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A commendable Job by Parliaments’ Finance Committee on the Public Finance Management (Amendment) Bill 2015

Published 2 years ago -


PFMA
The Public Finance Management Act passed not more than 6 months ago is now being ammended

The Public Finance Management Act, 2015 (PFMA) is in my opinion arguably one of the best pieces of legislation enacted by the 9th Parliament.    In its current form the PFMA provides strong checks and balances against government expenditure and debt financing; allows for enhanced Parliamentary oversight over GOU fiscal management as well as conformity of sector budgets to gender and equity budget guidelines developed by government.[1]

Barely 6 months after the Law came into force; government through the Ministry of Finance has already moved to amend the Act. For me, four key amendments stick out; to repeal the provisions on the requirement of a gender and equity responsiveness for ministerial policy statements, provide for further financing of supplementary budgets, extend timelines when unspent funds can be returned to the consolidated fund, reallocation of funds from one vote to another, and provide for guarantees and advances to government by Bank of Uganda (BoU).

On 30th September 2015, the amendment bill was tabled in Parliament and subsequently referred to the finance committee, which reported back to the house on 14th October. In his justification for the amendments, the Minister of Finance claims that government has encountered challenges in implementing certain sections of the law such as financing supplementary expenditures where the contingencies fund is depleted, getting advances from Bank of Uganda in situations where government has cash flow deficits.

In its report to the house, the Finance committee made strong objections to a number of amendments moved by government. Firstly, the committee found no merit in the assertion by government that the requirement for over 300 certificates of gender and equity responsiveness for individual ministerial policy statements would be a formidable task for the equal opportunities commission to execute without delaying the budget timelines. In any case, the equal opportunities commission explained that they had the capacity to do so. Furthermore, this amendment would be a regression on the need to address development concerns for women, men and marginalised groups and undermines article 32 of the Constitution[2]The Finance committee recommended deletion of the amendment.

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Secondly, the bill also sought to extend the timeline to return unspent monies to the consolidated fund by 4 months in order to allow time for settlement of outstanding obligations. It is worth noting that the biggest challenge to budget performance and service delivery has been under absorption of resources by MDAs[3]. In the 2013/14 OAG report on central government votes, 217 billion was reportedly unspent. The low absorption capacity was attributed to inefficiencies in the management of procurements, delayed accountability, incompetence by contractors, inadequate planning among others. Whereas this undermines service delivery, the finance committee took exception to the unique challenges faced by local governments, to retain unspent revenues for a period of two months. The risk with this though is it will encourage further inefficiencies in the already blotted local government service delivery system.

Thirdly was the proposal to allow government to get temporary advances from bank of Uganda without approval of Parliament. Finance claims that it is necessary in cases where government has cash flow deficits and thus to prevent a potential “catastrophe” such as government shutdown. Whereas this threat (short term fluctuations in revenue) is conceivable, the proposal departs from the Section 82 (1) (b) of the PFMA that requires all government loans to be approved by Parliament. In its wisdom the Finance committee allowed this provision but capped the total advances made at 18% of the total recurrent expenditure of government and to be repaid within the financial year, as per section 33 of the Bank of Uganda Act.

However if past experience if anything to go by, one would know better than to trust government with a blank cheque even with good intentions. In the minority report by Hon Ekanya on this specific amendment, he cites cases such as the government compensation of Bassajabalaba (over UGX.142 Billion), purchase of fighter jets (UGX.2 Trillion ), where funds were expended from BoU without parliamentary approval, as a telling remainder of governments reckless management of public resources. A number of MPs while debating the matter were religiously opposed to this proposal. Instead, they suggested that government should only get advances from BoU with Parliamentary approval.

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Finally the committee rejected other proposals such as transferring funds from one vote to another, as that would undermine the parliament’s appropriation role. It also rejected the amendments on supplementary expenditures that would have allowed the supplementary budget to be funded from the reallocation of funds of the annual budget, which would constrict the approved sector budgets.

In conclusion, government seeks to address short term bottlenecks by amending the law which is utterly wrong; the challenges highlighted have a lot more to do with deficits in management and adjusting to the new legal regime as opposed to gaps in the legal framework. The strong stance taken by Finance Committee in rejecting the outlandish amendments is commendable, for now. One can only hope MPs stick to their guns for once and not cave in to the executive demands like they have so many times before.

[1] CSBAG: Why The Proposed PFMA Amendments are inappropriate

[2] Article 32: Notwithstanding anything in this Constitution, the State shall take affirmative action in favour of groups marginalised on the basis of gender, age, disability or any other reason created by history, tradition or custom, for the purpose of redressing imbalances which exist against them.

[3] MDAs: Ministries, Departments and Agencies

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