Finance under attack over Shs.750 bn fresh borrowing, faces tough IMF
Kampala, Uganda | HAGGAI MATSIKO | Matia Kasaija and his team at the Finance Ministry find themselves in a very tight corner as they look for Shs29.2 trillion to finance a new budget.
Previously, finding cash did not present as a big problem—the taxman would have met its revenue collection targets or Finance officials would easily just borrow domestically or internationally.
But it now appears as if all the three avenues have all connived against the team at Finance. Uganda Revenue Authority (URA) has already recorded a huge tax revenue shortfall. Kasaija’s recent decision to borrow Shs.750 billion from the domestic market is being criticized as a “mistake” likely to further hurt the economy. Yet borrowing from the international market is also becoming tough and could get tougher.
The Independent can reveal that while Kasaija was busy defending his decision to borrow domestically, at the back of his mind were the intractable negotiations between officials at the Central Bank and Finance Ministry on one hand and a team from the International Monetary Fund (IMF). The negotiations are being seen as the latest window into the tough times the managers of Uganda’s economy find themselves in.
By press time, details remained scanty but insiders said the two parties had not made much head way. Several attempts to get Kasaijja to comment were futile—he told this reporter severally that he was locked in meetings. IMF Resident Representative for Uganda, Clara Mira told The Independent in an email response that a “small team” and not the “full mission” was in the country looking at the implementation of the current budget, the preparation of next years’ budget and “just understanding ongoing developments and pressures”.
She pointed out revenue mobilization, government expenditure and debt management as sticking issues for the IMF team.
“Despite progress Uganda still has a low tax to GDP ratio compared to other countries in the region,” the IMF representative noted.
The budget, she added, should effectively and realistically prioritize expenditures, including all unavoidable expenditure, contractual etc.
“Supplementary budgets should not become the norm,” Mira added, “And finally, the key guiding principle behind fiscal policy is that government debt should be kept within manageable levels.”
While Clara appeared overly diplomatic in her comments, insiders say the IMF visit and their key concerns have piled more pressure on Kasaija and Keith Muhakanizi, the Secretary to the Treasury, who are already in the midst of many storms.
For instance, on debt management, the two are already facing a probe by the Auditor General over the management of the Shs700 billion PTA loan. The probe followed a report by parliament’s Public Accounts Committee (PAC), which recommended that Kasaija is censured and Muhakanizi fired. Plans to borrow another Shs.750 billion from the domestic market, have kicked off another storm.
On revenue mobilization, URA has failed to collect Shs300bn in the first half of this financial year and projections are that the full year deficit might reach the Shs700billin mark.