13 May 2014

Uganda: Low Resource Usage Costs Govt - Finance

The government's failure to use borrowed funds to work and accomplish certain projects is costing Uganda billions of shillings, the ministry of Finance has warned. The 2014/15 National Budget Framework Paper, drafted by the ministry of Finance, blames the country's low absorption capacity of resources for the money the country loses annually.

A lot of delays have been experienced as a result of the squabbles that surround the process of awarding contracts, compensation, and procurement. These delays lead to money being lost especially through the increase in the interest paid on the loans.

"This could be avoided if we improved on project selection, design, appraisal, implementation and evaluation," said the paper that acts as background to the budget. "Slow utilization or absorption capacity results in increase in overall project costs," it adds.

Government usually borrows money at a cost to undertake certain projects. With the delays, however, government has had to run back for more money to complete the projects, especially when the prices of goods and services increase.

Consequently, even when projects fail to take off, government has to refund the money, and with interest. Releasing money for the second quarter of this financial year, Keith Muhakanizi, the secretary to the Treasury, said government units were failing to spend money in time.

"They have been saying the new system (Integrated Financial Management System) is the problem, but how come you managed to spend money fast [in the last months]?" he wondered.

The construction of the 250MW Bujagali dam was estimated to cost about $860m, but due to delays, the total cost had to be revised upwards. The company blamed the increase in costs to higher prices of materials.

NSSF's Pension towers is one of the projects that have suffered as a result of the delays. Former NSSF Managing Director Richard Byarugaba once complained that his hands were tied.

"I am constrained," he said. "It takes at least two years to get a contract [awarded]. Look at the Pension towers where we had reached, now we went back to zero."

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