We know that the state during the recent years have been running on deficit financing. This means it takes up loans to pay up for new loans to pay recurring expenditures. The state follows up this negative spiral of lacking of funds to ask for more expenditure than it has funding for. This means, the state is fiscally indisciplined and misusing funds, as they have to later find sources of revenue or take up more loans to fulfil the voted expenditure it has.
That isn’t a sign of a growing economy, but a way to further more loans and add more debt, which has to be paid back with interests in the coming years. As the parts of the government budgets are becoming more expensive, as the state has to fulfil and repay on the debts it has already taken out over the years.
The Minority Report states this:
“The government contradicted itself when it indicated that there would be limited supplementary budgets in FY2022/23 but at the same time elaborately articulate unfunded priorities or additional expenditure needs of UGX 2.62 trillion. Unfortunately, the majority report is silent on this fiscal indiscipline. The indiscipline of supplementary budgets is bound to continue and government hos sent indications that a minimum of UGX 2.62 trillion will be sought in due course” (A MINORITY REPORT ON THE NATIONAL BUDGET FRAMEWORK PAPER FOR FY 2022/23 -2025/26, January 2022).
This here should create headlines, because this is planning to take out loans to cover the current debt, which this will be. Since the state needs borrow or take up loans to cover these expenses. This just show how reckless the state is carrying it’s budgets.
As it can create 2.6 trillion shillings without having any sort of funds or revenue to ensure it. Which means someone else has to foot the bills currently. A creditor will take the debt and make sure the state can pay for the expenses. However, the future citizens has to repay for this and that is fiscal indiscipline and deficit financing. As the deficit needs financing and the shortfall has to be covered, which tends to be covered by debt.
This is unserious of the government and a sign of worry. As they are doing this on the first budget for the financial year and we can know additional supplementary budgets will most likely become bigger than two trillion shillings. We should expect more and the shortfalls might become worse, as all revenue isn’t recovered or the estimated tax-base isn’t as huge as earlier estimates and therefore the state couldn’t perform or have fresh funds to pay for the reoccurring expenses. Peace.