CSO’s raise red flag over ballooning public debt, social gaps in budget

April 22, 2021 in Business, Companies, Finance, Investment, Policy by Editor

Servicing Uganda’s ballooning is taking resources away from service delivery with nearly 12pc of programmed resources for fiscal 2021-22 allocated to debt servicing. Some UGX 4.88 trillion of the UGX 41.219 trillion budget will go to interest payments, says Ugandan civil society umbrella body CSBAG.

Addressing a cross-section of media representatives at the offices of the Forum for Women in Development FOWODE, April21, CSBAG said matters were compounded by the fact that the fact that government agencies lack the capacity to fully absorb these loans, with some reaching maturity before full disbursement.

“We note that under-absorption of loans has led to an increase in the cost of loans hence leading to low returns on public investment,” CSBAG says citing the Auditor General’s report for fiscal 2019-20 which revealed that loans worth UGX 1.3 trillion underperformed with some reaching maturity without full disbursement.

“We also take note of the high cost of debt servicing at the expense of service delivery with interest payments taking up UGX 4.88 trillion in financial year 2021-22,” the CSO’s added.

CSBAG recommended better management of debt-funded public projects through better appraisal of absorptive capacity before the loans are contracted.

The CSO’s are also concerned over inadequate funding for local governments which they consider to be the gateway to service delivery. The sector remains underfunded with their budget expanding only marginally from UGX 4,382 billion in the current financial year, to UGX4,611 billion in fiscal 2021/22.

“Much as we welcome such an increment, it is still marginal given the high number of new administrative units. This is compounded by the fact that local governments have been performing poorly when it comes to domestic revenue mobilization and have continuously failed to meet revenue targets.”

Quoting the local government assessment report for 2019, CSBAG noted that only 23pc of local governments were able to meet revenue targets.

According the draft 2021-22 budget, the resource envelop is projected to shrink 9pc from UGX 45,493 trillion in fiscal 2020-21, to 41,219 next financial year. Despite this, governance and security will take the lions share at just under 19pc followed by human capital development at 16.6 pc and transport infrastructure at 9.7pc.

 

(@EPRC_official@ugandadebtnetCSBAG