The National Resistance Movement and President Yoweri Kaguta Museveni have created a negative spiral of debt. The state have taken out more and more debt over the years. The CSBAG, Uganda Debt Network and other organizations have spoken out about this. As the state have the need to pay more in interests and it takes away more from the general budget.
Now the state is saying it has 65 Trillion Shillings in unsustainable debt. That is happening after the Parliament have had sessions over the last few years. Where the only thing they do is to vote over debt and approve more loans to the state for various of development projects, roads and you can wonder if it does anything.
The state is now owning a lot of money. More money than it usually uses in a state budget. The state budgets of late have had half of the revenue coming from domestic taxes and the other either grants or loans. There is also additional supplementary budgets, which is coming in cycles during the budget year. Which is adding more debt… and creating more debt.
There been worry about the rise of debt, but the NRM and the President has said it has been done within reason. However, that is now the chickens coming home to roost. There is enough problems ahead and the state has created this financial conundrum. It has been done deliberately over time.
The Parliament is on the regular issuing now loans… and taking new loans. While hoping one day they have the revenue to actually do these things. The state is spending money and funds it doesn’t have. That is an unforgiving task… and the NRM cannot run away from this.
The NRM have created problem. The appointments of the President is doing this. The Bank of Uganda (BoU) and Ministry of Finance, Planning and Economic Development (MoFPED) should have seen this coming. They have been looking over the expenditures and the interests rates. They know when the grace periods of the loans are over. These folks are the ones who has the oversight and supposed sound judgement to advice the Parliament to accept all these loans. However, that is clearly not the case.
The state is crippling its budgets, overspending and over-loaning funds over time. Now, the creditors and debtors wants their pieces of coins back. They cannot bail on it or default on it. Then the state will not be trustworthy and be credible as a economic broker. The state is clearly struggling and lacking funds. That’s because they are having trouble to raise domestic revenue and have to high costs.
This is a self-inflicted ill-advised debt-cycle. A government not listening to CSBAG, Uganda Debt Network and others. The NRM and Museveni should have done that. It will be harder for them to get solidarity this time around. As the Museveni era of now is destructive. The state actions against its own citizens and totalitarian acts. Is not the ones who makes outsiders forgiving like it did in the early 1990s when Museveni was part of a new group of leaders that the West had hopes in. However, that boat has sailed and the truth has come out. That is why Museveni is still there and depleting the state like there is no tomorrow. This is why the debt is rising and its run without any balance of the budgets. That is why the debt is rising and there is no way out.
They want debt forgiveness. However, getting that now will be a feat, but not sustainable either. As this state will just take out new loans and not re-coup or try to absorb the lack of revenue, which is causing the problem in the first place. That is why the state doesn’t have any liquidity or equity to trade for the lack of revenue. It is just a sinking boat and the captain seems clueless…
Deficit financing can only take that far and now its at the end of that journey. Peace.
In the February 2021 Office of the Auditor General Report it states a very simple fact. The state has created more local government entities than it can manage to pay for. They have in this instance created to many Town Councils and therefore, they cannot afford to operate them. It is a total of 356 Town Councils, which they cannot afford to pay for.
The Auditor General Report says this:
“Government has over the last years created a Local Governments particularly Town Councils which should be financially independent from the Districts from which they were created in line with Section 79 of the Local Governments Act. Records reviewed indicated that Government had created a total of 584 town councils by June 2019/2020 out of which only 228 have been approved by MoFPED for direct access of resources from the national budget. As explained last year, it requires on average UGX.1.8bn to run a Town Council. This implies that the balance of 356 town councils would require approximately UGX.640.8bn for both development and operational costs. Failure to fund Town Councils significantly affects the ability of these Town Councils to Operate and deliver services. It appears that Government is increasingly finding challenges to provide the required funding for the newly created Town Councils” (Office of Auditor General (OAG) Report – February 2021).
It is telling that there is existing 584 Town Councils in the Republic, but there is lacking funds for 356 Town Councils, which is about 60% of all of them. That says how mismanaged the Local Government organization is. They are just creating more constituencies for the elections, but not thinking of how to cover the costs of actually having them. That is why this is so prevalent.
This little passage of the OAG is only about Town Councils, but is a part of a bigger problem of the gerrymandering. Where the state is creating local government bodies without any considerations of the costs. This is why 60% of them lacks funding and cannot afford to be operational. This says it all.
This is how the National Resistance Movement (NRM) is “securing your future” or delivering “steady progress”. Peace.
