Unproductive expenditure in Uganda’s Budget

This roadblock to sustainable growth result in financial strain instead of economic gain

COMMENT | JABEZ ATERAR | Uganda’s development is being held captive by a silent, yet incredibly thirsty, obstacle: unproductive government spending. Imagine, if you will, a national budget overflowing not with vital funds for education or healthcare, but with lavish spreads of special meals and drinks, endless rounds of welfare and entertainment, and a seemingly unquenchable appetite for international travel and so forth.

We’re talking approximately Shs. 2.0 trillion, to be precise (as per the National Budget Framework Paper FY2025/26) is disappearing into the abyss of unproductive expenditures which they consider “essential”. Meanwhile, critical areas like pre-primary and primary education barely survive or manage to get Shs.1,360.78 billion, and National Referral Hospitals Shs.464.42 billion, those bastions of healing, endure a Shs.10.67 billion cut. One must wonder whether we are building a nation or planning a never-ending party.

Over the years, the government has introduced promising policies, initiatives, and programs aimed at boosting household income and accelerating economic growth. Conversely, persistent challenges continue to hinder the realisation of a socio-economically transformed society. While the national budget has increased by 201.7% over the past decade from Shs.23.97 trillion FY2015/16 to Shs.72.13 trillion FY2024/25 the execution and use of these funds remain a terrifying speculation.

Notwithstanding the increase in allocation, poor implementation and financial mismanagement have hampered Uganda’s progress. The Auditor General’s (OAG) report 2024 reveals untold irregularities in payments, overpayments, revenue losses and wasteful spending that have amounted to about Shs.6.9 trillion in 2023/24, the approved budget of Shs.52.74 trillion was revised to Shs.61.67 trillion, and Shs.50.17 trillion was warranted only Shs.48.68 trillion was utilised.

The government incurred Shs.73.90 billion in commitment fees for undisbursed loans which further exacerbates the public debt stock now at Shs.94.9 trillion and is projected to reach Shs.110.6 trillion by IMF. Additionally, a significant portion of Uganda’s budget is spent on unproductive expenditures where services and goods that can’t help the country grow, benefit, or in some instances, items purchased remain unused/idle other than critical areas such as healthcare, education and agriculture.

In FY 2023/24 approximately Shs.2.9 trillion was lost to expenditures that did not contribute to economic growth. (OAG,2024) In the forthcoming FY2025/26 unproductive expenditure amounts to Shs.2.1 trillion for bedding and clothing, donations, special drinks and meals, welfare and entertainment (3.6%) of the Shs.57.44trillion National Budget Framework paper FY2024/25. Such allocation shrinks productive expenditure that would directly impact citizens’ livelihood.

Despite promising revenue collection trends registered in the half-year FY2024/25, inefficiencies persist. The Uganda Revenue Authority (URA) targets to increase collections from Shs.32.1 trillion in FY2024/25 to Shs.35.70 trillion in FY2025/26. However, revenue leakages due to non-compliance such as unpaid gold levy (Shs.68.84 billion) mineral rental fees (Shs.439 billion), Loss due to transfer pricing by large telecom operators (Shs.2.4 billion) and government investments in nonviable private enterprises, such as Dei- BioPharma (cumulative amount Shs.723.4billion), Atiak Sugar factor Ltd ( Shs.553.71billion) and Roko Construction ( Shs.207.13 billion), undermine these efforts. Poor returns on such investments result in financial strain instead of economic gain.

Comprehensively the inefficiencies that surround service delivery will foil the objective of government. Remember, the government has been receiving development finance assistance but this in shrunk because of lean-up by the US government to reduce unproductive expenditures.

Conclusively, the government must adopt realistic budgeting “just enough, not too much” in FY2025/26, improve efficiencies in the public sector, especially service delivery and maintain prudent fiscal management to reduce the debt burden, adequately prepare for projects, slash down on unproductive expenditure forthcoming in FY2025/26 to meaningful areas. But also, citizens must actively hold the government accountable to ensure public funds are allocated efficiently and productively to achieve socio-economic transformation from this very ambitious ten-fold growth strategy.

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Jabez Aterar

aterarjabez85@gmail.com

Economist-Graduate Trainee at the Civil Society Budget Advocacy Group (CSBAG).