No Middle Class Income for Country Uganda as Another Budget Miscarriage is in Offing ahead Financial Year End

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Finance Minister Matia Kashaija

Before we go any further on NIN, SIM Card registration and all the bla-bla on the political front, we need to remember that the president (at Kaweesi’s funeral) mentioned that the police was infiltrated with criminals yet it was on the orders of the IGP, Gen Kale Kayihura at the media center that Ugandans have been subjected to SIM card details registration.

Is the infiltrated police not giving away the same details to the criminals in it again? Maybe food for thought. For now I want us to focus on something different. Finance State Minister David Bahati recently made comments that the economy has not grown as expected or merely it’s flat or shows stagnations in many ways.

The GDP per capita for Uganda is the worst performer in the region without considering Burundi and South Sudan. In terms of collecting taxes, Uganda is at its worst based on the same statistics. Uganda Revenue Authority (URA) collects 12% of Uganda’s GDP ratio contributions, yet Rwanda collects 16%, Kenya over 20% and Tanzania collects over 18% of her revenue.

Besides, Uganda’s expected national budget to be communicated next month stands at UGX28Tn and URA collects about UGX14tn which makes a budget deficit of 50% nationally. The government therefore borrows nearly 50% to meet her budget obligations into heavy domestic borrowing. The government further ends up into trading treasury bills and bonds.

This negatively affects the private sector which must borrow from the same commercial banks where the government continues to lump her bonds and treasury bills! This in itself curtails economic growth in the country as in the same case; the private banks also favor to offer loans to the government because it’s easy to demand their loans to one individual annually than the private Ugandans.

The other foreign donors offer 21% of the national budget. This means that our economic growth and development is too, on the prism of other people, not necessarily Ugandans. In this part, we only say, the budget basically is raised by Ugandans, borrowing and the revenue. One of the cases which have curtailed increase on Uganda’s economic growth is the failure to increase on government revenue based on the increased tax exemptions given to the many foreign owned firms (investors with tax avoidance).

Also, capital in Uganda is seriously becoming expensive because the government, too is getting domestic loans from the small private banking sector. The multinational companies are surviving because they have cheaper capital access on top of the free land bonanza to them by the government. Another case is that of agriculture which is heavily declining and less budget financing too.

Agriculture contributes over 20% of the national GDP and worst of all; the government is easily paying a deaf ear at that. The recent drought in the country has led to not only starvation but as well increased budget cuts to buy food for the starving people. Agriculture used to be the predominant sector in the country but nowadays it’s something drastically failing due to underfunding.

There are also nuanced and surprisingly accepted foreign loans from China which are going to be injected in the economy yet economic stagnation is obvious. One example is the ‘Standard Gauge Railway’ which has landed Uganda into various but obvious questions from the World Bank and IMF, because of the huge sums of money to be injected, yet from the stressed economy. This alone has continuous economic dilemma as corruption also flips to the top especially in the infrastructural investment which course the government is trekking!

The misguided services sector is heavily invested in by foreign owned firms who continue to repatriate profits to their home countries. Firms dominating now in this category are telecommunication companies (MTN, Airtel, Africell, etc.), oil companies, the banking (Baroda, Stanbic, Ecobank, Equity, etc.) and insurance firms! They also employ a few Ugandans and you can easily see how unemployment is here to stay.

For ages of time, they have not floated their shares on the stock exchange so as Ugandans buy them. The merchant capital owned by these companies remain in circulation but not directly invested for a long time in the economy as again, government borrows it annually. They also invest in speculative businesses on the contrary to the needed investment in Uganda.

Uganda’s tax regime, policy is also another challenge as its also consumption-guided taxes. The poor consumers in Uganda are the target, not looking exactly on their income. The tax is basically narrow and regressive. It has many loopholes, like presidential offers to foreign investors who enjoy between 5 to 10 years of tax exemption. Now who understands Uganda’s economy? Watch the space…

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