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Post by sol_drethedon on Mon Jul 16, 2012 10:01 pm


Re-thinking the development paradigm of economic growth.

The Civil Society Budget Advocacy Group (CSBAG) is critical of the solutions to the current economic and social crisis which have focused on symptoms like the interest rate at the expense of the links between GDP – led growth and social progress.

CSBAG notes the systematic shrinking in formal sector jobs over the last two decades starting in the early 1990’s when the public sector was down–sized and industries privatized. As a result, more people have sought employment in the informal sector such as motorcycle transport (bodabodas) and hawking.

According to CSBAG, the stagnant agricultural sector, which supports over 80% of the population, is subsistence in character. The services sector that is fastest growing is very sluggish, characterized by poorly constructed buildings and s sloppy hotel industry. This unequal growth, the civil society group observes, has also led to mass suffering of rural Ugandans with significant land dispossession and many land conflicts. People with little faith in economic growth has increased social stress and damaged social cohesion.

In order to deal with the current crisis, the Group recommends the need to acknowledge that neo-liberalism and market–obsessed economics have failed. It urges government to integrate pluralism in macro-economic decision making. It calls for emphasis on provision of basic necessities of life, minimizing economic damage like high interest rates and promoting human dignity for all.

Responding to citizen needs CSBAG laments the high and increasing levels of inflation while salaries of most workers especially public servants cannot keep pace with the high interest rates or meet minimum standards. They propose that government addresses the issue of wages across the public sector with special attention to teachers and doctors.

Management of the oil resource
The group decries the perceived lack of transparency in the oil sector citing the recent signing of the oil agreement after parliament had resolved to stay all agreements until an appropriate legal frame work has been put in place.

They urge government to put in place concrete strategies for transparency in line with international best practice on ‘combating the oil curse’
Specially, the CSBAG calls for the involvement and participation of the citizens; creation of a petroleum authority balancing the current and future needs; manage the pitfalls of sudden influx of large sums of money, and avoid the negative impact on other sectors such as agriculture.

Supplementary Budget Expenditure
The group notes that supplementary budget expenditure is dramatically increasing yet the resources are spent on non-essential items. It compares the requests for expenditures that are not emergency in nature like the state house supplementary budget of 92 billions shillings with the slow attention by parliament to the supplementary budget for the recent out break of nodding disease CSBAG calls on government to prioritize the review of the Budget Act and related laws to deal with such lacunas in the law.

Consistent prioritization of consumption instead of Development.
CSBAG argues that consistent prioritization of consumption instead of development and the nature and level of government expenditure are very important to any economy. They affect production and macro economic variable resulting in high inflation.
The measures used to curb the inflation have had wide spread adverse effects such as increasing interest rates which reduces investments particularly by the private sector. This is in stark contrast to the medium term macroeconomic objectives indicated in the previous year’s background to the budget including crowding in the private sector.

While the group acknowledges that these measures have slowed the rate of inflation, it calls for guarding against arising secondary effects. They include collapse of businesses that can no longer afford credit and the associated unemployment.

Budget discipline and accountability
Civil society says that budget indiscipline undermines the credibility of the budget and with it the overall objectives. The budget performance report for 2009/10 shows that security; justice, law and order as well as public administration sectors substantively exceed the approved budget.

They recommend that government be checked to ensure that it acts in the interest of citizens. Individuals that act contrary to the law should be held accountable and this should pervade all levels of government from national (central) to sub-national levels (Districts and sub-counties). It is therefore important that the findings of the Auditor General’s annual audits should be used to hold people accountable / to account.

Furthermore, the CSBAG notes that the process through which farmers can acquire government credit through the Microfinance Support Centre Limited is still very difficult especially to small scale farmers. CSBAG appreciates the Agricultural Credit Facility, but points out that the interest rates are high for nascent investments in the agricultural sector. They recommend reduction of the rate to no more than 5%. In addition Government should establish an Agricultural Bank that will explicitly focus on farmers credit needs, hedge against risks like crop failures and volatilities in the prices of agro-products.

As is the norm, government annually sets priorities and allocates resources for implementing these priorities. But with the waning budget discipline and budget management by the government, the set priorities rarely benefit the Ugandan citizens. So as we anticipate what government will budget for in the FY 2012/13, one wonders how the citizens will benefit.
Since the 1990’s government reasoned that limited resources barred 6 from meeting the national priorities, a statement which sounded reasonable. Given that at the time our budget financing stood below 50% which meant that the bulk of the budget was financed by donors.

“Absorption capacity” is the new buzzword used by government lately in situations where sectors and local governments fail to utilize all funds allocated to fulfill government priorities. For instance, in FY 2009/10, 3.2 billion of unspent balances were returned to the treasury form Local governments.

Local governments with low social economic indicators and high poverty levels such as Kaabong, Nakapiripirit registered the highest levels of unspent balances.
This is worrying because for the budget to deliver, local governments should be able to deliver timely and quality services to the people and if they don’t, such inadequacies affect the country’s economic progress.
Supplementary expenditures which reached a record high of 38% in FY 2010/11, have continued to divert resources away from agreed national priorities and eroding the credibility of the budget.
Much as we may agree that these expenditures are inevitable, a critical look at these budgets reveals that they contain activities which are not unforeseen and should have been budgeted for in the budgeting period of a given financial year. If supplementary expenditures are raised mainly to run government operations in the current economic situations; biting poverty, emerging situations like the nodding disease, floods, famines, then the budget process becomes unrealistic.

It is also viewed as if government is insensitive and is recklessly spending public resources on matters that do not address the socio-economic needs of the Ugandan citizens. The budget strategy must also balance between the pursuit of macroeconomics and social welfare objectives.

to be continued.

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