By Otim Nape
Hon. Kisamba Mugerwa’s National Planning Authority (NPA) is by law required to annually issue the Certificate of Compliance (CoC) in order to enrich the budgeting process. In Uganda all development programs undertaken by the GoU are derived from the National Development Plan (NDP II) meaning all activities reflected and funded in the national Annual Budget (AB) must be aligned towards the realization of national targets and priorities as captured/stipulated in the NDP II. When appropriating money, Parliament must reflect on the extent to which a given MDA has contributed to the realization of NDP-declared national development targets to reward accounting officers who have excelled in doing that while sanctioning those that have failed. Rewarding is by way of increasing the budget of MDAs/accounting officers who have excelled while cutting for those that have flopped. The CoC is like a report card for the entire government and the different MDAs. It’s the instrument on which MPs depend to determine which MDA/accounting officer has performed or failed the assignment at hand. The requirement to annually issue the CoC (detailing areas of failure or achievement for the different MDAs) is imposed on NPA under the Public Financing Management Act (PFMA) 2015 Sections 13(6) & (7). The overall aim is to ensure that all government Ministries Department and Agencies (MDAS)-and Local Governments (LGs)-spend money entrusted to them under the AB in a manner that enhances the realization of targets stipulated in the NDP. The idea is that all planning and budgeting decisions should be aligned towards the realization of Vision 2040 which ideally is realizable through the periodical NDPs. The PFMA [specifically S13 (6)] requires that the National Budget Framework Paper (NBFP) and the ABs are clearly well aligned to the NDP. The AB should be made in a manner that enhances realization of the NDP, Charter of Fiscal Responsibility (CFR) and NBFP. And the NPA executes this statutory obligation by issuing the CoC to guide Parliament in the appropriation of MDAs’ budget for the subsequent FY. NPA looks at compliance at the macroeconomic, national, sectoral/MDAs and LG levels. The overall compliance score is then computed as a weighted average of these different (macro, sectoral/MDAs and LG) levels of assessment at 20, 20, 40 & 20 percentage weights respectively. All this is done by technocrats at NPA, a significant number of them are gratefully PhD holders. Through reliance on this well elaborated document (CoC), Parliament is able to determine and direct what MDAs must do differently/better to realize national economic growth and development goals in the subsequent FY.
KISAMBA’S KEY FINDINGS & EXECUTIVE SUMMARY:
This part of the GoU-wide Certificate of Compliance (CoC) gives an insight into what the NPA Chairman Kisamba Mugerwa thinks has gone wrong and needs to be urgently rectified. He recommends interventions President Museveni can undertake or cause to be undertaken before its too late for us as an economy. The Mulengera news team paraphrases Kisamba’s summarized reflections and observations as follows:
Firstly, he notes that: “The FY2017/18 Annual Budget [AB] is less compliant compared to the FY2016/17 AB. Specifically, the FY2017/8 AB is 54.2% compliant compared to the 58.8% of the previous FY2016/7. This overall decline in compliance scores is mainly attributed to the decline in performance at macro level at 41.9% [compared to the previous FY’s 48.1%], national level at 59.3% [compared to the previous FY’s 74.2%] and sectoral level at 53.2% [compared to the previous FY’s 60.1%]. However, there was an improvement in performance at Local Government [LG] level at 62.2% [compared to the previous FY’s 51.8%]. Overall, the Annual Budget for the FY 2017/18 was found to be unsatisfactory.” The LGs’ improved performance is attributed to the fact that they had in Development Plans and good quarterly budget releases by PSST Keith Muhakani’s MoFPED.
WHY THE BAD PERFORMANCE;
A number of quick lessons can be picked from Dr. Kisamba Mugerwa’s latest CoC unfavorably rating the performance of our government. It’s for instance very clear why the overall performance declined. It’s clear from the report that at the macro level, the problem was IMF’s Policy Support Instrument (PSI) being the main driver of budgeting (as opposed to NDP II well started targets and priorities). The other poor performance causes relate to: economic growth being low for the preceding three (3) years; Uganda’s failure to utilize the window of deficit financing to offload infrastructure investments; high debt interest payments and low private sector credit growth. Other causes for this decline in performance (at national level) include failure to adequately finance planned NDP II-enhancing interventions such as those aimed at achieving increased competitiveness, sustainable wealth creation, job creation and inclusive growth. It’s also true that we have failed to make adequate anticipated progress on Industrial Parks, light manufacturing & agro-processing, forests/wetland restoration, access to financial services and the Local Economic Development (LED) initiatives/approaches for historically disadvantaged/excluded areas like Luwero, Rwenzori and Karamoja regions. It’s clear from Kisamba’s dossier that we must, as a country, also expeditiously address the following; increased access to water for agricultural production, promoting value addition, maintenance of feeder roads, linking LGs to NBI to improve their internet connectivity, implementing early childhood development policy, putting in place the 5 regional skills development centers, address teacher recruitment and generally enhance government effectiveness. We must also, as a matter of urgency, prioritize infrastructure projects that impact on our competitiveness as a country (e.g. the SGR) in relation to the operationalization of the EAC convergence criteria regarding fiscal expansion.
