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.

The Judiciary – Uganda: Normal Court operations to wait – Chief Justice (28.05.2020)

Opinion: Mzee wants it to BOP his way

You want another rap? Nah, didn’t think so. Even if President Museveni wants a BOP. Not a DaBaby track or anything. His just approved the US$500 million dollars to the Republic. This was reported earlier this month and he approved it on the 6th of May 2020, but stamped by the Ministry of Finance, Planning and Economic Development (MoFPED) on the 11th of May 2020.

What is unique here is that this loan is given on the idea of “Balance of Payments”. Economist would know that this to cover the deficit and the balance the budgets. This is to ensure the state has enough revenue to already cover the deficit it has. That is why grants and loans comes to ensure the levels of revenue covers the spending. This means that the state has spend a hundred dollars, but only had 50 dollars in liquidity. So, to ensure the accounts are balanced, the BOP comes in and fix the shortfall.

Museveni writes this in the letter:

The money that goes to the Bank of Uganda is for “balance of payments support”. “Balance of Payments supports” does not only mean helping the country to “import more” but must also mean helping the country to “import less” by manufacturing these products here. With this undertaking, I approve the loan” (Museveni, 06.05.2020).

Because what the support does in the instance of the hundred dollars budget with a shortfall of 50 dollars revenue. The BOP support is the missing 50 dollars and makes it zero. Meaning, the accounts and financial flows should turn into zero. That means with the budget with its expenditure and its revenue its should be a nil or zero sum game. Therefore, when the President claims this helps local industry and less imports. I don’t see it.

Especially, if this is a BOP. Because, a BOP is a fixated way of balancing the budgets, not secure more trade. Its to cover deficits between expenditure and revenue. This isn’t a magical sphere of happiness and joy. This is budgetary measure to cover the shortfalls and lack of domestic revenue. To cover expenses that appeared or was already budgeted. Therefore, the need of Balance of Payments from the IMF to cover those.

This can be seen as a Financial Inflow to cover the deficit.

Like this:

-100 dollars budget/Import

+50 dollars revenue/Export

+50 dollars Financial inflow (BOP Support)

= 0

That is why, when the man says like this. Its a game of balancing the budget. Not putting a wand on the thing and swiftly changing things. This is just a financial measure to cover a deficit. A short-term solution to a shortfall. That will not solve anything, but by time. Not cover debt, not create a market nor make a big difference. Its just covering expenditure. Nothing else.

The President can make it seem so, but that wouldn’t be a BOP. That would be another instrument and another measure. Where the funds was actually meant for investment. This is covering the basics.

Let me end with DaBaby: “I needed some shit with some bop in it (Let’s go)” (DaBaby – ‘BOP’ of KIRK, 2019). Peace.

Statement by the People Power Movement on the IMF Rapid Credit Facility Announced on 6th May 2020 (09.05.2020)

Opinion: Don’t let Mzee pimp a second round of debt relief

Back in the day, President Yoweri Kaguta Museveni in the end of the 1990s the World Bank let the Republic of Uganda the opportunity to join their Heavily Indebted Poor Countries (HIPC) to cut the debt of the Republic. However, even with the massive amount of debt relief done in 1998 and later never stopped him from taking up more debt.

That is why the amount of interests paid on every single budget is debt burden, which is created by the President himself and his extensive cronyism. The President has ensured that the state owns so much money, while he stills continues the drill by financing half of it by more debt. Which has been method the National Resistance Movement (NRM) and Mzee has used in the recent years.

That is why such a big amount of funds is going into interest payments. Also, why the Republic are going in a negative spiral, while the lack of domestic revenue isn’t following the projections of growth that the state always promises.

With the knowledge of this, as the President is asking for a debt relief now. His using the Coronavirus or COVID-19. The whole world are into a recession because of this. It is the perfect smokescreen. The President had the 2000s and 2010s to fix issues, but instead the plunge the economy anyway. He just need an excuse for a bailout.

