Parliament has tasked the Ministry of Finance, Planning, and Economic Development to elucidate the expenditure of Shs4.05 trillion without prior approval from Parliament. The issue arose on Friday, 12 April 2024, during the deliberation on the ministerial policy statements and budget estimates for the finance ministry for the Financial Year 2024/2025.
The report was delivered by Hon. Jane Avur, the Deputy Chair of the Committee on Finance, Planning, and Economic Development and also the Pakwach District Woman MP. Hon. Geofrey Ekanya (FDC, Tororo North County) remarked that during a meeting of the Budget Committee with officials from the finance ministry last week, the committee was informed that the ministry issued treasury bills and borrowed funds to augment the budget for the Financial Year 2023/2024 to the tune of Shs4 trillion without Parliamentary approval.
“I anticipated that the Ministry of Finance today would have presented that position and appropriate action because that led to abuse of office. We expected repercussions, but I am surprised that Hon. Amos Lugoloobi has come to this House without a clear explanation. Under what legal framework did the Ministry of Finance borrow Shs4 trillion?” he queried.
The Speaker of Parliament, Anita Among, who chaired the session, recalled that in the preceding financial year when there was a deficit, the ministry introduced a supplementary budget which was approved, questioning what empowered them to proceed without proper authorization this time. Among, noting that while the finance ministry had reported it as Shs3 trillion, the Auditor General had estimated it at Shs4 trillion, also referred the finance minister to section 21(2) of the Public Finance Management Act, 2015
. The section stipulates that; “A vote shall not take any credit from any local company or body unless it has no unpaid domestic arrears from a debt in a previous financial year, and it has the capacity to pay for the expenditure from the approved estimates as appropriated by Parliament for that financial year”.
The Speaker, providing some relief to the minister, announced that the committee’s report would be endorsed, although the unresolved issues must be extensively clarified.
“The amendments we are going to make are; one, to open up Vote 130; two, to rectify the figures using a corrigendum; and three, to elucidate the Shs4 trillion – who authorized it – and domestic arrears, and we need that in the House,” she directed.
In the finance committee’s report, elevated domestic borrowing and interest costs were underscored as urgent concerns by the committee deputy chair. She pointed out that the government’s heightened reliance on domestic borrowing has resulted in high interest expenses.
“To address this, there is a consideration to exchange domestic debt amounting to Shs1.86 trillion in the Financial Year 2023/24 with cheaper external debt of up to Shs500 million,” Avur articulated.
Nevertheless, notwithstanding this initiative, Avur disclosed that the majority of projected interest payments in the 2024/25 financial year totaling Shs8 trillion are still attributed to domestic interest payments amounting to Shs6.4 trillion, warning that this trend could strain the budget and impede service delivery.
The deputy chairperson also expressed concern over undisbursed debt and commitment fees, stating that as of December 31, 2023, the committed but undisbursed debt stood at Shs14.42 trillion – a situation that is anticipated to result in a surge in commitment fees from Shs19.34 trillion in the Financial Year 2023/24 to Shs45.76 trillion in the Financial Year 2024/25.
She noted that the Auditor General’s report highlighted that the costs of tax incentives, such as tax holidays, exemptions, waivers, and refunds, exceed the benefits, adding that in the Financial Year 2022/23 alone, these incentives amounted to foregone revenue of Shs1.41 trillion while not achieving desired objectives like employment generation, enhancing exports, or import substitution.
The committee also mentioned discrepancies noted between the draft budget estimates, ministerial statements, and the Appropriation Bill for 2024. Hon. Sarah Opendi (Indep., Tororo District Woman Representative) criticized the finance ministry for only allocating Shs200 billion of the Shs1.86 trillion domestic debt clearance.
The Speaker urged the ministry to furnish a breakdown for the domestic and international debt to ascertain the details including if they are fictitious or not. Hon. Muhammad Nsereko (Indep., Kampala Central Division) opined that the Government needs to focus on securing cheaper credit with favorable terms. He urged the government to, for instance, explore Islamic banking.
“Possibly, we can obtain cheaper credit primarily for infrastructure development and education to help us bridge the gap and prevent us from acquiring expensive loans,” Nsereko proposed.
Hon. Martin Mugabi (NRM, Buzaaya County) remarked that government’s failure to compensate local contractors has severely affected the credibility of contractors domestically.
“If you have a contract from the government and you want to seek a loan from the bank, they will decline saying they cannot assist you,” he noted.
