Published: 21st July 2016

 
Uganda Debt Network (UDN) through her Community Based Monitoring and Evaluation System (CBMES) approach, different strategies have been employed to build communities’ capacity to effectively carry out monitoring and benefit from Government programmes. Oversight Committees/User Committees and Community Based Monitors in different districts have been trained with an aim of enhancing local accountability and local activism for improved service delivery.
As a result, stories of change capturing impact have given UDN the morale to continue the commitment in training oversight Committee members and Community Based Monitors for a better Uganda.

1. Empowering accountability and oversight committees.

Lubira parish, Buyanga sub-county in Iganga district reported cases where water users committees for three community boreholes regularly collected money from users as contributions to maintain and sustain functionality of the boreholes without ever accounting to the beneficiaries’. This is because the service users did not have the knowledge on how to hold the Water User committee accountable.
For example the treasurers and secretaries were in the habit of sharing money collected for their personal gains as repairs of the boreholes would be referred to area politicians including the Member of Parliament for Bugweri constituency and Bumozi primary school which shared the water source with the community.
Following the joint training of accountability committees with Community Based Monitors (CBMs) who were provided information of their roles and responsibilities, the group led by Damali Nalugoda during their monitoring found out that all the boreholes were not functioning well.
On the 10th, November 2015 they organized a successful stakeholders meeting for Bumozi village borehole where she explained to community members, the guidelines for the roles of Scholl Management Committees (SMC) and Water User Committees (WUCs) and service users and another on 15th, March 2016 at Buswaga village on the issue money amounting to UGX 80,000 which had been embezzled by the Treasurer and Secretary of the WUC. Consequently the community of Bumozi resolved to disband the old committee and elected a new committee to manage the borehole and mechanisms for future repairs to be rotational by village. The 80,000 for Buswaga village that had been embezzled was recovered and borehole repaired in April 2016.
This intervention empowered community members to be vigilant on accountability and increased functionality and management of water sources has improved. It was noted that: “Calling a meeting is possible but to tell the community what is expected from them is hard because we did not know about the guidelines”- Nalugodha Mubaraka- member of the Water User Committee Bumozi village in Buyanga sub county Iganga district.
 
2. Functionality of the Parish Development Committees (PDCs).

In Kumi district, the PDCs were non-functional in a number of sub-counties. After the training of oversight sight Committees and Community Based Monitors (CBMs) in February 2016, the PDCs of Mukongoro and Atutur sub counties immediately held a meeting the district planner and CAO. The PDCs and CBMs demanded for more responsibility in the planning and budgeting processes in the district and other development activities.
As a result, PDCs from the two sub counties have taken on a more active role in quarterly Sub County and district budget, planning and review meetings. The facilitation of PDCs was included the district budget for FY 2016/17 and specifically Mukongoro sub county Local Government budget provided for 1,000,000/= for continuous mentoring of PDCs and data collection in the FY 2016/17 and 46,841,500/= for grading and maintenance of community access roads in Mukongoro sub county.

3. Installing of Power in Aparisa Primary School.


In Amuria District, after the training of Oversight committee members in February 2016, the Chairperson of Aparisa Primary School in Asamuk Sub County on realizing that it’s their responsibility to improve and develop school facilities using various means called for a PTA /SMC meeting and among others things agreed to install power in the two classroom block constructed by the district in the FY2015/16 at the cost of UGX 109m. As a result of the SMC meetings, parents were mobilized to contribute UGX 5000 and a total of UGX 970,000 was raised and used to install power at Aparisa primary school in April 2016.

4. Hospital Beds received in Kolir HC III in Bukedea District


Since August 2015, Community Based Monitors (CBMs) in collaboration with members of Health Unit Management Committee (HUMC) reported inadequate beds at Kolir HC III in Bukedea district to the District Health Officer (DHO) who promised to liaise with Ministry of Health to acquire more bed through the district dialogue. In February 2016, Kolir HCIII received four beds i.e. 1 Labour bed, 2 for the female ward and 1 for the male ward, all worth over UGX 10 million. The community based monitors followed up these developments to establish the facts at the district and the Health Centre.

