Members of Parliament sitting on the Budget Committee have accused the Ministry of Finance of flouting the provisions of the Public Finance Management (PFM) Act, 2015 while providing for an additional budget worth UGX3.4 trillion which has increased the National Budget of Financial Year 2021/2022 from UGX41.29 trillion to UGX44.77 trillion.
During the committee meeting with Finance Minister Matia Kasaija on Monday, the MPs asked him and the team of technical officers to return and explain whether the additional budget was in line with the law which provides for 3.5 percent of the total budget to cater for fiscal deficit.
Committee Chairperson Amos Lugoolobi yesterday said that there is need for the Ministry to clarify to Parliament whether it followed the law while considering the additional figure to the budget, raising concern that the UGX3.4 trillion corrigenda was non-compliant with the law.
“We note the increase in the budget by UGX3.4 trillion Shillings and we wonder if this is compliant with the Public Finance Management Act- PFMA regulation, particularly relating to fiscal deficit,” said Lugoloobi.
Butambala County MP Muwanga Kivumbi noted that the corrigenda that was tabled before Parliament within a week of tabling the final budget estimates might have contradicted the provisions of Section 7 of the PFM Act regarding the deviations from the Charter of Fiscal Responsibility.
What the law says
Section 7 of the Public Finance Management Act provides that the Minister may, with the approval of Parliament deviate, from the objectives of the Charter where Uganda experiences a natural disaster, unanticipated severe economic shock or any other significant unseen debt that cannot be funded from the Contingency Fund.
The law directs the Finance Minister to within 30 days after deviation, publish a report in the gazette and the website of the Ministry.
“If you gave us a charter of fiscal responsibility and you started in the objectives and said you were expected not to exceed 3percent and then you come up with (additional budget) approaching 7 percent, it is a gross failure on your part. You must take us through the reasons why you have not been able to stick to these objectives” Kivumbi said.
In response, the Deputy Secretary to the Treasury, Patrick Ocailap that the current charter of fiscal responsibility is expiring on May 12 when President Museveni begins a new five year term of office and since the budget being processed is to be implemented in the new term, the provisions of the old charter cannot suffice.
“Did we deviate from that fiscal deficit and did the Minister come to parliament to explain why we are deviating from that? Yes, in the budget for this financial year 2020/2021, the Minister did come to parliament and explained a number of macro-economic assumptions,” he said.
Ochailap cited external and internal shock to the economy arising from Covid-19 pandemic that had not been anticipated as one of the deviations from the fiscal deficit of 3 percent in the current financial year. He said that the Covid-19 pandemic led to several requests for adjustments to the budget as well as requests to borrow more money to cover the fiscal deficit arising from the shock to the economy.
“What were these borrowings meant for which made us expand beyond the 3 percent fiscal deficit in the charter. There was a shock on revenue. The revenue shortfall is projected to be UGX2.5 trillion. There were other requirements in the budget which made the Minister come back again to Parliament for prior approval” added Ochailap.
Kenneth Mugambe, the Director Budget in the Ministry of Finance, said that the fears of the MPs will be catered for in the new charter of fiscal responsibility that will be tabled in Parliament within three months of the new political term office.
“In line with the law, within three months from the assumption of power of the new government, the Minister will be laying the charter of fiscal responsibility and that will provide an opportunity to review the various targets…fiscal and macro. And they will be tabled in Parliament,” said Mugambe while insisting the budget under process is in line with the law.
Redefining the CFO Role in Oil and Gas: How UNOC’s Emmanuel Mugagga Is Executing Strategy for National ImpactHowever, Lugoloobi disagreed with a move by the Ministry of Finance to present an additional budget basing on a charter that has not yet come into effect saying that parliament does not approve funds or any law in speculation.
Contingency Fund
The MPs insisted that such money would have been provided for in the Contingency Fund so that government uses it to cater for the unfortunate events that occur after the budgeting process has been completed.
A Contingency Fund is the Government account where a certain position of the national budget is saved with an intention of spending it on responding to emergencies that occur after the budget is approved.
In the Financial Year 2020/2021, Parliament allocated UGX60b to the Contingency Fund and Minister Kasaija reported part of the money had been spent on the relief response to the people affected by floods last year.
Kasaija also revealed that in the coming financial year, his ministry has provided for UGX60b to be held in the Contingency Fund. He said the fund needs to be allocated more resources because the country is still facing threats of floods and desert locusts.
“The money has gone to floods in Buliisa district but there is still a lot needed to be done there. Other money went to the locusts. Those locusts from what I have been told by the Ministry of Agriculture are still around. They are waiting in a neighbouring country” the Minister said.
Rubanda East MP Henry Musasizi, said that the reason the 3 percent of the total budget was put in the law was to cater for Contingency Fund and Supplementary budgets to cater for the unexpected events that may befall the country within the course of the financial year.
“What the Minister is talking about would be taken care of if we had enough money in the Contingency Fund. It is important going forwards that the Contingency Fund is provided for because it is in the law to cater for things that would occur” said Musasizi who is also the Chairperson of the Committee on Finance.
Meanwhile, Kasaija who has been facing the Budget Committee since last week pleaded with the MPs to encourage Ugandans to get involved in production so as to increase the revenue base for the government through paying taxes.
He also said that there is a need for Parliament to agree with the government and devise means of reducing on the expenditures which are always higher than the income every financial year.
“There is a need for us to promote production of products that will increase revenue. On the side of the expenditure, it may come to a stage when we say we can’t do some activities. You are the ones who make demands for more Constituencies and on most matters am not with the final say, because I am a servant,” Kasaija said.
Lugoloobi also questioned the inconsistencies in the budget compared to allocations in the National Development Plan. He noted that the Ministry of Finance is over supplying resources to some sectors like Security at the expense of the productive sectors like Tourism.
He said tourism, manufacturing and other sectors are key in creating employment but they have not received attention from the Ministry considering the meager budgetary allocations.
