“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).
Just as it is soon a new Financial Year and also another budget. This time its for the FY 2019/20, the last one before campaigning. Therefore, the added strain on the economy will come, as the state funds are used for campaigns for the ruling regime. This is a steady act of the National Resistance Movement (NRM) and President Yoweri Kaguta Museveni. We can expect more of it. That is the reason why the lack of fiscal responsibility is evident. As the state is within a year going from spending 32 trillion shilling into 40 trillion shillings. This without substantial rate or even more revenue to cover the added expenses. That means the state is more addicted to loans and grants.
Surely, the people should be aware, as the state has already gotten more loans and has to pay more in interests than before. With the new infrastructure loans and other development projects will hit the costs in future budgets. Even with Petro-Dollar, the state still has a lot of old debt to get revenue to cover. Especially, in the short-term window, as the grace periods of old loans will hit the budgets too. It seems like the state is only considering the debt-rate, but not the actual cost of the loans in itself.
That is why I will take one quote from the IMF, before showing what reports there was from Parliament, As they have voted for a new budget, which has escalating spending further without the revenue. That should be a worry. Take a look!
IMF May 2019:
“Rising debt puts more strain on the budget as more resources need to be allocated for interest payments. One shilling paid for debt service is one shilling less going to a school or a health clinic. The current ratio of interest payments to revenue is comparable to what countries with high risk or in debt distress typically face” (IMF – ‘Uganda’s Economic Outlook in Six Charts’ 09.05.2019).
“The Committee noted that , the total public debt stock increased by 12.5 percent to USD 11.52 billion as at end December 2018 from USD 10.24 billion as at end December, 2Ol7 out of which domestic and external debt accounted for 33.5 percent (USD 3.86 billion) and 66.5 percent (USD 7.66 billion) respectively. The external debt stock increased by USD 0.78 billion to USD 7.66 billion by end December 2018 from USD 6.88 billion at end December 2017. The increase was mainly from China (25 percent) and World Bank (40 percent)” (REPORT OF THE BUDGET COMMITTEE ON THE ANNUAL BUDGET ESTIMATES FOR FY 2O19/20, P: 7, 2019).
Minority report on growing debt:
“Worrying to note is the fact that huge portion of the budget resource is to be financed through borrowing. Out of the projected by domestic revenue of UGX 20.59 trillion (51%) while the budget of UGX 40.48 trillion, 9.44 trillion (48%) will be sourced from both domestic or external borrowing” (…) “It should be noted with concern that projected are almost debt expenditures in FY2019/20 equal to tax revenue (URA tax collection) of UGX 20.59 trillion” (A MINORITY REPORT ON ANNUAL BUDGET ESTIMATES TY 2019/20, P: 4-5, 2019).
It should be worrying how easily this budget was passed. How between last FY 2018/19 to FY 2019/20 the state could add 8 trillion shillings on the budgets. This without counting or even having the added revenue needed. This meaning the state has a giant deficit, which is about half of the budget. Where they have to get funding from outside sources, either by loans or grants. Lots will be loaned for and has to be paid for later with interests.
Certainly, this is a way of ensuring that for every shilling paid in loans, the state could have delivered state services to the public. That is even something the IMF was pointing out. This should be a worry for Ugandans, as the state is misusing the funds, loaning and borrowing on their future, without certainty of being able to repay these loans. That is what is shocking as the oil revenue has been postponed again and the lack of progression on the matter. This means the state is not hitting its targets, while taking up more loans on future revenue. Anyone should be worried about this, because who knows tomorrow and what if the economy totally tanks before the industry takes off. They are clearly living large on Deficits Financing and hoping the golden goose soon lays eggs. Since, they are continuing to fund their operations and the state with loans.
Than, the oil will be sold wholesale, as the state cannot manage to gain revenue and has to trade off everything. The risks it is taking is reckless. The spending is bonkers. That the state is initially a year before an Election Year is creating this huge deficit. Isn’t a sign of strength, but of weakness. As well, as having a blind faith, hoping for a narrow escape in the realm of Deficit financing. Peace.
