Opinion: Museveni and the NRM is in a ill-advised debt-cycle

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.

Ethiopia: The Global Society of Tigray Scholars and Professionals (GSTS) letter to the World Bank, International Monetary Fund (IMF) and African Development Bank Group (AfDB) – (14.04.2021)

 

Sudan: Council of Ministers – Press Statement (26.03.2021)

South Sudan: National Revenue Authority (NRA) – Re: Suspension of Withholding Tax on Pension Fund/Social Insurance Fund (02.03.2021)

Uganda: Deficit financing is creating an evil circle financially [72% of revenue spent on debt repayment!]

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.

Reserve Bank of Zimbabwe (RBZ): Old and Worn United States Dollar Notes (21.12.2020)

Opinion: Switching the SSP to something else isn’t the trick

In Juba on Friday, the Cabinet decision to change currency came to the public. This is happening after several of attempts and changes in Ministry of Finance. However, none has lasted or made a difference. Therefore, the Transitional Government of National Unity (TGoNU) have decided to drop the South Sudanese Pound and create another one.

Nevertheless, economics and financial policies aren’t that simple. There are some key components missing to create the balances in order. First, the state can and is allowed to change their currencies. That is up to the sovereign. Is that advisable?

Most like not, because you have to build a foundation and have the balance sheets in order. The grander public got to understand the change. The markets have to invest in the futures of the currency and it has to trusted.

It can be a financial trick, a juxtaposition to just to get you out of a hurdle. You move from one account to another. But, then again… you get the same value for practically nothing. Maybe, even the currency has no value, as nobody trades on a value that nobody trusts. That is why its key to build trust and monetary policies around what you already have.

Unless, you want a Bond-Note bonanza and erupting inflation out of spiral. Making the pennies and dimes worthless anyway. If that is the trick, the Bank of South Sudan and Ministry of Finance should just go ahead. Instead of securing the measures, the trade policies and the monetary instruments of the Republic.

They are instead re-issuing a new currency. They are dropping the SSP for something else. There have to be a transition period. A time and opportunity to change the currencies. As the time goes for the switch, the public and businesses can go from SSP to whatever it will be. If not, then they are draining the system and emptying the coffers of people. Which in the end, will also ensure there is less money in circulation.

The saga of the SSP will haunt the new currency. Because, this is just changing the name, but not changing the elements. They are taking away the history and the namesake. However, the same lack of trust and monetary instruments are still there. If they had these and ensured the markets and safeguarded the currency. Then the public could have some trust and if there was measures in place. It wouldn’t be necessary to switch and ditch the old one.

This here is a sign of weakness, lack of process and just sudden change. In hope that this is the remedy. This sort of action is the quick fix and hope it can miraculously save the day. However, it is never that easy. Especially, when your not only building market dynamics, but also on trust. When you need several of components to work in tandem and be at each others side. If they are not. Then one will beat the other and in the end the citizen or consumer is the loser. As the currency gets devalued since the authorities cannot contain the brutal assessment of currency.

This is short-sighted. It really is and the next one will have the same remaining issues. Your folding one chapter, but your just starting where the other left off. It will be just a matter of time before this stinks too. Since, the same fella’s are running the shop and their game is to earn a quick buck. Peace.

Zimbabwe: Dollar Dollar Bill Y’all!

Cash rules everything around me

CREAM, get the money

Dollar dollar bill, y’all” – Method Man on Wu Tang Clan’s – ‘C.R.E.A.M’ (1994)

I don’t know and I cannot count how many currency and monetary reforms that been since the launch of the New Dispensation from the Mnangagwa Government. What I do know? There’s been plenty and countless of initiatives in concern with the currency. Which was made to stabilize and supposed to ensure a steady rate in the inflation. However, that ship has sailed, as the rates are over double-digit and its not getting better.

The Zimbabwe government has stopped and reopened opportunities to have foreign currencies in trading. Today is not different. Just like a year ago in June they ceased to trade with United States Dollars. Today they are returning through bank action and able to show prices in Zimbabwe Dollars and US Dollars in the shops.

The return of this imminent. As the value of the Zimbabwe Dollars are depleting, the inflation is out whack. The money is getting devalued and destroyed. The state knows, the Reserve Bank knows this and the people know it too. This is not new, but the normal mockery of financial stimulus and fiscal responsibility, which causes this damage on a regular.

There is no trust in either the Ministry of Finance nor the Reserve Bank. All institutions are running a shit-show and hoping to trade insults to save their lives. They are all just pinning on duck and hoping it doesn’t quack. It is like an endless circle of Bond-Notes, RTGS-Dollar, Zimbabwe Dollar Notes and unattainable monetary polices in concern with the US Dollars.

In June 2019, the President proclaimed this: Except that if you want to transact in any shop, if you want to buy your tea and milk in dollar or euro, then you must go to bureau du change” (Mnangagwa, 25.06.2020).

Now a year later the opportunity to use US Dollars is back and the promise of “normalcy” is a far-cry from reality. As the state, the institutions and the men behind the monetary policies cannot figure out the trick of the trade. They don’t have the ability nor the slightest idea on how to stable the economy nor ensure any trust in the currency they are printing. It is like a gift of misgivings and lack of integrity.

The whole state could fix this, the men behind this could really try to do something. They should first quit their day-jobs, because they are not up for it. These people have tried and tried. Done so much work for nothing. They have been jibber-jabbing for so long without any luck.

