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

By: REA­GAN WA­MA­JJI

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.

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.

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