We know President Yoweri Kaguta Museveni is someone whose eating of the plate of the government, that is practically his job. The National Resistance Movement (NRM) is praising this as a government tour, where they are even asking local pledges for the upkeep as they did in Moyo Town, where his scheduled later this week. This whole Manifesto Week and continued Tour is an extravagance the Republic cannot manage and was certainly not budget for. As the State House is now asking Parliament for more funds.
The President is asking for Ush. 17,5bn shillings or about $4,6 million USD for this enterprise, where his indulging himself and his comrades in every valley and creek of the Republic. Where the is known steps of typical NRM campaigning of voter tourism, as they pay participants, give them free t-shirts and offers small gifts to participate. Because, he cannot generate crowds out of popularity. They have to be paid and be ferried there.
Just take a look:
“State House requested for additional supplementary request Shs 33,282,235,000, the breakdown is as follows: Shs 15,700,000,000 for classified expenditure . Shs 17,582,235,000 for H.E the President’s field operations including accommodation and feeding of the teams that accompanying the President; fuel and other logistical expenditure, by the President during the country wide tours” (ADDENDUM TO THE BUDGET COMMITTEE REPORT ON SUPPLEMENTARY EXPENDITURE SCHEDULE LES NO.1 AND NO.2 FOR 2018/19, May 2019).
That is what the state boils down to the MPs Cecilia Ogwal Atim and Muwanga Kivumbi are loyal subjects professing the pledges and the needs, even signing off on the report. They have no boundaries and no levels of pity. As the NRM and Museveni does to this to show strength and get “endorsed” everywhere.
Of the first part of the report, only 9 out 30 MPs in the Committee signed of to these arrangements, so certainly the popularity of paying these funds to the President wasn’t there. What is special also in the report for this funding, is that the MPs are reasoning out why he needs the funding for the Tour his doing, but none for the Classified, because that is not needed. He can spend that on IPOD Delegation or whatever, because who knows where that money goes. Since its all classified and doesn’t need any recommendation, not even from the lawmakers whose job is to verify and check the accuracy of the needs for this.
I will end with the funniest and most Point Blank statement from the report: “Failure for State House to ensure that the president operates within approved budgets sets a bad precedence”. Just let that sink in, as his most likely getting an added payday by default. Peace.
“A government which robs Peter to pay Paul can always depend on the support of Paul.”– George Bernard Shaw
This January, the Parliament made a Report (REPORT ON THE STATUS OF FUNDING FOR SUB-COUNTIES AND TOWN COUNCILS, January 2019) into the creation of new Town Councils and Sub-Counties, the Local Governments if you may. As the National Resistance Movement (NRM), have with swift haste over the recent years split up the Republic in record speed. As they are continuing to do so. There are added expenses and more salaries to pay, even more officials and public buildings to procure or facilitate. As the Local Government does gain revenue over night either.
Therefore, the release of this report is a story been told before, about how the Parliament are enacting more districts, but doesn’t have the pocket to facilitate it or the fantasy of thinking of the costs of doing so. In the same vein comes this report, that is rewind of the previous ones, but still important to address.
“Government created 108 Town Councils to commence operations on 1st July 2017 and 95 Town Councils to become effective on 1″1 July 2018. Government also created 204 Sub-Counties that became in FY 2018/ 79 (refer to annex 1). However, the operationalisation of the newly created local governments units has not been matched with the requisite budgetary resources”.
“Government created a total of 203 Town Councils and 196 Sub-Counties which have not received operational funds. However, during the FY 2017 118, a provision of Ush. 2bn in the budget was made to cater for startup activities for the 35 Town Councils. In FY 2018/ 19, government released Shs. 2.5bn to cater for startup activities for 50 Town Councils. However, the Committee notes that some Town Councils received partial funding against what had been approved by Parliament”.
“The funding requirement for operationalization of the newly created 203 Town Councils and 196 sub-counties is estimated by Ministry of Local Government at Shs. 108.5bn and Shs. 30.7bn respectively and this excludes costs for public administration such as establishment of a police post, health and education facilities in line with the current government policy”
The final quotes from the report, which is the recommendations is worth to mention as well: “The government should provide Shs. 139.2bn for operation of all approved Town Councils and Sub- Counties in FY 2019 l20” (…) “The government should review the policy of creation of new, districts and other local government administrative units in view of the constrained resource envelope”.