INDUSTRIALIZATION FAILURE;
Our FY2017/18 AB didn’t sufficiently fund interventions aimed at industrialization yet it’s our major hope for job creation, mineral beneficiation, technology transfer, increasing house hold incomes and tax base expansion. We must also inevitably recapitalize Uganda Development Bank (UDB) to the tune of Shs500bn (envisaged in our NDP II) and revitalize Uganda Development Corporation (UDC). Whereas UDB is our only sure way to avail long term credit (which is unattractive to commercial banks), UDC is the surest way for government to invest in areas of strategic importance that don’t necessarily attract private sector investment. It’s also critical that the GoU prioritizes strengthening of its banks like PBU and HFB to increase access to affordable credit by private sector players so that we quickly grow and diversify our exports. We must improve on the release of budgeted funds (currently at 26%); absorption of the released funds (now at 49.5%) and implementation of the 39 NDP II core projects (now at 39.7%). The FY2018/19 Annual Budgeting process should prioritize funding for the 39 NDP II core projects because that is the only way we are going to sustainably achieve national economic growth and development that currently look elusive.
AT THE MDAs LEVEL;
Here progress has been made because most of the MDAs/agencies have strategic plans that are well aligned to NDP II targets and priorities. 15 of the 16 sectors we have in our economy have strategic plans that are consistent with NDP II targets. We have a total of 135 MDAs (Ministries Departments & Agencies) 89 of which have approved plans aligned to the NDP II in terms of strategic direction and time frame. 18 MDAs have strategic plans that are not at all aligned to the NDP II delivery time frame; another 18 have strategic plans at the drafting stage and 10 MDAs totally have nothing in place and should be sanctioned for refusing to comply with the pace expected of the President’s Hakuna Mchezo approach. Dr. Diana Atwine’s MoH is indicted for being very poor at absorption capacity (4.2%) yet Muhakanizi’s MoFPED has so far released up to 86.9% of the money budgeted. Kisamba reports to Speaker Kadaga in his CoC executive summary that this kind of ineptness, more than anything else, slows down the delivery of health services in the country and realization of related NDP II targets/priorities.
OFF-BUDGET FUNDS;
In some sectors and MDAs, off-budget support (mostly from donors) exceeds direct budget financing and Kisamba notes that this “poses a challenge to harmonized implementation and monitoring of effective achievement of results” in GoU service delivery. That these billions coming to MDAs under the off-budget arrangements distort GoU planning because such funds are “not integrated in the overall planning and budgeting process which leads to duplication of effort, double accountability, reporting issues and diversionary implementation” of government programs. Outrageously very high expenditure on land compensation for PAPs is also distorting our development process. Kisamba gives the example of the road sector where Shs1.5trn of the Shs3trn allocated for roads has this (ending) FY2017/8 gone to
compensating PAPs. On the SGR, 520bn is budgeted to go into PAPs’ compensation and for the Entebbe-Express Highway, the same item cost GoU 308bn. “This has increased the infrastructure costs and reduced value for money on public investments. It has also delayed implementation of projects and the realization of NDP II targets,” Kisamba writes on page 7 of his executive summary accompanying his government-wide CoC to the Speaker Rebecca Kadaga. The CoC also faults some MDAs for not complying with government rules concerning the collection and utilization of NTRs; examples being CAA, UCC, NDA, NFA, NEMA, UWA, UETCL, ERA, UEDCL etc. Kisamba recommends that, to optimize the domestic revenue mobilization, all NTRs should be collected solely by URA. The NPA report strongly recommends reliance on Sector Wide Approaches (SWAp) saying it’s the best way to enhance planning, budgeting, implementation and reporting. And Bart Katureebe’s judiciary is commended for fully embracing this approach under the JLOS framework that has led to efficient coordination and thereby eliminating duplication. The NPA also decries “support to vote projects” questioning why such projects have been recurring without specific start and end dates being stipulated. “This leads to budget misuse.” In some cases, the NPA report wonders why there is a lot of development expenditure which isn’t accompanied with appropriate recurrent expenditure. This is common with regional infrastructure projects which become idle and non-functional. This has also been rampant in recruitment of extension workers.