So since nothing is working. We can all just put on the old classic Wu Tang Clan joint ‘C.R.E.A.M’ and sing: “Cash Rules Everything Around Me/Cream, get the money/Dollar Dollar Bill, Y’all”. Peace.

The Art of Deficit Financing: Budget 2020/21

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).

What is striking from the 2020/21 budget is that its not only 45 trillion shillings, but the way they are financing this spending. Because, the budget need financing or revenue to pay the expenditure. You cannot use air to pay the bondsman. The people you owe money or supposed to spend on needs real cash-flow and liquidity to be fiscal responsible.

What we learned again is the debt deficit financing, which has been common staple in the Republic. Since domestic revenue or tax revenue is about 20 trillions shillings. This means that the rest of the budget has to paid for in various of other ways. In this regard, the state are borrowing, refinancing and gaining more debt. As the state is also wasting more of the budget on paying interests.

This is really making a evil circle and continuing debt trap. Even if the trillions upon trillions owned by the state is growing. That this still haven’t hit a debt ceiling. However, the issue here is the amount of paying interests. They are wasting away money on paying for old loans. This is what the state is initially offering. While it is gaining new debt to finance the over-expenditure today.

When the state pays 4 trillion shillings (9% of the budget) in interests. That shows how destructive this is for the budget. How important it has become. When 1 in 10 shillings of the budgets are paid in interest. This money could have been spent in all parts of society. It could have changed people’s lives and invested in the future. Instead its paying on the debt trap created by the same state.

Deficit financing and refinancing will only ensure the future generations are paying for the growing debt created by the current government. They are borrowing on the future growth and supposed revenue. Even as the state is ballooning the budgets, that they are not able to cover more than half. That is worrying and should worry the republic too.

Yes, that budgets get ballooned in election years are common. That the budgets are insincere and write of taxes in these years are typical too. All of this isn’t new. It is what happens when the Republic is preparing for elections in the coming year. Therefore, the state needs a treasure chest to bling out on chiefs, voter tourism and whatever else to look good for everyone.

That is why this budget is like this. We can clearly see that the state are continuing to acquire more debt, which means the interest payments will grow every year. This is why the refinancing and growing debt should worry everyone. Because, just like the interests payments are now at 9% or 4 trillion shillings this year. We can wonder how it will look when the grace-periods of several of loans are over and the initial price of these as well.

The Republic of Uganda deserves better, but the leaders and the ones in-charge are making it like this. They are not concerned about the future and that is very clear. As they are spending and squandering away the future today. Then someone have to pick up the tab in the future. Peace.

Opinion: The government have money [unless your not a priority]

Let me just say, that tonight, this evening I am tired of reading headlines from various of Republics and Countries where they state they don’t have funds for pledges nor supposed basics during this global pandemic. Yes an global pandemic of COVID-19 or the Coronavirus isn’t a planned affair, unless your a conspiracy theorist who makes up ghost stories out of thin air. The rest of us lives in reality and try to figure the best way out of this.

What is boring in these troubling times is when the state says they doesn’t funds for PPE, Masks, Medicine, Salaries for Front-Line workers and whatnot. It is just an endless stream of costs, payments, allocations and expenditure the state has to carry. The imports of sudden extra equipment, ventilators and such. By all means its an expensive enterprise to cover this and ensure enough of the basics. Still, if the people, the citizens and the well-being of them matters. Than this should be shielded first.

However a reason for the lack of funds is that the state hasn’t this as a priority. This isn’t their breadwinner, this isn’t their ballpark. No, this is a side-show, a show where donors, where foreign donations and other comes in to cover the basics and the needed cover. In sunny days this is usually enough, because the ones getting hurt isn’t an priority and the ones whose VIP gets treatment abroad anyway.

That is why the Health Care system isn’t fully functioning nor has the capacity it should have in consideration per capita. The lack of enough beds, ICUs and such are now a contrast to the amount people in the dominion. Therefore, the state has lost the battle, if it gets bad quickly. The state cannot assume they will get help from elsewhere. Since they are already hurting themselves and are damaged by the virus as well.

So in this regard, when the state is complaining and stating lack of funds for this now. Its all about priorities. These states usually has no issues getting loans, grants and donations to cover deficits. They have no issues getting loans and supplementary budgets to secure new revenue-streams in sunny days for infrastructure and development projects. However, securing the well-being of the citizens and their welfare. That is burden it cannot shelter. Not to the max, not to the appropriate levels. That is just to expensive. Unless, a drunk uncle, snappy-nephew or an in-law is kicking in some remitted funds to shelter its own family at family. That is how this goes.

The governments can run their coffers dry, they can create huge deficits in the times of needs. They can boost their stimulus and use the credit, the forecasted revenue and the sales of treasury bonds. All of that cover it in the future, as the government and state can in practicality never cease nor get bankrupt. That as a sovereign state and therefore, has more gains and possible future income to cover debt and deficits.

That is why in these times of need, the government can prove where their loyalty lies. Either its with their citizens or its with the corporate agenda. They can show that solving it and investing in the Health Care system matters.

We can see if it is a priority or just talk. We can see by the pounds sterling, the US dollars or whatever currency spent on it. That its a priority or not. If they priorities it, they are risking a bigger deficit for now. If not, they are shielding the hurt and hoping it just goes back to normal quick. Peace.