Surely, we can see that the state is not sufficiently ensuring the creation of the new Town Councils and neither the Sub-Counties. This is the costs of office equipment, the payment of salaries of the local government and all the procurement that needs to be done.
That is if these entities matters or supposed to govern locally. If not it is just made up areas before the elections to garn voters and spilt the districts to ensure problems for the opposition. Which seems more likely. Since the state, haven’t done much to facilitate or even tried to make them functional.
Even with the funding proposed by this Parliamentary Committee, they are still not discussing the other needs for public administration, police posts, health care or education facilities. Which should be the basis for these entities in general, if not their offices with no portfolio in the districts. That is how it seems.
Surely, the Memo on this matters are the same as before, a ploy to gain voters and promise patrons and cronies of a job after elections, but not having the bank balance or the funding to actually do it. That is how the state operates in these matters and that is why this is a recurrent issues. That is always coming up to discussions about the splitting of districts, sub-counties and town councils. It is just reappearing like the monster of the past and the government acts clueless about to get rid of it. Peace.
“One of the leading causes of obesity is the misbelief that, when it comes to juice, ‘100%’ means ‘sugar-free.” – Mokokoma Mokhonoana
In the Philippines, there been a long tradition of Pork Barrel or specific payout for government projects for Representatives in the Lower House, the House of Representatives and the senators in the Senate. Because this week has been hectic in touch with tradition. There are back and fourth. There is no end in sight for this rodeo. I will show pieces of it, because, I cannot make sense of it.
If there is, then there is, if its not, its not. However, after the recent week action in the headlines and following the wires. I got nothing. Because, even I am unsure. It is hard to know if there is Pork Barrel within the ratified Budget for 2019, which was ratified on Friday on the 8th February 2019.
Let me show some statements that isn’t coherent, reporting that is not backing each other. From various of sources. Since I feel this is important, because there is lack of consistent messaging, therefore, the truth might surface later. However this is what I have by today.
GMA Reported: “Senators took exception to allegations by House appropriations chairman Rolando Andaya Jr. that they will get P3 billion each in pork allocation in the 2019 budget. Senate President Vicente Sotto III, in a text message, said the accusation of P3 billion per senator as pork “is a slur against the Senate.”” (Amita Legaspi – ‘ No P3-B pork in 2019 budget, senators insist’ (08.02.2019) link: https://www.gmanetwork.com/news/news/nation/684334/no-p3-b-pork-in-2019-budget-senators-insist/story/).
CNN Philippines Reported: “He was referring to the funds that current House committee on appropriations chair Rolando Andaya said were illegal insertions made by Budget Secretary Benjamin Diokno — a charge Diokno has repeatedly denied. Lacson said that around P51 billion of the controversial P75 billion funds have been distributed to all members of the House of Representatives in P20 million chunks. “Of this amount, 20 billion pesos was distributed equally among the almost 300 congressmen, which translates into P60 million per congressman plus additional allocations to those close to the leadership of the House of Representatives. These are all embodied in the General Appropriations Bill (GAB) or the House version transmitted to the Senate,” Lacson said” (CNN Philippines Staff – ‘Lacson: New House leadership continued pork barrel mess’ 08.02.2019, link: http://cnnphilippines.com/news/2019/02/08/lacson-andaya-arroyo-pork-barrel-2019-budget.html).
Manilla Standard Reporting: “In total, the Senate proposed some P25.4 billion in adjustments while the House introduced P20.65 billion in realignments or a total of P46.35 billion under the DPWH where legislators can identify specific projects. Andaya confirmed that each congressman will get P160 million in itemized projects” (Maricel Cruz and Macon Ramos-Araneta – ‘Congress approves budget’ 09.02.2019, link: http://www.manilastandardtoday.com/mobile/article/287358).
