sectors, especially agriculture, to
unlock the desired GDP growth and to spread economic opportunities beyond the services,
real estate and manufacturing sectors. We are calling for district or zonal based agroprocessing and providing key agricultural inputs to farmers.
3. Poor performance of Uganda’s Exports sector; For decades, Uganda has grappled with
increasing value addition to exports. In the Financial Year 2013/14, total export earnings
declined by 6.97%. According to Ministry of Trade, Uganda is losing at least UGX 497
trillion through export of unprocessed selected commodities. From FY 2011/12 in July to
January of current FY 2014/15, average value of Uganda’s exports was merely USD 227.83
million. We still talk about coffee exports in terms of bags of coffee beans, for which
earnings have reduced from USD 113.29 million in Q3 (January-March) of FY 2013/14 to
USD 97.03 million in Q1 (July-Sept.) of FY 2014/15) and USD 89.94 million in Q2 (OctDec) of the same FY 2014/16 (according to BOU).
Recommendation:
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
No Ugandan coffee should be exported as coffee bean; We as civil society expect a Government
policy shift and zeal that, no Ugandan coffee should be exported as coffee bean ever again,
but rather as a finished processed product. This will not only significantly contribute to job
creation, expand tax base, but also fetch much higher premium from the sweat of the
Ugandan farmers.
Invest in PPP capacity for processing; Under the Public Private Partnership modalities, the existing
coffee roasting firms in Uganda should be supported to grow in value chain capacity and
functionality for finished processed product, beginning with FY 2015/16. Other Ugandan
produce should be sequenced in the subsequent Financial Years.
4. Uganda’s deteriorating Current Account balance: The Current Account measures the
inflows and outflows of goods, services and investment incomes. In the recent years, Uganda
has registered a gradual, large and persistently increasing current account deficit. This
indicates that the value earned from exports has been lower compared to our imports bill.
The current account deficit of USD 423.2 in Q3 (January-March) of FY 2013/ 2014 doubled
to USD 817.4 in Q3 (January-March) of FY 2014/15. This unprecedented deficit in the last
13 years, attests to Uganda being overwhelmed by imports, thus contributing to the recent
depreciation of the UGX against major global currencies.
Recommendation:
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
Implement, rather than abort, Uganda’s competitiveness and private sector growth strategies
to logical conclusion: e.g. under NDP 1 (2010-2015), Bonabagagawale (2006), Plan for
Modernisation of Agriculture (1997) and National Export Strategy (2007).
Uganda should not simply be a supermarket for other economies. Rather we should have
policy regimes that promote export growth and competitiveness, with a focus on investment
in agriculture, tourism, minerals, roads, electricity and railway infrastructure, to improve the
exports per capita, net flows and overall current account for Uganda. The national budget in
FY 2015/16 should reflect this desire.

Persistent Budget indiscipline: We recognize supplementary budgeting for unavoidable,
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un-absorbable and unforeseeable circumstances. We are, albeit, deeply concerned that barely
three months to the end of FY 2014/15, a supplementary budget of a whopping UGX
847.2 billion was presented by Ministry of Finance. Such behavior undermines the very
essence of prudent budgeting and planning.
Despite the Treasury Single Account, IPPS, IFMS and such mechanisms, the annual audits
of Government by Auditor General and in our own civil society assessments, we are
increasing concerned about the challenges in budget credibility, control and compliance with
financial and accountability guidelines and standards, especially at Central Government,
where bigger chunks of resources are often unjustifiably retained.
Recommendation:

Critical votes and institutions such as Financial Intelligence Authority, Uganda Free
Trade Zone Authority, Public Procurement and Disposal of Assets and the Appeals
Tribunal should not be brought in middle of a Financial Year, but rather be
systematically planned, for in the next Financial Year 2015/16.

To ask for a supplementary budget to facilitate RDCs and their Deputies to carry out
their mandate, to host the northern corridor integration summit, to compensate
claimants, workshops and allowances, rent arrears erodes public confidence in the budget
process and puts the credibility of the budget into question. As such, Parliament should
during the constitutional review look at the provisions on retrospective approvals and
expedite full implementation of the Public Finance Management Act, 2015.
10.
Prudent Debt management; Despite the institutional, legal and policy regime on debt
and debt sustainability, we note that Parliament has been weak in studying debt acquisition
proposals by Cabinet. This has contributed to instances of questionable overall transparency
in debt acquisition, implementation, accountability and value for money. Overall, external
debt and domestic debt are rapidly increasing, even when still in the debt sustainability
threshold. By June 2013, the total debt for Uganda was at UGX 18,560bn bigger than the
national budget of UGX 15 trillion for current FY 2014/15; while domestic debt has so far
surpassed UGX 6.7 trillion this FY.
Already about UGX 10 trillion in FY 2014/15 will go to interest payment of about UGX
1.2 trillion and much more in FY 2015/16. This is too high, for Uganda to forge macro5|Page
economic stability, gender responsive and inclusive economic development. Domestic
debt has more lethal implication to Uganda’s economic management, crowding out
private sector investment, increasing inflationary pressures that contribute to macroeconomic instability that lead to and loss of jobs and tax revenues for the Ugandan
economy.
Recommendation:

