* Museveni seeking to extend 30-year rule
* Critics say ruling party and state indistinguishable
* Opponents claim harassment by security forces
* Government says ruling party not spending taxpayers' cash
By Edith Honan and Elias Biryabarema
MBARARA, Uganda, Jan 26 (Reuters) - At an election rally this month, Ugandan President Yoweri Museveni awarded city status to the town of Mbarara - a minor distinction on the face of it, but one that promises more public sector jobs for local voters.
As top musicians played for thousands of dancing supporters, critics said it was another example of Museveni spending freely on government patronage in a campaign to extend his three decades in office while teachers go unpaid and clinics run out of drugs.
"For 30 years, it has been the same face, the same system, the economy in the hands of a few people," said 53-year-old Steven, who did not want to give his full name. "He has the state machinery buying the election."
Museveni, whose government denies squandering state cash on campaigning for the Feb. 18 presidential vote, has brought a measure of peace and economic stability since he took control of the country in 1986 after winning a protracted bush war.
His achievements since then pleased Western allies, who value Uganda for sending peacekeeping troops to hotspots like Somalia. But as the 71-year-old seeks a fifth term, Western donors frustrated by his lengthy grip on power are calling more loudly for him and other entrenched African leaders - such as Paul Kagame in neighbouring Rwanda - to relinquish office so a tradition of peaceful transition of power can be established.
Museveni's opponents at home complain that the rebel-turned-statesman treats the treasury as his personal fiefdom in a nation that remains among the poorest in Africa.
Museveni "simply believes that anyone has a price, and he is purchasing people as if they are some chattel in some market", candidate Amama Mbabazi, a former ally who was sacked as prime minister last year, told Reuters.
Mbabazi and Kizza Besigye, a longtime opponent who has lost three previous elections, are Museveni's main election rivals.
They command big crowds and draw cheers when they criticise runaway government spending. Mbabazi promises to cut the budget of the State House, or the presidential office, by 60 percent.
Both candidates say the government uses the security forces to harass them and their supporters, which the police deny. When the pair were detained last year, police said they had broken the law by campaigning before it was allowed.
Government spokesman Shaban Bantariza said the idea that Museveni's party was using taxpayers' money on the campaign was "purely speculative". He said a costly bureaucracy was the "the price of democracy".
But in the budget for 2015/16, the year that covers the election, government spending rose by 71 percent, helping to push the Ugandan shilling to all-time lows.
"His entire governance is based on a system of patronage," said Nicholas Opiyo, a Kampala lawyer, in comments echoed by other observers. "The line is so blurred that you often can't tell which is the state and which is the ruling party. Museveni is the state and the state is Museveni in Uganda."
In September, the government ran out of antiretroviral HIV drugs and activists accused it of diverting funds to its election campaign. Officials denied this and blamed a shortage of foreign currency. Last year, teachers from several regions complained that they had not been paid for months.
The scale of election spending is hard to establish. Museveni's party, the National Resistance Movement, does not release financial reports.
Portions of the government budget are not publicly allocated or, as with parts of the bill for security, are secret.
The State House covers the president's campaign travel and accommodation costs, but does not say how much it spends.
After the 2011 election, the European Union's observer mission said "the distribution of money and gifts by candidates, especially from the ruling party" was "inconsistent with democratic principles".
Analysts say this presidential vote follows a trend. Each election season, Museveni creates new local government districts, each with upwards of 100 new jobs, says budget analyst Godber Tumushabe.
Museveni himself has more than 100 presidential advisers, Tumushabe said, all with salaries, official cars and money for their running costs.
It was not immediately possible to obtain a list of advisers from the government. But Bantariza said: "If the opposition thinks (such positions) are useless they should have brought a bill to amend the constitution and abolish these provisions."
Opposition bills are usually shot down in a parliament dominated by Museveni's supporters.
Opponents say Museveni's campaign pledges will do little to reassure those who worry about fiscal prudence. They include a promise to give 18 million hoes to farmers, costing the Agriculture Ministry about 28 percent of its budget.
Museveni's long years in office make it difficult for many Ugandans to imagine any other leader. Most people in the young nation cannot remember another president.
"He's not our choice but if he wants to stay, whether we like it or not, he will stay," said Steven in Mbarara. "You know, it's African politics."
Writing by Edith Honan; Editing by Edmund Blair and Giles Elgood