By Cirrus Kabale
Currently, the 10th parliament is reviewing the Budget framework paper 2021/2022. The proposed national budget for FY 2021/2022 is projected at UGX 45.658 trillion which is a slight increase of 164 billion shillings of the current budget of FY 2020/2021. A total of 10.330 Trillion Shillings is expected from external borrowing, with Shs 6.744 trillion coming in form of project loans, while Shs 3.585 trillion is expected as budget support loans.
While debt repayment will take the lion’s share with nearly 80 percent of the country’s total tax revenue, the government continues to borrow billions of shillings to invest in electricity and oil projects which have further increased the national debt. Currently, Uganda is indebted to a tune of Shs 66 trillion that’s about 48% of the value of the economy (GDP) according to Bank of Uganda report.
Per parliament’s January 2021 report on the 2021/2022 Budget Framework Paper, Uganda plans on mobilising UGX 20.1 trillion in tax revenue. On the other hand, UGX 15.4 trillion, or 33% of the projected UGX 45.66 trillion budget, will be spent on debt servicing. This means that only 23% of Uganda’s tax revenue will be available for use in Uganda.
Indeed, the continued borrowing for the energy sector has compelled our country to be highly indebted for instance as Karuma dam at $1.7 billion, Bujagali Dam at $862 million, Isimba Dam $570 million, Upgrading and construction of national oil roads- $456.3 million, Kabaale International Airport-$318m, Uganda Rural Electricity Access- Shs4.2b among others.
Over 77% of the tax revenue that Uganda plans to collect in the 2021/2022 financial year could be spent on debt servicing. High indebtedness constrains countries from using their revenues to provide much-needed health, education, water and other services.
It is also a reminder of our country’s sad history of corruption, selfishness and wrong priorities by leaders. This is why the majority of Ugandan citizens remain trapped in misery and poverty amidst heavy borrowing.
Increased national debt burden, the government has invested billions of shillings in large hydropower projects financed through loans adding to the already high national debt burden that stands at 48% of the GDP. For instance, Karuma and Isimba hydropower dams costs over $2.268 billion (about Shs 8.28 trillion). Yet the projects have been restricted to grid connected consumers mainly those in urban centers and large industries leaving out the rural households that represent the majority in the country. Other energy projects include the crude oil pipeline that is estimated to cost over $3.5 billion (about Shs 12.7 trillion) and will be financed through debts. The government’s appetite of over borrowing will result in over-burdening of the taxpayers.
What is more disappointing is that there have been minimal economic returns from the accrued debts by the government. According to 2015 World Bank study showed that for every shilling invested in infrastructure projects in Uganda, less than a shilling is recouped. This loss was seen for over a decade prior to the study. Yet more money is set to be borrowed to invest in the energy projects and roads through the next 2021/2022 financial year budget.
Poor government planning, the government is continuing to investment in expensive electricity even when it is evident that grid electricity has failed the benefit citizens especially for the rural households. The current electricity capacity in the country stands at 1268.9MW as of October 2020 by Electricity Regulatory Authority (ERA). Out of the available 1268.9MW, only 700MW is consumed majorly by industries and few citizens and 526MW is wasted.
This has made the few Ugandans who are connected to the electricity to pay exorbitant power tariffs to compensate for the unconsumed power making the majority population in rural areas lacking access to electricity. Instead of government investing in off-grid solar energy to provide power access to the rural communities, it just extends electricity transmission lines and passes through peoples’ homes due to unaffordable electricity.
Secrecy government dealings, the government continues to operate in darkness especially in signing agreements for the electricity and oil projects. The lack of transparency in electricity, oil and gas contracts has caused public suspicion and raised corruption concerns. For instance, power purchase agreements, Production Sharing Agreements (PSAs), Host Government Agreements (HGA) among others that government signed with electricity and oil companies operating in Uganda remain secret in violation of Article 41 of the Constitution. Such violations of government’s laws have increased the levels of corruption and mismanagement of revenues. Therefore, in a way to promote transparency and accountability, there should be further investigations into the loans for the electricity and oil projects.
