UGANDA, September 13, 2016 –The World Bank Group took a decision to withhold new lending to Uganda effective August 22, 2016 while reviewing the country’s portfolio in consultation with the Government of Uganda. We continue to actively work with the Ugandan authorities to address the outstanding performance issues in the portfolio, including delays in project effectiveness, weaknesses in safeguards monitoring and enforcement, and low disbursement.
We reiterate our commitment to doing everything possible to work closely with the Government of Uganda, as well as with other stakeholders, to support the country’s development and ensure that all World Bank-supported projects deliver tangible and long-lasting results to all Ugandans, especially the poor and vulnerable.
Tonight’s announcement by President Zuma that he has fired Nhanhla Nene as Finance Minister is a reckless and dangerous move that further damages our country’s economy. Accompanied by no reasons for such a drastic move, one can only conclude that tonight’s action is yet another example of how President Zuma puts himself first and the country second.
It is common knowledge that Nhanhla Nene sought to reign in excessive government spending and was causing too much of a blockage for President Zuma in respect of the nuclear procurement deal and SAA. President Zuma has made one thing very clear tonight: if you stand in my way as Finance Minister and seek to introduce fiscal prudence, you will find yourself redeployed and cast aside. A Zuma ANC government has no regard for sensible finance policy that puts South Africa first.
Tonight’s firing of Nhanhla Nene has already had profoundly negative effects on the rand which has plummeted since news of the announcement broke. This is sure to make the plight of the unemployed in South Africa even more difficult.
The appointment of David van Rooyen as Finance Minister provides no assurance that our economy is in safe hands. The fact that President Zuma waited until after last Friday’s rating assessments to make this decision shows that he knew this was a bad decision.
By President Zuma’s own admission, Mr Nene “has done well […] during a difficult economic climate, so it makes absolutely no sense for him to be fired. President Zuma has again proven himself to be a President incapable of making the right decisions to set South Africa on a path to increased economic growth and job creation.
At this time, our country requires strong economic leadership. Tonight’s decision is the complete opposite.
As the DA, we will subject Minister van Rooyen to close oversight as he begins his tenure. And we will intensify our efforts to bring change to South Africa. Change that brings strong leadership and a government that puts South Africa and its people first.
On July 27, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Somalia:
Since 1991, Somalis have suffered greatly from civil war. The economy deteriorated as the physical infrastructure was destroyed. In addition to the loss of lives, the war worsened the population’s living conditions, now among the lowest in the world. Even though the political and security situations remain challenging, Somalia has made tremendous progress since resuming relations with the IMF on April 12, 2013. The IMF has been actively involved in providing technical assistance and policy advice in its key areas of expertise, which laid the groundwork for this Consultation. While Somalia has been welcomed back as an active member of the Fund, it remains ineligible for financial assistance pending the clearance of its longstanding arrears. Arrears clearance will be an important part of normalizing relations with the international community and establishing a roadmap to debt sustainability.
As a result of the civil war, all Somali state institutions are severely impaired. Improving governance in key state institutions is critical for progress on economic reconstruction and development. The federal government, working with the international community, has taken steps to improve governance based on the rule of law and the application of international good practices for fiscal and financial operations. IMF technical assistance is largely devoted to enhancing governance in the ministry of finance and the central bank. Rebuilding critical infrastructure and delivering basic social and economic services will be crucial for the new government to gain the trust of the Somali people, advance the process of national reconciliation, and to extend federal government authority over all parts of the country.
Economic activity is estimated to have expanded by 3.7 percent in 2014, driven by growth in agriculture, construction, and telecommunications. Consumer price inflation was 1.3 percent. For 2015, real growth is projected at 2.7 and inflation should remain subdued at about 4 percent. With modest progress on the security front and an absence of drought, medium-term annual growth should be about 5 percent. Nevertheless, growth will remain inadequate to redress poverty and gender disparities.