Last time it was Universal Primary Education, a empty campaign promise and now there are plenty of dilapidated schools. They played and tried to focus on it, but gave it up along the way. Because, doing this properly would actually cost time and effort. The President and his big convoy would actually have invested more, than they wanted too. More promising spending on proxy-wars, than on proper education for everyone.

So, knowing that the Multi-National Organizations, Bretton-Woods Organizations and donors gave way to the Uganda in between the late 1990s and early 2000s. They offered billions in various of schemes, not only HPIC and Poverty Eradication Action Plan (PEAP). This has been done already and still the state is bound by loans and grants to function its government. Therefore, the bullet of debt relief has been wasted.

The amount of US Dollars spent on the debt relief earlier in the reign of Museveni. The Head of State has misused this in the past. Not like he will change now. He has used the system to pimp his budgets and his wealth. His enriched himself and his cronies. While the Republic is still poor and the revenue isn’t growing like the economic recovery of the 1990s said it should have done. If the cure of the past would have worked, than the need for debt relief now would be unnecessary.

In 2020, the Republic shouldn’t get debt relief. It will be only spoils for the elites and the cronies around the President. It will be used buying tear-gas and SUVs. The WaBenzi will eat the spoils and only give away beans to the ones in need.

That Museveni says the continent needs debt relief. He means that himself needs it now. Even if his a wealthy guy in an impoverished republic. A republic he has run for three decades. Which already got special treatment and had a controlled Consultative Group. So, its not like this man hasn’t pimped the system already. He has tricked it and promised to juice up vehicle, but instead continue to run it to the ground. Hoping he could trick some new leaders to do the same mistake. Trusting him and his “high above” leadership.

They already spent millions of dollars to cut of the debt of the Republic under his control. The leadership is the same and they will misuse this if they get it again. When he had the opportunity to use it the last time. He instead wasted it and has ensured the state is more addicted to loans. That is why he hopes someone else can bail him out. While his paying ghosts, fake tenders and whatnot.

So, the IMF and World Bank should know this, but they are maybe more afraid of their image, than the result of letting go of some funds. These funds will not help anyone directly out. Only ensure the President longer life in office. This will not help the ones in need. Than he would have already ensured that. Instead his continuing this ballad and serenading the international community. While he hopes that no one knows history.

He has failed the last debt-relief and misused his chance. That is why his continued to grow the debt, addicted to grants and not created a space for more development. Unless, they give the President some handshakes at the State House. This is the way it goes.

The President of the Republic has had all the time since 1986 and we are still here. There are still opposition Members of Parliament who are tortured, there are still lack of free space and militarization of politics. That has never changed, but he hopes nobody notice. That is why he hopes he can pimp the International Community another time. He already did the trick and hope he can get them buzzed by a few buzzwords.

I know for some this is a moment of nostalgia, but for some its deja vu’. We have been here before and we shouldn’t need to repeat the same bad tune, again and again. However, I expect nobody to listen to me. Peace.

Uganda: Kasaija plans to borrow $190m extra to cover a budget shortfall within two years!

Someone please call 911, yeah yeah (pick up the phone yo)

Tell them I just got shot down, tell them I just got shot down

And it’s piercin’ through my soul (I’m losin blood yo)

Feel my body gettin’ cold, oh, so cold

Someone please call 911 (can you do that for me)” – Wyclef Jean ft Mary J. Blige – ‘911’ , April 2000

In an election year in the Republic, the economy usually runs loose. The State House lacks suddenly funds, the President needs more and so fourth. That is standard procedure. However, on the 19th March 2020 Matia Kasaija has now announced that the plans to borrow USD 190 million to cover a short-fall of funds, because of the COVID-19 or Coronavirus.

This is deemed fit because of the pandemic and the financial disruption it has. Not that the Republic is alone in this. Other big states and plenty in the Western hemisphere is putting up packages of economic stimulus to salvage the economy because of it. So, the sentiment is understandable. However, the Ugandan republic is already heavily indebted and every single development project of late is covered by debts and debt relief. Not like its sustainable to take up nearly USD 200 million to suddenly boost a dying economy.