Sen. Franklin M. Drilon Press Release: “The minority leader also denied reports that senators will get P3 billion in pork allocation, including a province in the Visayas getting more than P3 billion. He called the allegation “grossly unfair”” (Franklin M. Drilon – ‘Drilon says no to 2019 national budget’ 08.02.2019, link:http://www.senate.gov.ph/press_release/2019/0208_drilon1.asp).
Sen. Leila M. de Lima Press Release: “Kudos to my colleagues in the Minority bloc – Senate Minority Leader Franklin Drilon and Senators Bam Aquino, Risa Hontiveros and Kiko Pangilinan – and, of course, to Sen. Ping Lacson, for their rejection of the pork-laden 2019 budget” (Sen. Leila M. de Lima – ‘Sen. Leila M. de Lima on her colleagues’ rejection of the pork-laden 2019 budget’ 09.02.2019, link: http://www.senate.gov.ph/press_release/2019/0209_delima3.asp).
We are clearly seeing mixed messages, but both sides of this. Where the allocated funds are seen as differently. Therefore, we will see if these allocated funds are for the Pork Barrel or not. Since, the various explanation for these funds are really special. They are showing something and how to interpret the budget itself.
If one side is lying, than they are receiving funds and telling porkies. I am not sure, because if it is, they have tried to be sophisticated, but somewhere the funds leaked out. Someone spoke out and then the ones loyal to the President and the Government calling it “offensive”. Which makes it all weird. Since, why should people lie about special pay-outs, wouldn’t that be a happy-day to see your bank-account to be pregnant?
The Pork Barrels are there maybe or maybe not. By this report and these statements, it could be anything. Certainly porky porkies and even slices of pork chop from those Pork Barrels. Peace.
“[Credit is a system whereby] a person who can’t pay, gets another person who can’t pay, to guarantee that he can pay.” – Charles Dickens
We have seen it for a while, as the Kenyan government have spent much more, than they are actually collecting revenue and getting grants. The Jubilee government have not only siphoned funds, but borrowed funds like a drunk sailor. This administration have not considered the implications of the loans and the deficit, they have created.
Uhuru Kenyatta and William Ruto has ordered this ship, it has been known. The Grand Corruption by this government alone has made huge losses. Jubilee knows this and the ones that has followed this government. Have seen it with time and discussed it.
Now suddenly Dr. Wagacha says this:
“ Dr Mbui Wagacha, a policy analyst who left the advisory role in the top office last December after five years, says Parliament has looked the other way as the National Treasury gave the Kenya Revenue Authority (KRA) unrealistic revenue targets only to fall back on debt and expenditure cuts. “We borrowed so much and our headroom for debt has narrowed … there was an over-commitment to capital borrowing and that has left us with narrow headroom for debt,” said Dr Wagacha. “If you look at 2011/2012, we were spending only about 11 per cent of GDP (Gross Domestic Product) directly to repay debt. We are now talking about 57 per cent of GDP in public debt.””(Alushula, 2019).
We know that the state has issues, when the Jubilee are putting austerity measures given by the International Monetary Funds (IMF). While the Jubilee are taking more debt, taking more infrastructure grants and loans, as well as the state is not having the revenue to cover the deficit that has created. This is why the state is paying more of the GDP now, compared to what they did when Kenyatta and Ruto took power.
The Jubilee government could have carried it differently. The Jubilee have used the Eurobonds twice to get fiscal stimulus, but it was also a loan. Therefore, the Jubilee will have to repay those. Just like it has to do with the Chinese loans for the Standard Gauge Railway (SGR) and others, loans that the state has absorbed within the years of Jubilee.
Dr. Wagacha is speaking the truth, but the state has taken the Kool-Aid. Will it find a way to move forward wisely or will it continue the negative cycle of loans to pay-off the old loans, instead of finding revenue and creating a healthy economy. If not just living within its means and not pushing for more, than you can pay for without credit. Peace.
Patrick Alushula – ‘Ex-Uhuru adviser says debt may affect growth in Kenya’ 05.02.2019, link: https://www.nation.co.ke/lifestyle/smartcompany/Ex-Uhuru-adviser-says-debt-may-affect-growth-in-Kenya/1226-4967482-b1tau4z/index.html