Budget preparation and implementation is fraught with difficulty due to deficiencies in revenue mobilization and expenditure pressures that exceed available resources. The budget consists largely of salary and security expenditures contained by strict cash rationing. Deficits have been financed mostly through arrears accumulation. Similarly, the 2015 budget was prepared on a zero cash balance basis with optimistic revenue forecasts and weak commitment control, leading the federal government to ration cash and incur arrears to the defense forces, civil servants, and suppliers. On July 19, an extraordinary session of the Cabinet, chaired by the President, approved and sent to Parliament a revised budget for 2015.
The formal financial sector consists of the central bank, six banks with provisional licenses, and nine licensed money transfer firms. The sector is small and nascent while there is reportedly a large informal sector. The central bank of Somalia (CBS) faces challenges in building financial sector supervision due to technical and human resource constraints. The economy is predominantly dollarized and cash is scarce, particularly in lower denominations. Somali banknotes are not readily available, creating problems for the poorest.
The 2014 current account deficit is estimated at US$644 million (11.3 percent of GDP). Trade consists mostly of exports of livestock to Gulf Cooperation Council countries and imports of foodstuffs from neighboring countries and the Indian subcontinent. The trade and income deficits were US$2,663 million and US$450 million, respectively, partially covered by remittances of US$1,333 million and other transfers of US$1,137 million. The deficit was financed by foreign direct investment of US$434 million, especially in telecommunications, electricity, and hotels, and donor capital transfers of US$150 million.
External debt was estimated at US$5.3 billion (93 percent of GDP) at end-2014, preponderantly arrears. Debt data covers most creditors, excludes commercial debt, and shows obligations to: (i) multilaterals (US$1.5 billion); (ii) Paris Club creditors (US$2.3 billion); and, (iii) Non-Paris Club creditors (US$1.5 billion). Based on a preliminary assessment, Somalia lacks the ability to service its debt in the medium term.
Executive Board Assessment2
Executive Directors welcomed Somalia’s reengagement with the Fund, setting the stage for its first Article IV consultation since 1989. Directors agreed with the thrust of the staff appraisal. They noted that, following the protracted civil war, the country is facing daunting challenges. The first priority is to continue building institutions and administrative capacity, while undertaking key structural reforms to spur inclusive growth and reduce poverty. Directors underscored the importance of continued assistance from the international community to support the authorities’ efforts. They welcomed the launch of the Trust Fund for Capacity Development, and highlighted the important role of Fund policy advice and technical assistance.
Directors stressed the need for decisive steps to build fiscal discipline, underpinned by realistic budgeting and effective implementation systems. They welcomed cabinet approval of a revised budget for 2015 that will avoid new arrears by raising revenues and rationalizing wages and services and other recurrent spending. Going forward, Directors stressed the importance of budgeting within a medium-term fiscal framework, based on sound fiscal principles and transparent reporting, and a public expenditure review to promote the allocation of resources towards investment in human capital and infrastructure.
Directors encouraged the adoption of sound mechanisms to ensure effective and transparent management of prospective natural resource wealth. They recommended building institutions consistent with international best practices to ensure that natural resource exploitation maximizes benefits for Somalis. They also stressed the need for clarity regarding the delineation of authority between the federal government and sub-national entities.
Directors supported ongoing efforts to strengthen the Central Bank of Somalia’s capacity and governance structure, with support from the Fund and development partners. They cautioned that currency reform should not be implemented until all prerequisites are in place, in order to safeguard policy credibility.
Directors stressed that elaboration of a financial sector roadmap will be a critical first step to build credibility in licensing and supervising money transfer firms, in order to help channel remittances through the international banking system. They also recommended bringing the AML/CFT framework in line with international standards. Other priorities include preparing and approving additional prudential regulations, and strengthening compliance.
Directors encouraged the authorities to improve statistical capacity, in order to enhance the scope, quality and timeliness of economic data compilation, with technical assistance from the Fund and development partners.
