Budgeting for Bureacrats

Nowhere, either in the National budget, or Vision 2040 or even NDP II is the average/median Ugandan –the 14 –year –old girl. Rather, we see a bleak picture of a technocrat/bureaucrat at the Ministry of Finance, Planning and Economic Development (MoFPED)

From the madness of more to wisdom of enough

About a year ago, I was reading a report titled “Gender and Social Inclusion: Uganda” by USAID when I came across a fascinating highlight that has been boiling my brain for quite a while. Over the years, I have realized that to graduate from the madness of more to the wisdom of enough, one needs to read such reports and the likes. The highlight, in the aforementioned report, typifies an average Ugandan and it reads, in part:

“The average Ugandan is a fourteen-year-old girl. She is one of six children, living in a rural area; her family is poor and it finds itself vulnerable to economic, political, and environmental shocks. She has a one-in-four risk of becoming pregnant during adolescence, is at high risk of being engaged in early marriage, and will likely drop out of school before reaching secondary level. Her status is the result of a combination of factors: poor nutrition, low performance in school, cultural expectations related to early marriage and family size, and systems not supporting her ambitions to thrive….”

In Uganda, the period of March to May has traditionally been a time for assessing the developments of the previous national budget, in order to anticipate what the new one has in store. It is in the same period that a group of young well-meaning economists at the Economic Hub Uganda (EHU) – a youth led think tank, where I belong – has restlessly questioned Uganda’s budgeting process and broadly, the relevance of her development agenda.

Driven by the above mind boggling highlight, EHU has organized a number of conversations on national budgets (FY 2017/2018 and FY 2018/2019), Vision 2040, and National Developing Plan (NDP II) to interrogate the fate of a “14-year- old girl” in Uganda’s development agenda. These conversations have given birth to a number of questions that have got us wet under the collars. For example, is Uganda’s national budget or broadly her development agenda oriented towards the needs of a median or average Ugandan –the 14 –year –old girl?

After disturbing our hair, in these conversations, we found the simplest answer to the above disturbing question: the answer is “NO”. Nowhere, either in the National budget, or Vision 2040 or even NDP II is the average Ugandan –the 14 –year –old girl. Not even her parents who perhaps own separate kiosks of tomatoes on a village street. Rather, we see a bleak picture of a technocrat/bureaucrat at the Ministry of Finance, Planning and Economic Development (MoFPED) perhaps a one Kenneth Mugambe –the Director of Budget, MoFPED envisaged in these documents. We thus concluded that our dream of attaining a middle income status by 2020, as highlighted by NDP II, is an improbable concoction –a fabricated story unlikely to happen.

Incrementalism:  an old budgeting paradigm

Under the theme “Budgeting for Economic Transformation and Social Inclusion”, EHU, in collaboration with the MUBS Economic Forum (MEF) and Friedrich Ebert Stiftung (FES) organized a public dialogue, on Tuesday, 30^th April, 2019, at Serena Hotel, to explore policy options to include the 14 –year –old girl in Uganda’s development agenda, through budgeting.

Prof Ezra Suruma — Chancellor, Makerere University attending the dialogue

The dialogue started with a key presentation from Ramathan Ggoobi –a celebrated economist in Uganda and coordinator of MEF. His presentation raised unpleasant facts about Uganda’s rare economic transformation process. It revealed that Uganda’s budget is not transformative and vocally raised recommendations to make the budget transformative. He stressed that a budget is transformative when it invests in sectors that encourage structural change towards higher productivity and jobs. Such sectors as education, health and social protection that Uganda has literally forgotten.

Interesting it was. It is in the same dialogue that I nearly lost my voice, in contribution to the plenary discussion, explaining that Uganda’s budgeting process is informed by an old and perhaps a wrong paradigm of incrementalism. A paradigm is simply a pattern of something or a model, just to escape an old criticism that economists use a sophisticated grammar, just as lawyers.  It is an old and wrong pattern to go to the budgeting process with a predetermined position that the current budget figure should exceed the previous figure. The budgeting environment needs to shift, markedly, from this paradigm to one of constraints and cutback expenditure.

The need to comprehensively review the National Budget

The beginning of wisdom about Uganda’s national budget is that it is almost never actively reviewed as a whole every year. Instead, it is based on last year’s budget with special attention given to a narrow range of increases. We have an agency –MoFPED that acts as advocate, protecting its budget base and requesting small “incremental” increases from the previous year. Then, we have appropriations subcommittees, in parliament and Local government that act as guardians to make slight reductions in what the agency requests.

It is because of that paradigm that Uganda’s budget figure is ever rising. The whole point was that our national budget wouldn’t necessarily increase if it was comprehensively reviewed every other year. That may be we would cutback expenditure on public management. There is no serious economist in this country that hasn’t questioned the logic of expanding the legislature and cabinet to the sizes they have become

Academics and practitioners: The big Divide

On the defensive, Kenneth Mugambe –Director of Budget, MoFPED, as well as one of the panelists for the dialogue dismissed my submission describing it very academic, just as he had earlier dismissed Ggoobi’s presentation. He mistook the whole point and rushed to conclude that I was proposing a zero-based model of budgeting.