FUNDING THE LGs;
When it comes to funding district local governments (LGS), a lot remains to be desired and here is why. Whereas the NDP II envisages that 30% of the national budget should be given to the District LGs, currently only 12% of the AB is being allocated to them hence hurting service delivery at that level. LGs currently are financially very much crippled because as per now they raise only 5% of their total budget requirement. This means there are constraints in local revenue collection by the districts which the current interventions aren’t sufficiently addressing. Kisamba says the National Tax Policy must be looked into and possibly altered to ensure the LGs are further capacitated to collect revenue better. Consequently local governments aren’t paying adequate attention to areas like skills development which the NDP II envisages would be their contribution to diminish youth unemployment. Whereas LG-based urbanization is a key ingredient in Uganda’s economic transformation under the NDP II, the LGs aren’t adequately investing in urban physical planning.
SPECIFIC RECOMMENDATIONS;
Kisamba’s paper proposes that NPA must be capacitated to embark on a very comprehensive Capacity Building program to enable implementers at different levels of government to become responsible actors towards the realization of the NDP II targets and priorities. That since the low middle income 2020 target can clearly not be achieved in the remaining two years (you need an economic growth rate of 15% per annum which we clearly can’t get now), the GoU should re-direct efforts and prioritize interventions contained in vision 2040. National budgeting and planning should be harmonized with IMF-supported Policy Support Instrument (PSI) so that none is over emphasized to the exclusion of the other. This is to minimize the disconnect between national development planning and budgeting. Key NDP II core projects should be fast-tracked including the Oil Pipeline, National Airline, Oil Roads, Kabale Airport, Jinja-Kampala Express way, Bukakata port and the petroleum refinery. Kisamba maintains these must be accomplished ahead of the operationalization of the EAC Monetary Union. The upcoming AB should prioritize this fast tracking, the NPA document recommends. On the public debt, which currently costs colossal sums of money annually (only next to roads), the report says such borrowed cash should be used to fund NDP II core projects and not other things. Affirmative action and equalization programs or interventions, aimed at achieving inclusive development while diminishing income inequality, should be re-designed to achieve desired objectives. The LED approach should be further prioritized to ensure OPM-based affirmative action programs/interventions for Karamoja, Rwenzori, Luwero and even war ravaged Northern Uganda deliver better results. URA should be enabled to monopolize collection of all Non Tax Revenues (NTRs) & Appropriation in Aid (AiA) in order to enhance domestic revenue mobilization for our country. Sectors/MDAs should be sanctioned for implementing projects that are not provided for under the NDP II. The whip should be cracked hard on speculators who fraudulently settle on government land and later on claim exorbitant compensations in order to leave to give way for GoU infrastructure projects. In fact the report says such encroachers should be evicted without any compensation. Industrial parks, access to water for agricultural production, value addition, feeder roads’ maintenance, linking DLGs to NBI for internet purposes, Early Childhood Development policy, five regional skills development centers and teacher recruitment should be prioritized in our Annual Budgeting processes to expedite the achievement of NDP II targets. Keith Muhakanizi’s MoFPED should rationalize development budgeting in relation to recurrent/operational expenditure for the different projects. The MoFPED is also faulted for not being enthusiastic about ensuring that off-budget resources are captured and integrated in the annual budgeting process. This is something the NPA has strongly recommended in the previous CoC and Kisamba wonders why Finance overlooks this aspect. The OPM too is faulted for not moving fast enough towards the scrapping and merging of some MDAs to achieve strategic functioning of government. This is something that a team of experts patronized by Gen Saleh have been imploring the President about. This is in line with the Sector Wide Approach which is part of the OPM’s sectors’ coordinator mandate. The decentralization policy should be reviewed in order to deepen the integration of the Local Economic Development (LED) approach which is part of the broader GoU strategy to achieve inclusivity in the development process while mitigating against income inequality.