Directors noted Somalia’s longstanding arrears to the Fund and other creditors, and encouraged the authorities to continue to work towards a pathway for arrears clearance and eventual debt relief. They noted that, in due course, the establishment of a track record of cooperation with the Fund on policies and payments in the context of a well-designed staff-monitored program (SMP) would be a key step in the process of arrears clearance and normalization of relations with the international community as a whole. Directors stressed the need for sustained international support and cooperation, and welcomed the formation of the Technical Working Group on Somalia’s Debt.
Here is my discussion on the document that is about the new Public Finance Bill of 2014.
Professor Ezra Suruma wrote a paper called ‘Will Parliament lose influence to the Executive in the budgeting process under the new Public Finance Bill?’ in August of 2014 (Suruma, 2014). Ezra Suruma is a Ugandan economist he works at the Brookings Institute in Washington D.C. where he is a part of the African Growth Initiative of in the institute. Second occupation is senior advisor to Ugandan President on finance and economic planning (Wikipedia, 2014).
Ezra Suruma says about the part of macroeconomic and fiscal policies where he is quoted to say: “The development of fiscal policy and the charter of fiscal responsibility lie solely with the minister. However, in the first session of Parliament, the minister is required to prepare and submit to Parliament the Charter of Fiscal responsibility for approval” (Suruma, 2014, P: 2).
New Zealand government has a splendid way of looking at what Fiscal responsibility:
“Fiscal policy comprises decisions about government spending and taxation. These decisions are made with a view to goals such as the optimal allocation of resources, economic stabilisation and the longer term sustainability of public finances” (New Zealand Government, 2005).
So if there is only transparency for the Minister and not the responsibility for the Parliament to oversee an approval. Then we know that there will be instances where the Ministers doesn’t have to show their progress or work to a broader public. This isn’t what you would call a transparent fiscal policy from the government of Uganda.
“The Minister shall within one month of the commencement of the first session of Parliament, submit to Parliament the Charter of Fiscal Responsibility for approval.”(Suruma, P: 2 2014). Suruma comments that it will only take from 31. December to the 1st of February until reading the budget, something which seems like a little time to prepare and give the opposition time to answer and make switches and tweak the budget of that year to come.
There is given specific powers to the Parliament which is part of ‘Clause 10’ in the new Public Finance bill of 2014 says:
“(1) The Parliament shall analyze the policies and programs that affect the economy and the annual budget and where necessary, make recommendations to the Ministry on alternative approaches to a policy or program. (2) The Parliament shall ensure that public resources are held and utilized in a transparent, accountable, efficient, effective and sustainable manner and in accordance with the Charter of Fiscal Responsibility and the Budget Framework Paper.” (Suruma, P: 2, 2014).
All of this should be in a bill, if you expect the parliament to shine lights on the budget and are main objective for the Fiscal Responsibility. The Parliament should make recommendation to the Ministry to a certain policy and give insights to other visions of what the government need to use sufficient funds and budget enough for the expenses of running the state and its obligations to its people.
This was on the Part II Budget preparation, approval and management on page 3 (Suruma, 2014). Directly from the new law text:
“12. Approval of annual budget by Parliament (Suruma, P:3, 2014).
(1) The Parliament shall, by the 31st of May of each year, consider and approve the annual budget and work plan of Government of the next financial year and the Appropriation Bill and
any other Bills that may be necessary to implement the annual budget (Suruma, P:3, 2014).
(2) Where the President is satisfied that the Appropriation Act in respect of any financial year, will not or has not come into operation by the beginning of any financial year, the President may, in accordance with Article 154 Constitution, by warrant under his or her hand, addressed to the Minister, authorise the issue of monies from the Consolidated Fund for purposes of meeting the expenditure necessary to carry on the services of the Government, until the expiration of four months from the beginning of that financial year, or from the coming into operation of the Appropriation Act, whichever is the earlier” (Suruma, P3-4, 2014).