Here’s the quotes:

The low activity in industry and services sectors will result into loss of jobs further leading to a decline in economic growth and an increase in the level of poverty. The number of people that could be pushed into poverty is estimated at approximately 780, 000” (STATEMENT ON THE ECONOMIC IMPACT OF COVID.19 ON UGANDA,, 19.03.2020).

To deal with the financing gap in the Government budgets for FY 2019/20 and FY 2020/21, my Ministry will seek for a budget support loan on concessional terms worth US$ 100 million for FY2019/20 and US$ 90 million for FY202021 from the World Bank” (STATEMENT ON THE ECONOMIC IMPACT OF COVID.19 ON UGANDA,, 19.03.2020).

It’s seems like they have the perfect cover for rising debt. They need to do something, because lots of industries are shut-down or silenced by the lack of tourism and foreign exchange. Also, the diaspora is hit and can therefore, not remit enough funds to boost the economy either.

The MoFPED really want to stain the economy more. To quote the IMF:

““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).

By borrowing close to USD 200 million is really pushing the envelope. As the interests needs to be served, the grace period might be short, as the state of finances across the board is souring. Therefore, the state will not get to favourable terms with this. The World Bank also has all other states begging for funds and possible grants to push the set-back of the pandemic. Not like Uganda is the only one crying out loud and applying for money.

This money will not be free money, but tainted money. This sort of funds is needed, because the state wasn’t planned nor had the capacity to have a rainy-day fund. The Petroleum Fund has already been raided and therefore, couldn’t come in handy now. This is the mismanagement, your already in a negative spiral with more and more loans. This is just adding two more and they are big. That will cost in the long run. It might salvage today and tomorrow. However, it will scar the next generation. Unless, someone is forgiving like these entities was in the early 1990s. Before the state again took up huge loans to cover deficits.

This is just the way it is now. Not a good look. Understandable in the growing crisis. However, that shouldn’t undercut the possible pain it will bring in the future. Save the day, but cause more harm tomorrow. Peace.

Bank of Uganda: Measures to mitigate the economic impact of COVID-19 (20.03.2020)

Bank of Uganda: Monetary Policy Statement for February 2020 (13.02.2020)

Government and donors enable WFP to assist 1.2 million refugees and build local economies in Uganda (31.01.2020)

KAMPALA – The United Nations World Food Programme (WFP) commends the Government of Uganda and all its donors for helping it to contribute to the basic food needs of 1.2 million refugees and their host communities across the country in 2019.

Donors and the Government of Uganda supported WFP to meet the basic dietary needs of refugees through monthly food or cash transfers. In addition, donors funded the treatment and prevention of malnutrition among refugees and Ugandans living around refugee settlements.

WFP was also able to support smallholder farmers to improve their yields and incomes while reducing food losses.

“The partnership between government, donors and WFP is vital to fight hunger and malnutrition in Uganda,” said El-Khidir Daloum, WFP Country Director. “The ability of donors to swiftly provide funding and entrust us to deliver assistance to those seeking refuge —often women and children fleeing unimaginable hardships—needs our heartfelt recognition.”

In 2019, WFP’s refugee operation received contributions from Uganda, Canada, the European Commission, Ireland, Japan, Sweden, the Republic of Korea, the Russian Federation, the United Kingdom, the UN Central Emergency Response Fund and the United States of America.

Donors enabled WFP to help boost economies within Uganda by purchasing food locally. In addition, WFP strengthened its food and cash distribution procedures, including using biometrics to confirm identities in order to improve the accountability and integrity of the refugee response.

The government and donors helped WFP to expand cash-based transfers, reaching 35 percent of all refugees assisted. Cash allows refugees to choose what food they buy and stimulates economic growth in and around settlements. Cash also boosts government efforts to enhance financial inclusion.

Through cash-based transfers, WFP injected US$35 million into refugee settlements in 2019.

At the end of 2019, Uganda hosted 1.38 million refugees— the highest number of refugees in Africa. More than 67,300 refugees arrived from the Democratic Republic of Congo and South Sudan between July and December. Women and people under the age of 18 make up 83 percent of refugees.