THE LEGAL F/WORK, THE BAD SHOWING;
Kisamba’s NPA is mandated to do all this under the Public Finance Management Act (PFMA). Specifically Sections 13(6) (7) require NPA to assess consistency or compatibility of the annual budget to National Development Plan (NDP) goals, targets and priorities. The rating for the FY2017/8 hasn’t been good at all and Kisamba doesn’t mince words on that. He states that: “Over all the budget year 2017/18 was found to be unsatisfactory and less compliant compared to 2016/7.” FY 2017/8 is 54.2% compliant compared to 2016/7 which was 58.8%. This is due to general decline in compliance scores at macro level at 41.9% against 48.1% of 2016/7; national level at 59.3% against 74.2% of 2016/7 and sectoral/MDA level at 53.2% against 60.1% of 2016/7. The only improvement in FY2017/8 was in LGs at 62.2% compared to 51.8% for the FY2016/7. This is because LGs had and operated on approved development plans and enjoyed timely budget releases by the MoFPED. “The weak level of budget compliance to the NDP II is mainly attributed to the challenge in translating sector strategic plans into budget actions that contribute to achieving NDP II targets due to weaknesses in planning. Further the budget macroeconomics targets significantly differ from NDP II targets. In addition, there was low budget release performance and absorption,” Kisamba’s report states adding that many of the MDAs have no strategic plans and yet those which have rarely translate them into budget actions that contribute to the NDP II macroeconomic targets. “Despite the good progress in development plans, macro-economic indicators continue to perform at dismal levels as the plans are not translated in budget interventions necessary to achieve NDP II macroeconomic targets.” A plain-speaking Kisamba predicts, in his brief (CoC) to the speaker, that Uganda can’t achieve lower middle income status by 2020 because the economic growth performance has been very low for the last 3 years (growth was 4.8% in 2015/6 and 4% in 2016/7 and is projected to grow at 5.5% in 2017/8). The NDP II had respectively envisaged/targeted 5.8%; 5.9% and 6.6% respectively. “Therefore for Uganda to achieve lower mid
dle income status in the remaining 2 years of NDP II implementation, it has to grow by over 15% annually. This is very unlikely given the resources available to the country. However, the country should remain focused on the middle income agenda by pragmatically and prudently implementing the prioritized interventions in the Vision 2040 and its attendant plans,” Kisamba recommends. “At macroeconomic level, there is a mismatch between planning and budgeting. The budgeting macroeconomic indicators significantly differ from NDP II indicators. On average the budget macro-economic indicators differ by 17% from NDP II indicators. Instead the budget indicators seem to be more closely aligned to the IMF- supported Policy Support Instrument (PSI). This implies the budget is more guided by PSI instead of the National Planning Framework. There is need to harmonize the national planning, budgeting and the PSI processes.” The dossier shows that, to achieve EAC regional competitiveness as an investment destination, Uganda should fast track key competitiveness infrastructure projects like the SGR “before the window of opportunity closes.” The NDP II (which is supposed to guide GoU ongoing development programs) provides for public debts but Kisamba’s latest CoC shows that much of ‘’the borrowing [we are currently undertaking] isn’t for the NDP II core projects which were expected to be the main drivers of the public debt.” Its stated that “The [2017/18] Annual Budget projected debt of 40.1% of the GDP which is in line with NDP II targets yet the main drivers of this debt are not performing as well’ and the implementation of NDP II projects is clearly behind schedule. Yet “high interest payment is crowding out budget allocations to key sectors and priority infrastructure projects that are key in driving growth and improving competitiveness of the economy.” For example in FY 2017/18, the domestic interest payments were 2.3% of GDP compared to 0.8% for external interest payments. “Interest rate payments and the nature of debt financing are a cause of concern. For example currently,
interest rates payments is second to Works and Transport in total budget allocation,” Kisamba notes adding that this repayment schedule isn’t conducive for the country. As President Museveni furiously argued in his March 12th letter to Matia Kasaija, domestic revenue mobilization efforts must be enhanced to reduce our reliance on expensive borrowing. Museveni has called for innovative approaches such as taxing usage of platforms like facebook, twitter, viber and whatsapp. He says this alone would annually realize for the GoU more than $400m. FY2017/8 AB was intended to deliver industrialization for job creation but the interventions and resources allocated in that direction were very inadequate (things like value addition, collective marketing, integrated steel & iron industries, zonal agro-processing, revitalization of UDC, UDB recapitalization with Shs500bn etc). When it comes to industrial parks, which is a key ingredient in industrialization, the report shows it has been a total failure. That of the 9 industrial parks planned for FY2017/8, only two (Bweyogerere & Luzira) are fully operational, three (Namanve, Soroti and Mbarara) are partially operational and the other 4 are yet to take off due to inadequate funding.
To address income inequality, which is a key ingredient causing economic stagnation, Kisamba notes that the “way affirmative action and equalization of programs are reflected in programs in the National Budget Framework Paper and Annual Budget doesn’t enhance the achievement of NDP II targets and priorities.” NDP II designed these programs to reduce income inequality across Uganda through Local Economic Development (LED) model/approach which Kisamba’s report card shows hasn’t been appropriately executed by entities like the OPM which is home such interventions for the historically disadvantaged/excluded places like Luwero triangle, Karamoja, Rwenzori and the North.
