Mr Gilberto Riccobono of Alstom (2nd L) shows Prime Minister Amama Mbabazi (C) and other officials the functional first 50MW unit of Bujagali hydropower project in Jinja yesterday. Government cut ministries’ budgets to pay private power suppliers, it has emerged. PHOTO BY NELSON WESONGA
The government was recently forced to slash ministry and other departmental budgets as it scrambled to avert a crisis when private power generators threatened to plunge the country into darkness over hundreds of billions of shillings in unpaid arrears.
This newspaper understands that the decision to starve non-critical sectors of cash was taken by Finance Minister Maria Kiwanuka with the backing of Cabinet— a development which highlights the cash squeeze currently facing the government as it seeks to implement activities set out in the 2011/12 budget announced in June last year.
A detailed break-down of how badly specific ministries were affected remain scanty, but Finance Ministry Spokesperson Jim Mugunga yesterday confirmed the cuts and asked the affected government agencies to bear with the situation.
“We had no choice but to make hard decisions in order to raise the money needed to subsidise thermal power generation,” Mr Mugunga said.
“The Shs92 billion allocated in the budget was not enough and we had to effect cuts to raise an additional Shs377 billion. In fact, by July we had already spent all the money budgeted for yet we had a crisis on our hands.”
Mr Mugunga, however, indicated that the Finance ministry did not touch core government activities in implementing the stop-gap measure. “We cut recurrent expenditures, targeting areas such as travel and procurement of vehicles, among others. This expenditure was made to sustain power supply on the national grid,” he said.
“The Shs92 billion allocated in the budget was not enough and we had to effect cuts to raise an additional Shs377 billion. In fact, by July we had already spent all the money budgeted for yet we had a crisis on our hands.”
Mr Mugunga, however, indicated that the Finance ministry did not touch core government activities in implementing the stop-gap measure. “We cut recurrent expenditures, targeting areas such as travel and procurement of vehicles, among others. This expenditure was made to sustain power supply on the national grid,” he said.
After Ms Kiwanuka realised Shs377b from this re-allocation, sources revealed that she later authorised the payment to power generators. The most recent installment of Shs120 billion was made last month.
On closer consideration of this emergency financing measure, it was later realised that the budget cuts were unsustainable as they could potentially paralyse public service delivery.
Cabinet is then reported to have taken the unpopular decision to withdraw the huge subsidies the government, has until recently, been making to the power sector and asked consumers to prepare to foot the entire bill. This is what led to the increase in the cost of power by at least 40 per cent in new tariffs announced by the Electricity Regulatory Authority last month.
Under the revised tariff regime, domestic consumers will pay Shs524.5 up from Shs385.6 per unit of electricity consumed. Commercial consumers Shs487.6 instead Shs358.6, medium industries Shs458.9 up from Shs333.2 per unit, and large industries Shs312.8 instead of Shs184.8 for each unit consumed. Asked why the government secretly cut ministries’ budgets to pay for subsidies they had scrapped, Energy Minister Irene Muloni said: “We were paying for arrears but government realised that paying for subsidies was expensive and unsustainable.”
The minister said government could no longer afford the large sums required to subsidise power whose estimated cost since 2005 tops Shs1 trillion.
Deputy Secretary to the Treasury Keith Muhakanizi confirmed that the Shs377 billion for the subsidy was financed through the budget cuts from all ministries.
Deputy Secretary to the Treasury Keith Muhakanizi confirmed that the Shs377 billion for the subsidy was financed through the budget cuts from all ministries.
“It is true that all budgets for ministries have been cut for the two quarters this financial year. This has mainly affected the cost of public administration,” Mr Muhakanizi said.
Courtesy East African
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