As Suruma himself commented on page 3.Read directly part 12:2. Do you see what it is really is saying. That it has to be “one third of the budget would be approved by the executive without the approval of Parliament”. The Executive approve one third of the budget without the Parliament. That is lots of money that doesn’t need any transparency, or votes to the public unit, or in the view of more than the executive. Suruma continues on Page 4: “If this is approved it will reduce the power of Parliament from 100% power over appropriation to 67%. The appropriations for 33% or the first 4 months of the year will now shift to the President” (Suruma, P: 4, 2014). As you see that the approved power will be 33% will be delivered directly to the president. They have only 67 %. The Parliament is supposed to have a full discloser and 100 % power of the budget, not a little over 50 %.
Another main change that is being discussed by Suruma on page 4:
“Although the minister may increase the appropriation of a vote by 10%, the amount so increased must come from the Contingency Fund. The Contingency fund has been raised slightly to 3.5% of the budget” (Suruma, P: 4, 2014). So the minister of finance has also gotten more power than before. Just see the percentage of the vote that he has for the Contingency Fund and also the piece of the whole budget.
“28. Investment of balances on the Consolidated Fund.
Any sums standing to the credit of the Consolidated Fund may be
(a) with an approved financial institution at call; (Suruma, P: 4, 2014)
(b) subject to notice not exceeding twelve months; or
(c) in an investment authorized by the law for the investment
of trustee funds and approved by the Minister.
(Suruma, P: 5, 2014).
(Suruma, P: 5, 2014).
This here has already Suruma pointed on big important points and questions that should be visible and addressed. Like which law question is just so cold and still so clear what he means when Suruma ask it. The minister has authorization and also right to choose investment even though it doesn’t say what kind of law that is authorization to the funds he needs to provide investments or what powers he need to give rights to authorize the actions of the ministry.
Suruma is continuing on Part VI accounting and audit:
(5) An Accounting Officer shall be responsible and personally accountable to Parliament for the activities of a vote (clause 43 (5) (Saruma, P: 5, 2014). As Suruma says and is understood that there is technocrats, there is only Parliament is mention in the law from the page 5 is on a previous audits. As it seems there is technocrats who gets the overview over the budget and not the parliament. This has become very natural process in many nations from the USA, Zimbabwe and even Greece. So this is not a problem only for Uganda, but a modern day issue which shouldn’t be left under a rug.
Under Amendments on page 6 (Suruma, P: 6, 2014). The Committee on National Economy Suruma himself even he comments that the power over the Committee is the Executive branch of the Government. This means that the President can control the Committee on National Economy.
“On Parliament Budget Office:
“(1) There shall be a Parliamentary Budget Office within the Parliamentary Services with the Clerk of the Parliament being the Accounting Officer, consisting of full time and part time budget and economic experts as may be required from time to time” (Suruma, P: 8, 2014).
(2) The function of the Parliamentary Budget Office shall be to provide Parliament and its committees with objective and timely analysis to assess economic and budget proposals including analysis of the economic and fiscal planning and reporting documents and annual budget documents, and without prejudice to the generality of the foregoing shall-
(a) Provide budget related information to all committees in relation to their jurisdiction;
(b) Prepare reports on budgetary projections and economic forecasts and make proposals to Committees of Parliament responsible for budgetary matters;
(c) Prepare analyses of specific issues, including financial risks posed by Government policies and activities to guide Parliament;
(d) Consider budget proposals and economic trends and make recommendations to the relevant committee of Parliament with respect to those proposals and trends;
(e) Prepare analytical studies of specific subjects such as fiscal risks posed by government owned or partially owned enterprises and other sources of risk;
(f) Evaluate the government’s explanations of deviations from the fiscal responsibility principles or fiscal objectives and the plans to address such deviations;
(g) Report to the relevant committees of Parliament on any Bill that is submitted to Parliament that has an economic and financial impact, making reference to the Charter of Fiscal Responsibility and its principles and to the financial objectives set out in the relevant Budget Framework Paper;
(h) Generally give advice to Parliament and its committees on the Budget and economy;
(i) Report on any other subjects relating to fiscal policy and performance requested by a committee or initiated by the Parliamentary Budget Office in the interests of assisting Parliament.