“By implication, if sh15.7 trillion for debt service-related expenditures is subtracted from the sh21.9 trillion the Government will have generated in revenue collection, it means that 72% of the country’s revenue collection would be spent on debt repayment. The committee raised concern that the high rate at which government is borrowing is not commensurate with the low level of increasing government revenue collection and, therefore, violates the country’s charter of fiscal responsibility. The report indicates that as of June 2020, Uganda’s public debt had reached $15.27b, which is equivalent to sh56.9 trillion. Out of this sh38.9 trillion is external debt and sh17.9 trillion domestic debt” (Moses Mulondo – ‘Govt earmarks sh15.7 trillion for debt repayment ‘ 03.02.2021, New Vision)
The news on how the state got to repay old loans is coming out. As the Ministry of Finance, Planning and Economic Development (MoFPED) have put forward the budget for the Financial Year of 2021/22. This is initially telling stories on the revenue or tax base, which will be preoccupied or used for paying debt repayment.
Just to put things in perspective. This is the definition of ‘Deficit Financing’:
“Deficit financing, however, may also result from government inefficiency, reflecting widespread tax evasion or wasteful spending rather than the operation of a planned countercyclical policy. Where capital markets are undeveloped, deficit financing may place the government in debt to foreign creditors. In addition, in many less-developed countries, budget surpluses may be desirable in themselves as a way of encouraging private saving” (Encyclopaedia Britannica – ‘Deficit financing’ (25.08.2015).
This here is telling the story, which the state media and others isn’t telling. Because, they are borrowing funds to cover up for the deficit. The deficit is created as a result of the rising cronyism and misuse of funds. These funds have to cover the bloated government and its staff. That is why deficit is created to fix the shortfall between the needed revenue and the expenditures of the state. They are using loans to cover and fix the lacking revenue of the state. If the state had enough funds through its tax-base, the state wouldn’t need these loans in the fist place.
However, the state have prolonged with this game over years. The state has used loans to cover its baseline and usage of funds. They have went out for foreign creditors to get enough funding. That shows that the state haven’t been fiscal responsible. They have misused the authority of the state and taken up loans, which now accumulate to over 70% of yearly revenue. While this is happening. The state and the Parliament is still issuing new loans and creating a bigger debt burden. That is what they are doing… and that cycle must stop.
Soon, all revenue will go directly to debt repayment. We know the state wants to have debt relief, but this is self-created by the regime, as they are borrowing for basic commodities and necessities. They are always loaning funds to build development projects and infrastructure, which will be costly. As funds are lost and misused in the building of these. That is why the price of road is so expensive and also projects in general. Therefore, the state is crewed over more than it can swallow.
That is why the state is deficit financing and its become a burden, which it cannot carry. The debt is not sustainable. When 72% revenue is spent on debt repayments. That shouldn’t be a thing, but that is fiscal policy of this regime and apologist cannot hide the fact. They have run down the state and taken up loans they cannot carry. Peace.
“We thank the officers of the United Nations and all development partners who have been close collaborators but at this juncture I must make it clear that while we appreciate your support and look forward to your collaboration you must remember that Kenya has its owners, and its owners are 50 million Kenyans, I ask you to refrain from trying to direct us in which way we should go. We are clear on where we want to go. We ask you to join us, to support us in that endeavor. But do not interfere because we shall not allow for you to dictate to us which direction that should be” – President Uhuru Kenyatta on the 4th December 2020
The idea that President Kenyatta comes with, I understand the sentiment and the ideal of acting as a sovereign and act as an independent state. As the Head of State … Kenyatta knows this too. The state his running is dependent on donations and aid. That is well known, as well as most of development expenditure is using foreign funds.
That’s why when you receive other people’s money and from foreign organizations. There will be strings attached to that money. The state who receives that money has to comply to a set of rules, regulations and deliver reports on the spending. This is happening because the state took the money and after that they have to prove the value for money.
Someone like Kenyatta should know this. The United Nations, Multi-Nationals and Foreign Donors are not doling the money out without any strings. This means that if the Kenyan state takes the money. They have to comply with the stipulations of the funds or the direction which they were intended to be spent.
If Kenyatta wants the state to be fully independent and sovereign he shouldn’t accept the money. The man shouldn’t even take the grants, donations or the development funds if they are putting strings on his actions.
President Kenyatta shouldn’t be dependent on it then. If you take other people’s money … there will expectations and directions coming with it. Yes, the Kenyan state is sovereign and can self rule. However, when you take funds to cover deficits and create development projects. These funds will steer the conversation, as these monies aren’t given out for F-R-E-E.
So, if Kenyatta doesn’t want to be told how to spend. Then he should add his own state revenue and tax-base so that he doesn’t have act out like this.
President Kenyatta there is no free lunch. You expect that money grow on trees and just get dropped in your hands. That’s not happening… Kenyatta, better buckle up and smell the coffee. Since, the reality is that the state can grow on its own. However, then you should stop the dependency of foreign donors. If you want to steer the ship without anyone telling you the direction. Peace.