Promoting environmentally destructive projects, the government is promoting activities in the country such as oil, sugarcane plantations, sand mining, rice growing and others in critical biodiversity which compromise environmental conservation. Worse of all, the above-mentioned activities are undertaken in forests, lakes, rivers, national parks and others which undermines the government’s efforts to conserve the environment to promote food security, water access, combat climate change to benefit the poor Ugandans.
The above environmental resources and the biodiversity support Uganda’s $1.6 billion tourism industry and is expected to increase to $3.0 billion in 2025, $2.005 billion agricultural sector and the $171 million fisheries sector among others. The resources also provide employment to over 5.3 million Ugandans in the various sectors.
What is more interesting is that government continues to risk billion-dollar industries from tourism, agriculture, fisheries, and as well as risking the employment of over 5.3 million Ugandans who only depend on a single job. This creates a million questions as to whether it is viable for Uganda to promote such activities like oil and gas in eco-sensitive areas especially at a time when countries that are expected to consume Uganda’s oil and gas resources are transitioning to use of clean energy.
Limited investments in off-grid energy access, it should be noted that over a decade, the government has increased investments in hydropower projects and connect them to the central grid with the aim of increasing access to electricity. However, this has failed to deliver and to-date, only 22% of the population has access to electricity and over 95% of Uganda's population still depends on biomass to meet their energy cooking needs.
This is because they cannot afford the high-power tariffs. Yet over dependency on biomass has resulted in destruction of forests with disastrous effects on climate and negative impacts on the health and education of citizens. Poverty has also increased from 19% to 22% in Uganda and amidst worsening poverty levels, repayment of national debts has increased fromUgs 56.526 trillion in the 2020/2021 financial year to UGX 66 trillion in 2021/2022.
High levels of corruption, it should be noted that Uganda loses over UGX 500 billion in corruption which costs taxpayers huge amount of money. For instance, Uganda lost over Shs. 24 billion to Eutaw Construction Company Inc., a fictitious branch of a US firm, in the infamous Mukono-Katosi road scandal. It is also common knowledge that the country lost about Shs. 4.7 billion in the bicycle scam when a sham company, Amman Industrial Tool and Equipment (AITE), was procured to deliver70,000 bicycles for local council one (L.C.1) chairpersons. To date, no bicycles have been delivered yet taxpayers’ money was paid for them.
Such acts in the country have contributed to increased poverty, poor health, lack of electricity access, education and other social services. The country’s development agenda demands good governance practices and appropriate actions in curbing corruption and mismanagement of the national resources to enable the realization of socio-economic transformation of Uganda.
Mismanagement of public resources or revenues, the government has continued to misuse the public resources and other revenues that are expected to be invested in the useful infrastructural developments. Some of the cases where the government has misused the funds include oil revenues abuses such as UGX 6 billion presidential hand shake, raiding the treasury to buy fighter jets, failure to account for over $ 1 billion signature bonuses, withdrawal of UGX 200 billion oil revenues without parliamentary approval and others.
Noteworthy, the most recent case was the allocation of the Covid-19 supplementary budget that opened the eyes of many Ugandans to the sectors that the government prioritises during budgeting processes. In the midst of a pandemic, the government sought to prioritise security over the health and well-being of Ugandans. It is clear that the Ministry of Health is the lead agency in the fight against Covid-19, however, other ministries and agencies allocated themselves similar responsibilities in order to get a share of the Covid-19 supplementary budget. This paints a bad picture of a scramble for and partition of public resources which clearly shows government’s misuse and wastage of public resources.
Therefore, I call upon parliament to do the following
(i). Amend the electricity Act 1999 to address the continuous challenges affecting the electricity industry.
(ii). Reject the approval of loans by the government to invest in failed energy projects that undermine the promotion of environmental conservation.
(iii) Urgently increase investments in renewable modern energy options particularly off grid solar that have the potential to meet the energy needs of majority of Ugandans especially the poor women and men who live in rural areas. Electricity and oil will not meet the needs of communities.
(iii). Further, Parliament should reject funding for projects that degrade the environment such as oil roads, sugarcane growing, hydropower dams, rice growing, sand mining and others.
(iv). Finally, government should allocate three quarters of energy annual national budgets to off-grid energy projects.
Cirrus Kabaale, Project Officer at Environment Governance Institute (EGI)
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