The State Minister for Finance, in charge of General Duties, Henry Musasizi has raised concerns over the country’s high fiscal deficit saying it’s worrying.
Parliament in May this year passed a budget of 48.1 trillion shillings for the financial year 2022/23. However, out of the total budget, only 25.55 trillion shillings will be predominantly funded using domestic sources.
The rest of the budget, for instance, 4.97 trillion shillings will be funded through domestic borrowing, 2.61 trillion shillings using Budget Support, and 6.72 shillings through External Financing. Meanwhile, 8.01 trillion shillings will be funded through Domestic Debt Refinancing.
It’s against this background that Musasizi concludes that the situation isn’t good news for the economy since the government is spending far more than its total income.
A fiscal deficit is a situation when the government’s expenditure exceeds its revenue in a given year.
Musasizi made the remarks on Monday during a regional budget consultative workshop in Gulu City. The meeting attracted district, city, and municipal local government chairpersons, mayors, Chief Administrative Officers, and Resident District Commissioners from parts of Karamoja, West Nile, and the Acholi Sub-region.
Musasizi notes that the country’s tax contribution to the Gross Domestic Product (GDP) is low at only 13.5 percent compared to the expenditure which stands around 23 percent.
Musasizi says the country continues to experience a higher fiscal deficit in the budget due to the growing obligation and challenges of tax administration.
To address the high fiscal deficit, Musasizi says there is a need to build a firm tax base and improve tax administration inefficiencies to ensure that taxes generated are channeled to the rightful purposes.
He says the government is committed to ensuring that it reduces the deficit to below three percent as indicated in the country’s Fiscal responsibility 2021/22-2025/26.
The government has made strides in the past years to introduce measures aimed at reducing the high fiscal deficit by improving tax collection and inefficiencies in administration. These include the electronic invoicing system, digital stamps, and scanners at border points, among others.
During the budget meeting, local government leaders raised several complaints to the minister, that the failure to address them in time has affected service delivery and revenue collection.
Arua District Chairperson, Alfred Okuonzi, says the district is incurring a lot of expenses on transporting road equipment from Gulu City yet it had donated land in Arua district for the establishment of a regional maintenance center.
Okuonzi says they roughly spend about 5 million shillings on transporting just one piece of equipment and argued that establishing a maintenance center in Arua will save the West Nile region.
Lamwo Resident District Commissioner Godfrey Osborn Oceng however on the other hand raised concerns about the failure of a contractor to undertake the rehabilitation of Agoro Irrigation scheme despite being contracted by the government.
He says the delayed rehabilitation of the irrigation scheme has left farmers unable to grow crops and called on the government to prevail in this matter.
Musasizi promised to delve into the concerns raised by the leaders.
Uganda’s fiscal deficit increased from 9.9 trillion shillings in the Financial year 2019/20 to 13.5 trillion shillings in the 2020/21 financial year. In the same period, the debt increased from 57.2 trillion shillings to 69.5 trillion shillings.
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