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Post by sol_drethedon on Wed Apr 24, 2013 1:56 am


As we look forward to the next budget of the National budget budget of 2013/2014, we need to look at what the challenges of implementing the National budget of 2012/2013 have been and learn from our mistakes so as to fare better in the next financial year round.

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 we anticipate what government will budget for in FY 2013/2014, one wonders how the victims will benefit from it.

Since the 1990's government reasoned that limited resources barred it 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 Shs 3.2 Billion of unspent balances were turned to the treasury from 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 that 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 situation, biting poverty, emerging situations like the nodding disease, floods, famines, then the budget situation 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 macro economics and social welfare objectives. For most Ugandans what matters at the end of the day is whether there is money in their pockets to reduce poverty conditions. The current macroeconomic strategy pursued by the government focuses on symptoms like interest rate, curbing inflation and yet what we need to focus on are the links between gross domestic product-led growth and social progress. The neoliberal macroeconomic framework, where fiscal policies revolve around maintaining small deficits, while monetary policy is fixated on a low inflation target of 5% and an exchange rate policy that is committed to full flexibility. Such policies are likely to accelerate growth and broaden the impact to eliminate poverty in Uganda.

I propose that we depart from the prevailing neoliberal macroeconomic framework, by introducing two major alternative economic models that could be successful by tapping into the country's full economic potential. One is a managed exchange rate regime to promote export competitiveness: maintaining short-term stability of the nominal exchange rate, which can reduce private sector uncertainty and facilitate public sector budget planning and achieve a real exchange rate that can foster broad-based export competitiveness and structural diversification of the economy. Secondly, a monetary policy that supports fiscal expansion and export promotion by achieving real rates of interest for private investment. Inflation control which places restrictions on money supply growth is in most cases difficult to manage. For instance, when the central bank purchases foreign exchange (and correspondingly sells domestic currency) in order to counteract currency appreciation, the domestic money supply grows. In response, the Central bank sells government securities in order to mop up excess liquidity. However, this ends up cancelling the potentially positiver effect of the original blend of domestic currency.

Sectoral allocations also affect the budget management in this country. Sectors such as water, health and agriculture which directly impact on the lives of the people, not only have inadequate funds but also their budgets continue to reduce. For instance, the budgetary allocations to agriculture which is the backbone of this economy reduced from 477.16 to 351.493 to 286.395 for the FY 2011/12, FY 2012/13 and FY 2013/14 respectively.

Conclusion: Government needs to prioritize funding sectors that address the social needs of Uganda. The poor especially women and men rely mostly on public services and as such such services should be of quality and in quantity. When managing and implementing budgets, Ugandans do not care which political party is managing the budget but rather whether the budget provides quality services and opportunities for improved livelihoods.



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