WHAT IS THE SOURCE OF UGANDA’S POST 2011 ELECTIONS INFLATION?
Even though Section 12 of the Budget Act 2001 stipulates that the total supplementary expenditure that requires additional resources over and above what is appropriated by Parliament shall not exceed 3% of the total approved budget, for that Financial Year without prior approval of Parliament, and that the same section provides that sources of supplementary funding to include suppression of expenditure on other votes (budget cuts), additional resources and re-allocation, it is a fact that the National Budget has both the Government’s contribution (taxes and non – tax revenue) and what is projected to be financed by the donor community. In the case of 2010/11 Financial Year, of the approved annual budget of Ushs 7,588.49 billion, it is most likely that not all the budgeted amount was realized, in which case, having a supplementary budget of Ushs 602.65 billion could have injected into the economy more than Ushs 602.65 billion as money created by the Central Bank which situation had obviously to create inflation. Secondly, as per the table below which shows the votes that had substantial expenditures for the financial years 2009/10 and 2010/11, it is clear from the addition of the total Supplementary for the Financial Year 2010/11 that it gets to Ushs 530,160,783,198, out of Ushs 602.65 billion the total supplementary for the same financial year. It is not clear how a whole Ushs 72.48 billion happens to miss in the figures for the year’s supplementary (How could the Budget Monitoring & Accountability Unit of the Ministry of Finance have overlooked the whole of this figure and not indicated through which Ministries it was spent?). Does that mean that the whole of that amount was not substantial?
It comes out clearly that we are experiencing inflation because of NRM’s indiscipline in expenditure to the extent that in an attempt to sort politics, it resorted to printing money and a lot of it is in circulation!
William Kituuka Kiwanuka
CONTINUOUS SUPPLEMENTARY EXPENDITURES UNDERMINING BUDGET CREDIBILITY
BMUA Briefing Paper (9/11) – April 2011
By Budget Monitoring & Accountability Unit (BMAU), Ministry of Finance & Economic Development
The Public Finance and Accountability (PFA) Act 2003 (16) allows that if the amount of funds appropriated by the Appropriations Act is insufficient, or that if a need has arisen for expenditure for a purpose for which no funds were appropriated by Parliament, a supplementary estimate, showing the amount required shall be laid before Parliament and that the expenditure votes shall be included in a Supplementary.
Appropriations Bill for Parliament to provide for their appropriation.
Section 12 of the Budget Act 2001 stipulates that the total supplementary expenditure that requires additional resources over and above what is appropriated by Parliament shall not exceed 3% of the total approved budget, for that Financial Year without prior approval of Parliament. The same section provides that sources of supplementary funding include suppression of expenditure on other votes (budget cuts), additional resources and re-allocation. The PFA Act 2003 (16) is in line with the provision of the Constitution of the Republic of Uganda 1995 Article 156 (2) (a, b).
Supplementary Expenditure FY 2008/09; FY 2009/10 and FY 2010/11
In the FY 2010/11 Parliament appropriated a total supplementary expenditure of Ushs 602.65 billion for recurrent, development and statutory bodies expenditures inclusive of taxes, arrears and tax payments. Of the total supplementary expenditure, the recurrent component was 71% (Ushs 428.3 billion); development expenditure was 8% (50.6 billion) while statutory was 21% (Ushs 123.78 billion).
The supplementary budget of FY 2010/11 exceeded that of FY 2009/10 by 145 billion representing an increase of 32%. The supplementary budget for FY 2009/10 was shs 457.94 billion of which Ushs 145.95 billion was for recurrent expenditure representing 31.2% of the entire budget and Ushs 98.263 billion (21%) was for development. The statutory expenditure budget was 5% of the approved annual budget of Ushs 7,588.49 billion.
THE KEY ISSUES NOTED
1. The budget continues to experience allocative inefficiency in form of supplementary expenditures on activities that are recurrent in nature.
2. The supplementary expenditure has been increasing over the years FY 2008/09 – FY 2010/11.
3. The regular supplementary expenditures undermine budget credibility.
The supplementary budgets undermine the entire budget process when the targeted outputs at the time of approving the annual budgets are suppressed as a result of budget cuts. This further creates inconsistency in the budget implementation by affecting sector outputs already indicated in the work plans. This hinders the timely completion of planned activities and subsequent service delivery.
The regular unplanned supplementary appropriation to the approved budget undermines one of the most important functions of the budget of providing a detailed, comprehensive costing of all the policy proposals.
The budget has continued to experience allocative inefficiency in form of supplementary expenditures on activities that are recurrent in nature.
KEY POLICY RECOMMENDATION
Entities must identify activities susceptible to supplementary expenditures in time and appropriately budget for them within the available resources. Recurrent supplementary expenditures should be discouraged except in extreme cases of emergencies.