5. Health Personnel wearing Uniforms while on duty.


In Kamuli district, Health Personnel used not to wear uniforms while at duty yet this is a requirement by Ministry of Health. This caused some fraudsters to extort money from patient since it was difficult to identify a health worker especially in the General ward. After the training of Oversight committee members in November 2015, Chairperson of Namwendwa HC IV called for a HUMC meeting in December 2015 after the last meeting held in 2013. The meeting was attended by the In charge of the Health Centre and HUMC members. Among the resolutions made, it was agreed that all workers should be clad in their uniforms lest they don’t report to work and this resolution was effected immediately.
UDN is proud to be apart of life changing experiences in different districts and will continue the struggle to achieve her mission of a prosperous Uganda with sustainable, equitable development and a high quality of life of people.

                                                                        Together we can make a difference.

Prepared for Global strategy meeting, Nairobi, July 2016, by Julius Kapwepwe.


Preamble and synopsis of Debt context in Uganda:

Uganda Debt Network (UDN) is an advocacy civil society organization (CSO) formed in 1996 as a result of concerns about the unsustainable level of Uganda's debt, under the global Jubilee campaign movement then. The Mission of UDN is to promote and advocate for poor and marginalized people to participate in influencing poverty focused policies, demand for their rights, and monitor service delivery to ensure prudent, accountable and transparent resource generation and utilization.

Uganda’s Debt situation is older than its independence from the colonial Britain in 1962 e.g. a) $24 million WB loan in 1955 under the broader regional railways & harbors connection in Uganda, Kenya & then Tanganyika b) $8.4 million WB loan for purposes of Owen Falls Dam electricity, eventually commissioned in 1954 (see WB reports). Under HIPC & MDRI initiatives; Uganda has previously defaulted on debt repayment in 1980s. Coming to the 1990s, Uganda was the 1st country in the world that qualified to benefit from the HIPC initiative- with forgiven debt cycles initially in 1998, then 2000 and 2004; and later the MDRI (G8- Gleneagles) window in 2005— leaving the country with a paltry public debt of about $900 million by March 2007. Before HIPC and MDRI initiatives, Uganda’s Debt: GDP stood at over 70%. Whereas Uganda has in place a Legal, Policy and Institutional framework for prudent Debt Management and the Debt Sustainability Indicators (DSAs) seem okay compared to the1990s and early 2000s situation, Civil Society remains concerned, given some of the following issues;

1)    Uganda’s level of Indebtedness- is a moving target; With varying figures depending on which source/ method for calculation (e.g. contracted versus disbursed; debt stock plus interest- real versus nominal; only current debt stock; with/ without a factor of inflation), Uganda’s gross public debt was approximately $8.81 billion by end of FY 2015/16 (i.e. June 2016) with a) External debt ($5.48b) and b) Domestic debt ($3.32b)- as per the Budget Speech for FY 2016/17 fiscal period. With official Debt: GDP estimated at 34% (GOU) and 38% (IMF) by May 2016, Debt still appears sustainable.

2)    Any economic rebasing linked to appetite for Debt? We are yet to ascertain if the appetite in some EAC States to opt to front load esp. infrastructural projects, has any link with recent GDP expansion due to rebasing. Even when we are resizing (real or perceived) our economies/ GDP- e.g. rebasing by Kenya (2014) & Uganda (2015); UDN analysis; UDN analysis gives higher % figures of Debt: GDP and indebtedness to about $13.7b (not $8.81b), whether 34% (GOU) and/ or 38% (IMF)- thus moving target. Yet the above levels exclude new lined up borrowing e.g. a) $14.2b Standard Gauge Railway b) refined products pipeline c) $400m 8th municipal Infrastructure dev’t (USMID project) d) $500m for Kampala Light Rail construction e) Fertilizer plant f) Ebb airport expansion g) $4.27b Oil refinery and h) phase three of National Transmission Backbone (ICT) Project.
 