His dismissal of my submission, on the account of being too academic, got my two hands on the cheeks wondering why the gap between academics and practitioners has increasingly become a laden topic. Subsequently, I began to think that this gap has largely outlived its usefulness, and that the recent arguments for and against academic-practitioner collaboration are not to advance any understanding yet.

And yet the two contending areas are inextricably related: academics explains much of the practice and equally practice explains much of academics. For example, academics was used to explain some of the practices in the country and to, by and large, dismiss the notion that Uganda is on the right development path as claimed by government authorities at MoFPED and National Planning Authority (NPA). That Uganda’s economy cannot structurally transform with increasing income inequality. She cannot achieve a middle income status with the increasing population growth rates. It is impossible when the average Ugandan is still giving birth at the age of 14 and later becoming a grandmother at the age of 28.

For starters, Uganda has the 9^th highest population growth rate of 3.25% and the 5^th highest fertility rate of 6 kids per woman in the world. Producing kids has thus become one the most booming sectors in the country, along with the “Jesus sector”. And it appears as if producing more children is something legendary. Surprising enough is that the population growth is slightly higher than growth in Agriculture (at 2.9%) thus we are not producing enough food for the rising population. In 1978, it was Reverand Thomas Robert Multhus who, in his classic work “An Essay on the Principle of Population”, argued that when population growth surpasses food growth, positive checks such as starvation, war, disease, floods etc. would operate to return population to return population to a lower and more sustainable level. We acknowledge that these checks are operating in Uganda.

Rural, informal, poor

Over the past two decades, Uganda has endured a questionable slow economic recovery with an average economic growth rate of 6%. A group of researchers at the Center for International Development at Harvard University (CID) presented economic growth projections which revealed that Uganda has the potential to be the second fastest growing economy (after India) over the decade 2014–2024.

Well, this is the Uganda that we saw in the ‘heavy’ documents i.e. Vision 2040, and NDP II. However, Uganda’s growth profile also reveals unpleasant statistics. First; despite the rosy growth statistics, Uganda has the largest number of rural population in East Africa (82%), but with an agricultural sector that contributes the lowest share of GDP. This implies low levels of farm productivity and high poverty levels. My brain bells begin to ring again: will the country’s obsession with infrastructure development improve farm productivity?

Second; rosy economic growth statistics notwithstanding, Uganda’s urban informal sector accounts for nearly half of GDP i.e. 42% or (1.2 million households) higher than any other E. African country except Tanzania. Months ago, I nearly emptied my pens pointing in these pages to decry government’s interventions in the informal sector. Indeed, much of our growth has been happening in low productivity sectors, mainly informal services sector with all its limitations to create jobs and raise revenue

I also noted that the sector’s challenge is not only to provide employment to the new entrants in the labor force, but also to absorb millions who leave agriculture sector in search of “non-farm” jobs. It is because of questioning such issues that I have started losing my hair at arguably a younger age. Because of wrong interventions, we now see young able- bodied men sell off their last piece of land in search of a non-farm job such as boda-boda riding.

Majority of Uganda’s workforce is also stuck in this unorganized sector, without any written contract, social security benefit, and security of tenure. Basing on a wealth of empirical research, I have tirelessly argued that most government policies which attempt to “regulate” the informal sector to bring it into the tax net, without adequate support, end up killing the sector that absorbs the uneducated and unskilled. How do we then reduce the size of the informal sector without killing the golden goose?

Third; Uganda hasn’t completed the demographic transition. She has the 2nd lowest death rate i.e. 12 per 1000 (after Kenya’s 10) but also has the highest birth rate (48 per 1000) i.e. a population growth rate of 3% per year. From the budget dialogue, it appeared obvious that an active policy on population control is badly needed. Granted, Uganda is one of the world’s youngest countries with about 77% of its population below the age of 30 years and yet it presides over a high youth unemployment rate.

Invest in women education

Indeed the phrase of “harnessing demographic dividend” has dominated much of the public discussions recently. For Uganda to harness this dividend, the population growth rate should be reduced and total employment increased. How? By not only controlling population directly using population “control measures” such as family planning measures but also investing in women education and income generation. In the long run, this will increase incomes and living standards and birth rates will decline.

Generation of empirical research shows that if adults, particularly women, get involved in economically productive ventures/jobs, population growth and poverty reduce. This research should inform us to rethink of our policy interventions on population control. It (research) calls for policies aimed at easing women’s childcare responsibilities, improving access and use of farm labour, securing equal access to and use of non-labour inputs, and supporting women’s education and training.

Family planning alone cannot control population control. Why? Behavioral economics predicts that such interventions may increase population on the account of a ‘moral hazard’. These measures act as incentive for people to get involved more in sex knowing that it is protected. So, sex intercourse increases and birth rates ‘may’ increase given that the measures are not 100% protective.

Who are we budgeting for?

Promises kept, we need transformative budget for a better Uganda. A budget that is pro-poor and oriented on the needs of the average Ugandan. A budget that is based on livelihood transformation rather than expectations of economic growth. To have such kind of a budget, we need to find answers to the following questions. Who decides the budget in Uganda and what are his/her/their interests? Who are the players in the budget process and what incentives are at each stage? How do we balance the power between those who decide the budget and the average Ugandan vis-à-vis their interests?

Darious Mugabe is an Economist at Economic Hub Uganda and also lectures economics at renowned Makerere University Business School (MUBS)