Rédaction Africa Links 24 with The Observer
Published on 2024-02-07 22:54:04
Opposition members of parliament, led by Kira municipality MP Ibrahim Ssemujju Nganda, who also serves as the shadow minister of Finance, have raised concerns over the Uganda Revenue Authority’s (URA) failure to effectively collect taxes from the export of refined gold. In their minority report for the Budget Committee concerning the 2024/25 budget framework, the MPs highlighted a significant gap in the nation’s resource envelope due to uncollected taxes from gold exports.
The report, referencing data from the Auditor General, points out that URA did not collect an estimated Shs 52.2 billion in taxes from the export of 70,837kg of gold. “With $200 per kilogram, the Government was supposed to realize at least Shs 52 billion,” the report states.
The MPs suggest that the failure to collect these taxes is due to the proximity of individuals involved in gold exports to the president, which allegedly renders their businesses immune to URA’s typical enforcement actions. The report further notes that taxes on 22 mineral categories, amounting to Shs 72.4 billion in export value, were not levied by URA due to the absence of tax assessment and payment on certain mineral exports.
Additionally, the report expresses concern over the projected decline in tax collection for the upcoming financial year. Contrasting the expected Shs 285 billion with the previous trend of collecting over a trillion shillings more in taxes each year, the MPs question the credibility of these figures. They highlight the consistent growth in domestic revenue in previous years, even during the Covid-19 pandemic lockdown, and suggest that the projected low revenue growth for the next year raises suspicions. The report asserts, “It is not possible that an economy whose GDP is projected to grow from 5.2% to 6% will have its revenue grow by less than 1%.”
The MPs speculate that either previous domestic revenue growth figures were inaccurately reported or there might be undisclosed intentions concerning the management of the country’s finances. The opposition MPs call for greater transparency and accountability from the government in managing and reporting the nation’s financial growth and tax collection.
President Yoweri Kaguta Museveni has consistently maintained that Uganda will not be adversely impacted by the withdrawal of donor funds. However, a minority report suggests otherwise, indicating that the country is facing financial constraints as a result of this withdrawal. This situation is leading the government to increase domestic borrowing and to take loans at commercial rates, further inflating Uganda’s already substantial debt burden.
The report reveals discrepancies in the reported figures of Uganda’s public debt. It quotes, “The Ministry of Finance puts the public debt at Shs 86.7 trillion while the Auditor General’s report to parliament says it is of Shs 97.499 trillion and the Bank of Uganda puts it at Shs 88.8 trillion.” It also notes a significant increase in public debt within the current financial year, with an addition of Shs 9.329 trillion. The MPs expressed concern over this trend, saying, “Growing the public debt burden is one area where the NRM has excelled and registered unenviable and undisputable growth.”
The report further criticizes the government’s borrowing practices, citing instances of borrowing funds without proper readiness for utilization. The Auditor General’s report, as mentioned in the minority report, states that Shs 14.5 trillion in loans remain unutilized due to various reasons including unreadiness of projects at loan/grant contracting stages, delays in meeting disbursement conditions, poor project management, lack of counterpart funds, and slow land acquisition processes. The MPs question the rationale behind such borrowing practices, asking, “For God’s sake if your project is not designed, why do you borrow money?” This situation raises concerns about the efficiency and effectiveness of public debt management in Uganda.
Next year, Uganda is set to allocate a significant portion of its budget to debt servicing, with at least Shs 20.6 trillion earmarked for this purpose. Of this amount, Shs 7.6 trillion will be used solely for interest payments, constituting 40% of the entire national budget. This substantial allocation highlights the growing concern over the country’s debt management. Additionally, the report sheds light on the repercussions of Uganda’s failure to meet its loan obligations in the previous year. This shortfall led to the depletion of the country’s foreign reserves at the Bank of Uganda, which decreased from $4.463.6 billion to $3.629 billion. This decline in reserves underscores the financial strain the country is experiencing due to its increasing debt burden.
Moreover, the majority report echoes similar concerns about the escalating debt levels. It warns that if this upward trajectory continues, Uganda’s debt could reach unsustainable levels. The report cites that the “Debt to GDP has increased to about 52.7% which is above the 50 percent sustainability threshold.” This increase in debt has led to a rise in interest payments, consequently reducing the fiscal space available for development expenditures. To address this issue, the majority report advises the government to “gradually scale down on domestic borrowing because of its negative effects on private sector credit.”
This recommendation is aimed at mitigating the adverse impacts of high debt levels on the country’s economy, particularly in terms of crowding out private sector borrowing and investment. The report emphasizes the need for a more balanced and sustainable approach to borrowing and debt management to ensure long-term economic stability and development.
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