3)    Low External loan absorption/performance; Due to  long procurement process and lack of transparency, co-funding/ counter-part funds by Government, Delays in approval by Parliament, given inadequate guidelines for approval.  How then do we smoothen investment expenditures over time, in broader view of limited absorptive capacity of Uganda’s economy- estimated at $25 billion in 2015?

4)    Rapidly growing Domestic Debt; This includes total domestic debt of UGX 1.632Bn (Treasury instruments) & (Domestic arrears) in 2003, to UGX 4.5359 trillion in June 2012, to even higher figures by Dec. 2015. With a rise of 178% (i.e. average annual growth rate of 16.6%) between June 2003 & 2011, the growth rate is simply too big and raises concerns to the Ugandan economy. Yet this excludes debt due to oil recoverable costs for private companies; Public acquired Private debt (under PP Partnerships); cost of debt servicing.

5)    Domestic debt was bigger than total domestic revenue; In FY 2015/16, total domestic debt was bigger than total domestic revenue, so for 2nd year running Uganda has had to roll-over a portion of her maturing domestic debt of about UGX 5 trillion each year, leading to UGX 7.3 trillion (or $2.1 billion) budget allocation in FY 2016/17 for both external and domestic debt i.e. 25% of the total national budget. More than 80% of annual interest payment over the last two years is to domestic markets. In some cases where we are borrowing for feasibility studies, we risk pre-determined biased positive feasibility reports.
 
6)    Poor adherence to existing debt management control systems; Orchestrated by Accounting officers (AOs). So far with no evidence of punitive sanctions to AOs who disregard policy provisions.  This is coupled with Fiscal indiscipline – reflected in escalated domestic arrears debt; also due to under -budgeting for fixed expenses (like utilities).

7)    Oil-related rapidly growing trends of borrowing (Domestic & External)- i) Just one case, between FY2013/14 and 2014/15, new external borrowing increased by 82% ii) With Debt: GDP growth from 24.2% in 2012 to 38%- IMF/ or 34% (GOU) by May 2016, is Uganda mortgaging her oil with increased borrowing (esp. for infrastructural projects, appetite to opt to front load projects)- even when oil real production is estimated for around 2022? What are the risks with spending in advance on account of future oil revenues? While Government may not borrowing on account of oil, the lenders seem to do so, esp. China through the EXIM Bank.

8)    Debt still sustainable? Whether Debt: GDP was at about 34% (GOU) or 38% (IMF) or UDN higher % figures by May 2016, that UGX 2.1 trillion out of UGX 13 trillion projected domestic revenue in FY 2016/17 has been allocated to interest payment alone, or 25% (UGX 7.3 trillion or $2.1 billion) of the budget due to debt repayment (interest & principal) , does that point to sustainable public debt?

9)    Increasing debt-related risks?-  Is Uganda increasing risks of debt restructuring (e.g. shifting the repayment burden to future generations, with bigger debt obligations? Will Uganda borrow for bail-out or ask for new debt relief- even amidst non-concessional and commercial creditors, or there will be defaulting on repayment? What is the implication on the economy, households, poverty reduction & dev’t?  Have we learnt any lessons from the Ghana-rapid borrowing since 2012 and implication on the currency or economy in general, e.g. with $1b IMF bail-out already? Broadly, East Africa’s growing debt levels to finance infrastructural projects could push regional economies into financial distress in the wake of volatile local currencies and falling export earnings.
 
