Museveni’s 2016 Budget

By Haggai Matsiko

Suspicions of vote buying eclipse record Shs 24 trillion budget

On May 25, Keith Muhakanizi, the secretary to the Treasury, wrote to the Clerk to Parliament notifying the House of the final corrigenda to the 2015/2016 Shs.24 budget that Finance Minister Matia Kasaija presented on June 11.  Of the several adjustments that Muhakanizi was communicating, an additional Shs 1.3 billion as facilitation for intelligence collection under the Internal Security Organisation (ISO) has attracted the attention of critics. Though a small amount, critics say that it is changes like these that make the latest budget suspicious. Matters are not helped by the fact that ISO falls under the President’s Office.

This is an election budget,” Godfrey Ekanya, the Shadow Finance Minister told The Independent. “First of all, they increased the budget from Shs 14 trillion to Shs 18 trillion and later to Shs 24 trillion much later after the certificate of compliance had been issued. Why do we need Shs 1.5 trillion for UPDF (Uganda People’s Defence Forces), are we in the middle of a war?”

Ekanya added that the funds in the budget are likely to be diverted by the civil servants to fund the elections.

“You wait,” the legislator added, “there is going to be a lot of money in circulation, there will be inflation during elections. The other negative thing is that they are going to crowd out the private sector because of too much domestic borrowing.”

The reference to inflation will re-open old economic wounds suffered by Ugandans after the 2011 elections when an economic crisis rocked the country. Indeed, the economy is still reeling from high interest rates as the Central Bank attempted to ‘mop up’ the excessive liquidity.

As Kasaija was reading his maiden budget, the local currency was struggling against the major currencies – having breached the Shs 3110 mark for the first time – and analysts say the situation will only get worse as trillions of Shillings go into circulation ahead of the elections.

Ekanya points to the fact that given the elaborate procurement process stipulated in the PPDA (Public Procurement Disposal of Public Assets Authority) Act, it is not possible for the government to procure contractors for the several projects lined up in this year’s budget. Where will all that money go?

In November last year, Bank of Uganda Governor Tumusiime Mutebile gave Ugandans a slight idea of what to expect when he stated that he was “misled” by the government into financing the 2011 elections, which essentially thrust the country into an economic abyss. Participants at the African Science Academies asked the governor to explain why the economy suffered unprecedented inflation levels in 2011 just after the general elections. In response, he stated that the money was passed on to the government through treasury bills. A month later, he told the Uganda Bankers Association annual dinner that he would not print any money to finance public expenditure. Indications in the current budget suggest that trillions worth of treasury bills are likely to be issued by the government to fund the massive budget, which comes with its own disadvantages.

While the new Public Finance Management Act stipulates that when a general election is to be held, the government must publish a pre-election and a post-election economic and fiscal update detailing all election-related spending, critics say the effect of this requirement might not be of any consequence especially when the incumbent wins the elections.

It is not the first time that government funds are coming under such scrutiny. Early this year, a request for a Shs 847 billion supplementary budget  was also largely criticized as a potential source for President Museveni’s 2016 campaign cash because of its sheer size—the biggest supplementary ever—and what it was to be spent on.

Like the Shs 1.3 billion in Muhakanizi’s corrigenda, critics were quick to single out the cash that was allocated to institutions that President Museveni directly controls.

Joseph Bossa, the former vice president of the opposition Uganda People’s Congress (UPC), dubbed the supplementary a “flush fund” to finance Museveni and the NRM elections, while Erias Lukwago, the Kampala Lord Mayor, said given that President Museveni and his ruling party were not in the habit of mobilising funds from supporters, they had earned a reputation for raiding public resources to run their activities.

As the polls near, such suspicions cannot easily be ignored especially given that President Museveni’s government has also done very little to dispel them. Instead, insiders estimate that the President has already spent about Shs 100 billion on neutralizing potential competition and galvanizing support for his bid.