(3) The Parliamentary Budget Office shal1 ensure that all reports, studies, evaluations, findings, recommendations and other outputs are presented in a user-friendly form and that all outputs are published in a timely manner unless publication is not in the public interest”
(Suruma, P: 8-9, 2014)
Minister’s Report on Performance:
(1) The Minister shall report at least twice per financial year on Government’s performance against the fiscal objectives in the Charter for Fiscal Responsibility and Annual Budget.
(2) In reporting performance against its fiscal performance, the government shall provide-
(a) Updated macroeconomic and fiscal forecasts with sufficient information to show changes from the forecasts in the last Budget Framework Paper or Annual Budget;
(b) Budget execution compared to the appropriations and other lawful spending authorities.”
(Suruma, P: 9, 2014)
The continuation is of the problem that we’re on page 6. The technocrats have the powers over the budget and not the parliament who will execute the budget on these matters. It is not something new in this matter, it’s kind of normal in our day and age. NPM – New Public Management and those technocrats get their wisdom across instead of the people we elect.
PART VII: PETROLEUM REVENUE MANAGEMENT
The major players in petroleum revenue management are the following:
(Suruma, P: 10, 2014)
ISSUES IN OIL REVENUE MANAGEMENT
There ia an old saying that “too many cooks spoil the broth”. There are so many power centres that it is difficult to know how they will interact and not conflict and cause paralysis. Specifically, I wish to make the following observations:
I have two concerns:
(a) Can bank of Uganda do all these reports and continue to its other responsibilities such as banks supervision and monetary policy?
(b) Can the Minister or the Parliament possibly absorb all these documents?
(Suruma, P: 11, 2014)
As seen on Petroleum Revenue Management you can see that there are many actors in it. For the Bank of Uganda and Uganda Revenue Authority has their part. Then it’s all the different parts of the government which is supposed to follow the industry of the oil revenue. From the Parliament, Treasury Secretary to the Investment Advisory Committee and also the External Investment Managers. With this it proves that it should be transparent with the Oil revenue because it has to go by everything from the National Bank of Uganda, the tax office in URA and all the Governmental institutions and committees. This tells it all.
I think the eight points that Suruma has pointed out I don’t think I need to address since there are so valid on their own. You should think about them yourself! There are just a lot of issues for the government and the parliament together with the other institutions of finance that the government has at its disposals.
The technocrats have a lot of power when it comes to budget and also the financial of fiscal transparency. Public Transparency Bill gives much more power to executive branch or the President. The Parliament will now have around 60 percent of its power instead of a 100 % as it has today. Which is a big step for the government and also with the movement of financial transparency has the same issue as the rest of the world where the technocrats has a lot of power over the planning and executing the budget, and not the Parliament or the Executive branch. Even if the Executive branch is getting more place, even the; “Although the minister may increase the appropriation of a vote by 10%, the amount so increased must come from the Contingency Fund. The Contingency fund has been raised slightly to 3.5% of the budget”. This proves that both the Executive branch, the president and also the Finance Ministry gets more direct power even if the technocrats get a bigger oversight over the budget and the finances of the state.
PS: Want to say thanks to Parliament Watch Uganda! For loading the document online.
New Zealand Government – ‘A Guide to the Public Finance Act’ (August, 2005) Link: http://www.treasury.govt.nz/publications/guidance/publicfinance/pfaguide/guide-pfa.pdf
Suruma, Ezra – ‘Will Parliament lose influence to the Executive in the budgeting process under the new Public Finance Bill?’ (August, 2014) Link: http://www.scribd.com/doc/237400795/Public-Finance-Bill-Paper-14-Aug-2014
Wikipedia – ‘Ezra Suruma’ (02.05.2014) Link: http://en.wikipedia.org/wiki/Ezra_Suruma