Specific Recommendations

  •      A guide/tool to MPs; UDN so far has a draft tool, “Guidelines for Loan Scrutiny and Approval Process in Uganda to influence the loan contraction process” to support Members of Parliament (MPs) in assessment criteria for approval of loans.
  • Advocacy Campaigns; For responsible borrowing, including reduced Domestic debt; and broader citizens’ participation - especially the intended beneficiaries for they understand better the local context where implementation is to take place- beyond MPs.
  • Campaign against short-term borrowing for long-term investment; Else, how will Uganda pay back if the assumption is that investment will spur economic activities that generate returns (e.g. taxes, self-financing after commissioning) to sufficiently meet debt payback obligations? The burden also weighs heavily on Uganda’s dev’t Budget component (with debt servicing making up to nearly 25% of FY 2016/17, thus being the largest “sector”.
  •      Resist Eurobonds where possible; Even with the apparent rising debt, Uganda has not been to financial markets/ global market/ e.g. floating a Eurobond. Given the experiences & challenges through this debt instrument, Uganda should continue resist the modality- instead look at reduced opulence & huge consumptive spending- largely recurrent.
  •      Phased borrowing & investment; Through sequencing of planned projects, rather than Debt/ projects frontloading, given absorption challenges of a small economy.

Finally; Enhance broader North- South; and South-South linkages and corroborative advocacy actions at national, regional (e.g. EAC/COMESA, AU- UNECA) & global levels


By Juliet Akello

Published: 30th June 2016

The national budget as a policy instrument helps the Government to run the state of affairs (political, social and economic) smoothly to achieve set priorities for a given financial year.Uganda’s development agenda is guided by Vision 2040 and the NDP II (2015/16 – 2019/20); therefore planning, budgeting and policy formulation processes at all have to be aligned to transform Uganda’s economy to modern and prosperous country. Of the total, national budget FY 2016/17 (sh26,361b),  sh6,524.5b equivalent to 24.8% will be sourced externally. External borrowing will total sh5,034.5b which is 19% of the budget; that is; sh2,520.8b in concessional loans and sh2,513.7b in non-concessional loans; while sh1,490b in grants and domestic debt refinancing (sh4,977.7b) equivalent to 18.8%.

However, sh2,022.9b (7.7%) is expected to settle interest payments. This is more than the 3.1% share of the budget for the agriculture sector considered the back-borne of the economy. National budget deficits increase when debt service is characterised by high interest payments because part of the available resources is diverted from public service provision translating into a cost.

Notice that public debt-to-GDP was 26% by February 2015 which rose to 32.7% by June in the same year (MoFPED Report). The Budget speech FY 2016/17 indicates that this has further risen to 34% representing an increase of 31% in just one year and three months. Can Uganda’s economy growth faster than this debt growth rate to ensure debt sustainability in the future? Moreover, all this is within the context of; i) slow economic growth rate averaging less than 6% in four years, ii) stagnated revenue-to-GDP ratio at 13% for about three years now, iii) Negative Balance of Payments in recent years of less than 50% of the import bill within 12 months to March 2016 arising from a large international trade imbalance; and iv) costly infrastructural development (World Bank, 2016). These prevailing conditions are not favourable for debt sustainability.

Meanwhile, the Auditor General since FY 2009/10 to-date highlights challenges related to low absorption capacity of loans by the Government MDAs with Uganda’s debt portfolio underperforming below 50% (2015 report). This is a good sign of ill preparedness for the loans acquired yet it attracts commitment charges/fees which have been steadily increasing. In FY 2012/2013 commitment fees paid on undisbursed loans increased by 40% from sh9.023b in 2011/2012 to sh12.7b in 2012/2013 yet, total commitment fees for FY 2016/17 alone are estimated at sh84b which is highly costly. Uganda’s high appetite to borrow will heavily weigh on economic growth, especially where productivity is low.

Therefore, shall Uganda need a big-bang to shake the economy out of the current state for the national budget to deliver?; is it a case of mismatch between the country’s development needs and available credit?; do we need to borrow every time we need to advance our development? should we lower public debt or build public infrastructure first within the context of current public expenditure Vs investment for the future generation? An analysis of whether “productivity” or “job creation” comes first is another area of interest (Budget theme).

The Government should expedite the process of establishing a fully functional and empowered appraisal, monitoring and evaluation entity to approve project designs to avoid costs and delays caused by changing project designs during implementation. This will enhance the absorption capacity to ensure full utilisation of the funds released. For an economy to gain debt sustainability over time, it should grow at a rate higher than interest rate of the debt. Otherwise, it is worth discerning the “devil out of the details” if the national budget is to deliver on the theme and the NDP II.