The bulk of this, about Shs 50-70 billion, insiders claim, has been spent on neutralizing Amama Mbabazi, his former prime minister and former NRM party secretary general.

Yet official campaigns, which tend to gobble more resources, are yet to begin. Some insiders even say that should Mbabazi, who is seen as the biggest adversary contests, more billions are expected to be pumped into neutralizing him.

Museveni’s big spending

Election spending trends also show that President Museveni’s spending continues to grow. Estimates show that Museveni’s ruling party spent Shs 13 billion in 1996, Shs 30 billion in 2001, Shs 50 billion in 2006, and Shs 75 billion in 2011. This projection shows that Museveni’s expenditure on his re-election grows by an average of 60% above previous expenditure.

For critics like Ekanya, a huge budget is a pointer that Museveni intends to spend much more come 2016.

But Amos Lugoloobi, the chairman of the Parliamentary Committee on the Budget, says the suspicions that the money will be used to fund elections are unfounded.

“We have looked at all these figures critically,” Lugoloobi told The Independent, “and part of the reason we see this increment is that, for instance, the new law (Public Finance Management Act) provides for full disclosure of the domestic debt, which in the budget is Shs 4.7 trillion, and you also have Shs 2 trillion as interest accrued to domestic and external debt.

Lugoloobi added that the other funds are for development projects like the Standard Gauge Railway (SGR), energy projects like Isimba and Karuma and road projects.

“All these infrastructure projects are critical, they are a foundation for our economy,” Lugoloobi said. “What we need to focus on is how to utilize them; that is why subsequently we have to invest in agriculture and tourism if we are to reap from these infrastructure projects.”

Lugoloobi also allayed fears over the country’s debt situation. “Our debt situation is delicate, we have borrowed a lot and a number of loans have not been performing but some like the one for the Northern by-pass are now moving,” he said. “If we can get them all to move, the better and if this does not happen, we (Parliament) are ready to come in and take action.”

Julius Mukunda, the coordinator of the Civil Society Coalition on the Budget, also says that the claims over the money getting diverted to fund elections could be mere speculation. His major concern, however, is that the government must have borrowed a lot of money for it to have a debt of Shs. 4.7 trillion.

“The other issue for me is absorption capacity,” Makunda said, “take UNRA (Uganda National Roads Authority), for instance, they have been given more funds yet in the last financial year, they returned money to the Treasury because it could not be absorbed.”

Parliament passed the budget on May 30 giving stakeholders time to analyse it before President Museveni explained it on June 11.  The State of the Nation address, had already set the tone. The President maintained that his priorities would remain energy and infrastructural development. Indeed, the bulk of the budget has been earmarked for these development projects.

For some, coming a few months before the 2016 elections, the budget was expected to target issues closer to the voter – jobs, agriculture, health, education and the like.

Instead, President Museveni stuck to his script of grandiose development projects, which are the major reason the budget has increased from last year’s Shs 14 trillion to Shs 24 trillion.

The bulk of the funds for these projects especially have been borrowed. URA is projected to collect only about Shs 11 trillion or under 50% of the total budget.

The major concern, some critics claim, is that while Uganda has invested in making the elaborate National Development Plans (NDP), the new budget appears to read from a different script.

For instance, many legislators struggled to make a connection between the budget and the National Development Plan II, yet the two were tabled before Parliament the same day.

“When we look at the two documents,” legislator Raphael Magyezi said, “some of us cannot tell which direction we are heading as a country.”

While proposed priority areas of NDPII (2015/16-2019/20) are agriculture, tourism, minerals, human capital development, and infrastructure, agriculture instead saw its budget slashed in percentage terms from 2.9% to 2.7%.

The sector was allocated only Shs 485 billion, a slight increment from last year’s Shs 437 billion but a drop in the ocean compared to the 10% of the Maputo Declaration requirement. Tourism, minerals, and human capital development also didn’t get much. As has been the case over the last few years, it is infrastructure that attracted the bulk of the budget though that is the very area where the citizens have felt the least impact over the years.