Support BOU for only monetary purposes and macro-economic stability; As we scrutinize budget
proposals for FY 2015/16, Parliament should iron out distortions around Bank of
Uganda (BOU) issuing treasury bills and bonds for monetary purposes (and macroeconomic stability). While sections of Government have for years used the same to meet
the national budget deficit. By simply going for other people’s money rather than
frugality, Government has unjustifiably increased public debt in some instances. We
should disengage issuance of treasury bills by BOU away from using the same for fiscal
purposes.

Support BOU to contain domestic borrowing; Parliament should ensure full and expeditious
implementation of the PFM Act, 2015 and also support BOU in containing the
accelerated domestic borrowing.
11.
Proposed Budget Cuts to social sectors: Although we appreciate government’s efforts
of living within its means by reducing the total budget from 15829.9bn in FY 2014/15 to
14472.05bn in FY 2015/16, the cut has affected more of the social sectors like agriculture,
education and health rather than the bourgersie sectors like Public Administration and
interest payment. We are dismayed that governments is proposing to reduce health budget
has reduced by 317.4bn (from 1281bn to 963.7bn), Education has reduced by 45.3 bn
(from 2026.6bn to 1981bn), agriculture has reduced by 56.7 (from 473.3bn to 4170bn) to
mention but a few and yet Public Administration budget has increased by 155.3bn (from
554.8bn to 710.1bn), interest payment 678.4bn (from 1082.9bn to 1761.3bn). By reducing
money of sectors that has a direct impact on Uganda’s population, not only will this affect
the overall welfare of the population but will also increase the economic cost of
government to take care of a sick, illiterate and hungry population.
12.
Slow progress in implementation of the Public Finance Management Act, 2015:
Despite the passing of the Public Finance Management Act, 2015, we are concerned about
the sluggish implementation of this law. For example, the Ministerial Policy Statement
should have been submitted by 15th march, also government should have presented the
annual budget by 1st of April accompanied with the certificate of compliance from
National Planning Authority and the Certificate of gender and equity as well as the
Treasury memorandum and a statement of budget, list of accounting of officers,
appropriation bill and any other bill. Despite the executive being aware of these
requirements, there was no deliberate effort to prepare accordingly and as such we are
under immense pressure to respond to government budget proposals and at the same time
we are worried that there is going to be commotion in parliament as there will be no time
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to effectively scrutinize and input into the NBFP which will lead to rubberstamping of
proposals from the executive. Going forward we demand that government prepares all
these documents as required by law to enable citizens and policy makers make informed
choices and decisions at the same time we urge government to ensure that transitional
clauses are inserted in laws to enable to appropriate transition from old to new laws.
13.
Unfulfilled pledges in the FY 2014/15 Budget Speech: in the FY 2014/15 Budget
Speech two major proposals were made and have never been fulfilled. The establishment
of the cooperative bank, which has now become an unfunded priority under the Trade
sector, requires Ugshs 35bn for its revival. The establishment of the salary review
commission which has never taken off and it’s not even mentioned anywhere in the
budget framework paper. We are tasking government to bring back these proposals as they
are key in promoting efficiency in budget implementation and enhancing service delivery.
In conclusion, we the civil society organizations are optimistic that the future of Uganda’s
economy is bright and thank government through ministry of finance for enforcing prudent
financial management practices such as zero tolerance, supplementary budgeting, and increased
government intervention in exchange management and increased investment in agriculture. We
are proud of Ministry of Finance, Planning and Economic Development for their effort and
vigilance in managing this economy despite the glaring challenges aforementioned.
For more information please contact:
Mukunda Julius
Coordinator
Civil Society Budget Advocacy Group (CSBAG)
Plot 11, vubya Close, Ntinda-Nakawa Stretcher Rd
P O BOX 660, Kampala |Tel: + (256) 0755 202154
Email: [email protected] | Web: www.csbag.org
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