Ministries fail 2008/9 budget targets

A new report from the Finance Ministry indicates that the 2008/09 Budget has performed poorly, citing persistent cash constraints.

The new report; Semi Annual Budget Performance Report FY2008/09, attributes the poor performance to revenue shortfalls and failure by key sectors like infrastructure and agriculture among others to spend over Shs263.2 billion.

"Domestic tax collections had a slow start to the fiscal year. Targets were missed in every month excluding October, resulting in a shortfall as of December of Shs108 billion.

Preliminary analysis indicates shortfalls across all major tax sub heads," the report reads in part.

The report comes after Finance Minister Syda Bbumba told Parliament in April that the pace of Uganda's economic growth had also declined by 2.1 percentage points and is now projected at 6 per cent, as the country prepares for the 2009/10 budget reading this Thursday.

The current figure projecting economic growth is far below the 9.8 per cent growth which President Museveni promised in his State-of-the Nation Address last year.

The decline has been attributed to the effects of the financial crisis which have started to be felt in lower export growth, a decline in foreign capital inflows, depreciation of the shilling as well as lower tax revenue collections.

Under fiscal performance, of the Shs4.5 trillion planned for expenditure, the government had a glaring deficit of Shs1.1 trillion (excluding grants) over the first half of 2008/09 in support of various interventions.

The deficit projection, according to Ms Bbumba, crystallised a "modest" deficit of Shs554 billion which resulted into delayed implementation of government programmes, particularly in the road sector.

During the first half, of the planned donor grants of the Shs666.4 billion, the government only received Shs238 billion representing a shortfall of Shs428.4 billion.

Like in the first half of 2007/08 performance, where there was a year-on-year decline in donor grants by 34 per cent, the new report indicates that for the second year running shortfalls were recorded on project and budget support

"The shortfall in donor support is partly explained by the appreciation of the US dollar against other major currencies. Since disbursement is made in many currencies and converted to US dollar, a reduction in dollar units per other international currency unit was registered," the report reads in part.

Further details indicated that the direct domestic tax collections performed below target. According to the report, as of the end of December, the shortfall was Shs20 billion. Collections of Pay As You Earn (PAYE), the largest item in the tax had exceeded their mid-year targets.

However, the strong performance on PAYE was not able to mitigate the poor performance of the corporate tax which also underperformed by Shs20 billion.

It reads, "Indirect domestic tax collections were below target for the first six months of the fiscal year by Shs45 billion. International trade tax collections have missed the target for the first half of the fiscal year about Shs60 billion."

Adding: "As a result, only Shs32 billion has been collected, thus far for Value Added Tax compared to the mid-year projection of 341.5 billion. Petroleum and import duties were well bellow the projected collections by Shs65 billion and Shs20 billion respectively."

The most noticeable budget underperformance was registered under the domestic development component which accounted for 74 per cent and 53.4 per cent for releases and expenditure respectively.

This, according to Ms Bbumba, equates to Shs142.48 billion of the released funds that were unspent. �The underperformance is characteristic of accountability shortcomings and failure to submit timely work plans and procurement plans," the report adds.

source: Citizen