THE OPM FLOPS;
The following is what Kisamba writes about LED programs resident in the OPM: “This [failure] is seen in the fact that the AB has interventions like Luwero Rwenzori Development Program LRDP, Karamoja Integrated Development Program [KIDP], NUSAF II & III etc do not have a clear focus on LED and don’t provide for harnessing of synergies across the different value chains of investments. There is therefore need to redesign these programs based on the LED approach to deliver the expected outcomes.” Elsewhere in the CoC report, the OPM/LRDP is given as an example of GoU projects where much more money is spent on operational expenses/costs than on capital and infrastructure development. The operational expenses (at 33.4bn) is 13 times greater than the development/infrastructure budget (2.57bn) therein. “There is need to separate the development component from the recurrent expenditure component to provide a clearer picture.” In the general sense, Kisamba regrets the fact that the FY2017/8 AB concentrated more on expenditure side and was weak on revenue generation/mobilization from domestic sources even when “there has been satisfactory performance in tax administration [by URA] and thereby achieving NDP II targets on domestic resource mobilization.” The report calls for a new approach regarding the NTRs: insisting that its collection should be a preserve of Dorris Akol’s URA. Agencies like CAA, UCC, NDA, NFA, NEMA, UWA, UETCL, ERA and UEDCL are clearly criticized for insisting on spending at source all the cash they collect under NTRs. MDAs are criticized for paying lip service and indifference towards the achievement of NDP II targets whereby “most of the projects are performing below NDP II schedule while others have completely failed to kick off.” Of the total 39 core NDP II projects; only 2 (5.2%%) are being implemented on project schedule; while 35.9% are being implemented but behind schedule; 17.9% are still at preparatory stage and the remaining 28.2 percent have not yet started at all. “At this pace, the realization of NDP II aspirations will be unlikely.”
DEFAULTING MDAs NAMED;
Examples include MAAIF where Agricultural Cluster Development Project (ACDP) was planned to start in July 2013 and today (4 years on), the project is still on inception stage. As for project on Enhancing National Food Security through increased rice production in eastern Uganda and the Regional Pastoral Livelihood Improvement Project nothing has been done yet the money is available. These are strategic projects under NDP II on food security! Instead MDAs like implementing projects outside the NDP II priority areas and Kisamba reports “this is crowding out the implementation of the original NDP II core projects.” Compensation of PAPs is also crowding out the impact of NDP II Infrastructure projects and slowing progress of NDP II core projects implementation. For instance in the FY2017/8, land compensations alone are taking Shs1trn (in the roads sector) off our national budget. This money would give us 300kms worth of roads. On Entebbe Express Highway, compensation took Shs308bn which would give us 100kms worth of well paved roads. “This has increased the infrastructure costs and reduced value for money on public investments.” Sometimes compensation has been complex and delayed road projects implementation and realization of NDP II targets. Sector interventions being implemented outside the relevant sectors is also another distortion and is frustrating NDP II implementation. The NPA report wonders why agricultural financing is being managed and implemented by BoU; why Uganda Aids Commission (vote 107) is under presidency yet it fits in health sector budgeting process and why ISO is under president’s office and not the Defense or Security ministry. The reason for doing this might be well intentioned but “this isn’t good delivery mechanism [in as far as the need for synergies is concerned],” the NPA chairman notes in his government-wide CoC reporting.
BIGIRIMANA CITED;
In order to explain how off budget financing distorts harmonized planning and budgeting process, Kisamba’s report refers to Pius Bigirimana’s Gender Ministry experience. He notes that many sectors and MDAs continue to receive off budget support that is not integrated into the overall planning and budgeting processes. The example is Gender ministry that in the FY2017/18 commendably attracted off budget financing for projects like Integrated Community Learning for Wealth Creation (ICOLEW)-DVV International of Shs663m, Transition Program on Gender Based Violence prevention and response for Busoga sub region/from Irish Aid of Shs520m; Uganda Child Helpline/from UNICEF of Shs999m and Alternative Care/ from UNICEF of Shs600m. The NPA document decries the fact that “there is no mechanism to capture the off budget resources to allow their integration into the budgeting process.” Watch out for part 2 of this story, directly focusing on MDAs that Kisamba Mugerwa’s NPA says are letting down the President on service delivery. For comments, call/text/whatsapp us on 0703164755!
