Uganda 2016 / 17 Budget Reading

Posted by: lukwago J in Business June 8, 2016

Uganda – ^[⁹^]Mr Kasaija says agriculture is key to creating wealth and employment. He says the 2014 Population and Housing Census indicates that household reliance on subsistence farming has risen to 69% from 68% between 2002 and 2014. This, he says represents a higher number of households reporting Agriculture as their main source of livelihood, even as Agriculture’s contribution to the national output has declined to only 26%. ^[⁶^]In addition, according to Mr Kasaija, commercialisation in agriculture remains low, with only about 119,000 or 2.3 per cent of the 5.2 million farming households being engaged in commercial farming.

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He says, declining productivity in this sector is therefore a major challenge. He says the low productivity is caused by limited access to appropriate technologies,^[¹^] declining soil fertility and poor farming methods. He adds that farmers do not use high yield seed and animal inputs, and there is limited use of fertilizer. He says farmers also lack the requisite skills training, apply ineffective land management practices and suffer from poor farm-to-market infrastructure.^[⁵^] He says all these render agriculture highly vulnerable to exogenous shocks including low prices and climatic changes, which ultimately reduce the welfare of the households.

Mr Kasaija says notwithstanding challenges of declining productivity, ^[⁴^]the agriculture sector achieved the following progress through Government’s concerted interventions during the financial year now ending

4:18 EAT: He says Uganda’s economy is projected to grow by 5.5% next financial year. ^[⁸^]Over the medium term, he predicts, GDP growth is projected to average 6.3% per annum. ^[⁹^]He says this outlook is premised on the Government commitment to fast track implementation of key public investments in infrastructure to facilitate private investment.

Mr Kasaija says, in this regard, ^[¹^]government will continue to implement appropriate fiscal and monetary policies to ensure macroeconomic stability. In the medium term, he says, Uganda will prioritise the reduction of the trade deficit by increasing our revenue from exports by adding value to our primary commodities, ^[⁶^]harnessing the largely untapped tourism potential, and continuing to attract foreign direct investment.

4: 16 EAT: He says gross nominal public debt is estimated to be Shs. ^[¹⁰^]29,984 billion by 30th of this June. Out of this, he says Shs. 18,665.7 billion is external debt (equivalent to US$ 5,382.9 million) and domestic debt Shs. 11,319 billion. In nominal terms, according to Kasaija, our total public debt is equivalent to 34% of total economic output (GDP). The corresponding Present Value of our debt is 30.5% of GDP,^[²^] after discounting for time value of money. This ratio, he says is far below the Public Debt Management Framework threshold for sustainability and the East African Community Monetary Union convergence criteria requirement of 50%. These benchmarks show that our public debt remains sustainable over a long period in the future.^[⁵^]

He says increase in public debt financed priority infrastructure investments like the Karuma and Isimba Hydro power projects, rehabilitation and expansion of Entebbe Airport and Phase three of the National Transmission Back Bone Project,^[⁴^] is meant to enhance productivity in all sectors of the economy.^[¹⁰^] H says government will therefore borrow in future for highly productive fixed capital investments that can generate financial and economic returns to ensure debt sustainability.

4: 14 EAT: He says provisional outturn for domestic revenue for the financial year 2015/16 is Shs. 11,598 billion equivalent to 13.2% of GDP. This,^[⁸^] he says, is higher than the planned target of Shs. 11,333 billion. The Shs. 11,598 billion, according to Kasaija is accounted for as follows: provisional outturn for tax revenue is Shs. 11,192 billion,^[²^] non-tax revenue is Shs. 282 billion. He says Oil capital gains tax revenue is Shs. 124 billion.

He says the provisional outturn for total external financing during the year is Shs. 5,602 billion, of which project loan disbursements is Shs. ^[¹^]4,355.4 billion and grants Shs. 1,247 billion. Mr Kasaija says the provisional outturn for non-concessional loan disbursements is Shs. 3,041 billion while concessional loan disbursements is Shs. 1,315 billion.^[²^] He says the non-concessional loans are financing major priority projects such as Karuma and Isimba Hydropower plants and other projects in the transport and ICT areas. He says budget support loans were Shs. 120 billion. ^[⁹^]He says government domestic borrowing is projected to be below the amount planned of Shs. 1,384 billion for the financial year.

4: 11 EAT: The Buyanja county MP says while interest rates will continue to be determined by the market, Government will ensure fiscal and monetary policies prevent a significant rise in interest rates that crowd out the private sector.^[³^] He says this will be complemented with strengthening consumer protection measures to address any misconduct, such as the manner in which collateral is sold in case of loan default,^[¹^] by some financial institutions.