They typically arrive in Uganda with little to no assets, leaving them heavily dependent on assistance. A WFP and government study in 2017 found that even while the government gives land and the UN and other organizations provide additional assistance, refugees remain vulnerable for years.

By meeting their basic food and nutrition needs, WFP and its partners enable refugees to begin a journey toward self-reliance and resilience in line with Uganda’s refugee policy.

Donors to WFP’s relief and development work in Uganda to support refugees and host communities in 2019 were: Canada (US$562,000), the European Commission’s Humanitarian Aid and Civil Protection Department (US$16 million), Ireland (US$2.3 million), Japan (US$2 million), the Republic of Korea (US$7 million of oil and rice), Russia (US$1.5 million), Sweden (US$1.7 million), Uganda (US$2.7 million of rice), the United Kingdom (US$56 million), the UN Central Emergency Response Fund (US$3.5 million) and the United States of America (US$110.6 million).

Contributions also came from multilateral (US$2 million) and private donors (US$306,400).

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The United Nations World Food Programme is the world’s largest humanitarian organization, saving lives in emergencies, building prosperity and supporting a sustainable future for people recovering from conflict, disasters and the impact of climate change.

Opinion: NRM queuing in the line of 1989

It was reported that in February 2019, that the National Resistance Movement – Central Executive Council (NRM -CEC) was proposing to have the NRM Primary Elections of 2020. Where all the members and the general public who would participate in these elections would go behind their lines. By that way decide whose the candidate in the up-coming election in 2021.

That was just a mere report from NRM CEC was reported in the New Vision this: “The Central Executive Committee (CEC) sitting in Entebbe on Thursday discussed the proposed amendments to the NRM Constitution and adopted lining up as a mode of voting during party elections” (New Vision, 24.01.2020). That’s a mere year later and they are really sticking to it.

This time they have made excuses for this lax elections too: “The party leaders extensively discussed the advantages that come along with this proposed amendment some of which include reduction in logistical and financial such as procurement of ballot papers, buckets, indelible ink, pens and basins among other electoral materials, provide a desirable party cohesion because it will be open and transparent and elimination of ghost polling stations” (New Vision, 24.01.2020).

Its like they are initially saying, we are so bad at holding these elections and we don’t trust the NRM Electoral Commission. Especially not that rascal Dr. Tanga Odoi. His a useless tool, but our useless tool. So, we have to abolish ordinary elections. The candidates has to put forward like school-kids in the yard and the ones with the most people behind them. Becomes not only captain, but the class-president. This is how it seems.

Just like in 1989, it was the personal merit, which counted in the National Resistance Council Elections. Now, the same will happen. On the grounds on Election Day. Where the polls will all be open. Where the members and the public in general participating will stand in line behind the person they see most fit or feels the pressure to vote for. This is not secret voting, but a public gathering of people and pressuring them.

The NRM CEC and Delegates Conference should maybe give it a three week notice for the elections. Let the President decide the majority of the Candidates and call it a rewind of the RC Election of 1989. They are queuing like the RC1 did back then. So, the NRM CEC and the President wants a Personality Contest.

What is special is that the liberator is going back to his old tricks to get his cronies behind the wheels. His using the same tools he did in the 1980s. Instead of developing, the NRM and its Secretariat is digressing. This isn’t developing the party, but time travelling back-in-time.

So, the NRM want the public to ‘Walk a fine line’. It’s 34 years in power, 31 years since the first election was held and now they want to repeat that. It is internally, but shows their lack of respect for their members and voters. When they want to continue the “art of peer-pressure”.

We are living in 2020, but the NRM CEC is still in 1989. Maybe, the NRM CEC should buy a Nintendo Gameboy or even watch Lethal Weapon again. So, they can reminisce about that long forgotten time. Instead of pushing old tricks on the public now. The Party of a ruling regime, which is getting closer to 4 decades. Should be able to run a proper election. Not do the same as it did in their inception.

That’s what’s you do when your lost and you got no where else to go. Peace.