4:10 EAT: He says commercial bank lending rates have remained high largely due to the limited availability of long term capital,^[⁶^] resulting in the mismatch between the commercial bank financing products and the nature of the investments being undertaken.^[²^]

Mr Kasaija adds that the growth of credit to the private sector has also declined to about 8% in March 2016 compared to about 17% during the same period a year before.^[⁹^] He says this is primarily on account of constraints in private sector cash flows because of high debt service payments arising from the consequences of increased inflation.^[⁵^] The risk of higher interest rates, he says has now reduced as inflation is now around the policy target of 5%, following the Bank of Uganda’s implementation of appropriate monetary policy.

04: 09 EAT: Mr Kasaija says inflation has remained stable and in single digit as planned. Annual headline inflation was recorded at 5.4% in May 2016. However,^[⁶^] he says, in the first half of the year, inflation peaked at 8.5% in December 2015, due to the pass-through effects of the sharp weakening of the Uganda shilling against the US Dollar. ^[³^]This, he says also caused an increase in prices including electricity tariffs which adversely affected both manufacturers and domestic consumers. However, according to him, government implemented prudent fiscal and monetary policies that reduced inflation and therefore restored, as I speak now, price stability in the economy.

4: 05 EAT: He says the country’s foreign exchange reserves remain adequate, ^[²^]estimated at US$ 2,925 billion representing 4.4 months of future imports of goods and services in April 2016. The target recommended in the East African Community is 4.5 months of imports.^[¹⁰^]

4: 00 EAT: Mr Kasaija says Uganda’s earnings from exports are far less than what we spend on imports resulting in a large trade imbalance vis-à-vis our trading partners.^[¹^]

He says in the 12 months to March 2016, Uganda’s imports were worth US$ 5,647 million; compared to export receipts of just US$ 2,669 million, less than 50% of our import bill.

3: 55 EAT: The President, ^[⁸^]using the Constitutional mandate, invites the Member of Parliament for Buyanja Mr Matia Kasaija to present the budget statement. Since he has not been vetted and approved by the Parliamentary Appointments Committee,^[⁵^] he cannot be referred to as Finance Minister. Mr Museveni appointed him Finance Minister on Monday.

3:47 EAT: He says anybody (civil servants) who disrupts investors in anyway will be sent home (sacked).^[⁶^] This time, Mr Museveni says,^[¹^] the State shall move with the trustworthy and those who are enthusiastic for work.

3: 45 EAT: He says buying without selling is a recipe for failure. ^[²^]Mr Museveni says he is engaging Kampala City Traders Association to reverse the trend. ^[¹¹^]The areas of interest he says must be textiles, milk products, fish among others.

3:40 EAT: Mr Museveni says the logic of this budget is to expand the base of a modern economy that is infrastructure to lower the cost of doing business and to attract more investors in manufacturing, ^[⁴^]services and ICT. He says the culture of buying without selling must be reversed.

3: 33 EAT: Mr Museveni says manufacturing and farming need low interest loans and the Uganda Development Bank will be capitalized to promote the idea.^[²^] He says commercial banks cannot be relied upon as far as manufacturing is concerned

We are not going to wait for oil money to develop Uganda.^[¹⁵^] The President says he’s disappointed by the 4. 6 percent rate of growth in the last financial year. He says meeting the standards, Uganda needs to move to double digit growth.^[⁹^]

3: 25 EAT: A section of opposition MPs stand to protest Mr Museveni’s reference to them as having a leader of opposition. Pleas by Speaker Kadaga asking them to resume their seats fall on deaf ears for about two minutes. ^[¹^]Some of them raise placards questioning the continued detention of Dr Kizza Besigye, who was defeated by Mr Museveni in the February presidential elections. ^[⁴^]The MPs finally resume their seats. Mukono Municipality MP Betty Nambooze, however, walks out.

3:09 EAT: Speaker Rebecca Kadaga makes a proclamation for the presentation of the 2016/7 financial year. She highlights several bills that were passed in the last financial year by the 9th Parliament.^[⁹^]

2:58 EAT: Invited guests have settled in the conference room as they wait for the Finance Minister to deliver the budget. ^[²^]The Finance ministry is expected to allocate a total of Shs6.27trillion to the works and energy sectors.^[⁶^] The Education sector completes the top three budgetary allocations with Shs2.7trillion up from Shs2trillion in 2015/16.^[¹³^] Going by the past record, this has been the most consistent trend of allocations.

2:43 EAT: President Museveni arrives at Serena Conference Centre where the 2016/17 budget.^[¹⁰^] The head of State is inspecting a guard of honour mounted by police officers. ^[¹^]The Shs26 trillion budget that will be delivered by Mr Matia Kasaija, the finance minister, mainly focuses on infrastructure.

Source: Alla frica

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