In recent years, it has become the norm for the finance ministry to come up with a breathless theme to pivot the annual budget presentation.
This year was no exception. The government is proposing to spend UGX48.1 trillion ($12.8 billion) for financial year 2022/23 under the theme, ‘Full Monetisation of Uganda’s Economy through Commercial Agriculture, Industrialisation, Expanding and Broadening Services, Digital Transformation and Market Access’.
Of the projected total expenditure, UGX 30,797.3 billion is to be raised through domestic revenue sources specifically UGX23,754.9 billion as tax revenue and UGX1,795.9 billion from Non-Tax Revenue.
Planned domestic borrowing will be capped at UGX5,007.9 billion while Budget Support accounts for UGX 2,609.2 billion.
External financing for projects is UGX6,716 billion of which UGX4,625.7 billion is from loans and UGX2,090.5 billion is from grants.
During this period of rising costs of living, ordinary Ugandans can be excused for feeling less than enthusiastic about stirring slogans; even less so, when impressive figures are added.
Overall inflation has jumped from 2.7% in January to 6.3% in May. Wallets are getting lighter by the day and the much sought after relief from the government is not forthcoming now except a promise of no new taxes being introduced.
The run-up to Budget Day on Tuesday has seen an escalation of public sector wage demands which the government says it cannot afford to fulfill even as threats of industrial action continue to come and go amidst all the bickering.
Nor are the repeated explanations centred around the Covid-19 pandemic and war in Ukraine, making any headway.
Launching into his budget speech with a determined air, the Minister of Finance Planning and Economic Development, Matia Kasaijja said, “The theme is in line with that of the East African Community which is ‘accelerating economic recovery and enhancing productive sectors for improved livelihood’.”
He spelt out the government goals in the coming year and the medium term. These are to kick-start the process of getting the households still engaged in subsistence into the money economy.
Support businesses and the overall economy to recover from the impact of the Covid-19 pandemic and restore the lost jobs and livelihoods as well as protect households from the rising prices of food, fuel, and other essential commodities using prudent economic policies.
Kasaija made other promises notably to reduce the debt-to-GDP ratio back to 50% or below, cut domestic borrowing, increase funding for anti-corruption institutions, increase allocation for paying off arrears of suppliers, more money for local governments, Uganda Airlines flights to the UK and China. As usual the list is long.
He said the size of the economy is projected to expand to UGX162.1 trillion for the financial year ending 30th June 2022.
“This is equivalent to $45.7 billion. Economic activity has been more buoyant at the growth rate of 4.6 percent per annum this financial year, up from 3.5 percent of last year.
This shows that the economy is on a path to full recovery from the Covid-19 disruptions,” he said.
Kasaija said due to deliberate and prudent economic policies that have resulted in a buoyant recovery and resilience of the economy, Uganda’s GDP per capita has increased to $1,046 in
This is equivalent to UGX 3.7 million per person per year and means that Uganda has stepped onto the lower rungs of the middle-income category.
The planned launch of Uganda’s first earth-monitoring satellite in September is one testimony of this achievement.
Major sectors of the economy are recovering fast. Services, which now contribute 41.5 % to GDP, are expected to grow by 3.8 percent up from 2.8 percent growth last financial year.
This is on account of continued recovery in wholesale and retail trade, education and tourism services; coupled with growth in real estate activities and ICT.
He said, “The industry sector is expected to grow by 5.4 percent up from 3.5 percent growth last financial year, largely on account of recovery in manufacturing and construction activities.
The industry sector is projected to contribute 26.8% to our GDP. The agriculture sector is expected to grow by 4.3 percent, largely as a result of growth in food and cash crop production, livestock as well as recovery in fishing.
This is the same rate at which the agriculture sector grew last year. The sector contributed 24.1% to total economic output.”
Total export receipts of goods and services were $5.74 billion in the 12 months to April 2022, down from $6.2 billion in the previous 12 months. However, coffee receipts increased by $279.5 million to $811 million in the same period.
Private sector imports of goods have increased significantly to $6.4 billion in the year to April 2022 from five billion dollars in the previous 12 months.
This increase is attributed largely to investments in the oil and gas sector. For the same reason, foreign direct investment (FDI) has rebounded strongly to $1.36 billion in the year to April 2022 from $892 million in the same period a year before.
Uganda’s international reserves at the end of April 2022 increased to $4.54 billion, equivalent to about 4.6 months of imports. This was an increase from $ 3.57 billion as at April 2021.
To maintain this momentum, the government wants to transition the 39% of households still engaged in the subsistence economy, into the money economy (Parish Development Model).
Step up implementation of the relief and recovery funds to support the recovery of businesses and restore the lost jobs and livelihoods.
These relief funds include the Small Business Recovery Fund; the Emyooga Fund; Microfinance Credit to SACCOs; the Uganda Development Bank (UDB) and Uganda Development Corporation (UDC), debt and equity funds, respectively; implement appropriate fiscal and monetary policies to mitigate the impact of price shocks on the wellbeing of ordinary Ugandans, without causing long-term distortions in the economy; and enhance investment in infrastructure to facilitate increased production, value addition and national and regional market access and entry.
A set of six relief measures to limit rising prices have also been put forward beginning with supporting farmers to grow more fast-maturing food and oil seeds to ensure sufficient domestic supply.
Secondly– maintaining a market-based determination of prices to support a continuous supply of the goods and services.
Kasaija said, “This is intended to ensure that demand does not outstrip supply; (3) Expediting improvement of alternative fuel import routes across Lake Victoria to avoid possible unnecessary supply disruptions; (4) Using appropriate fiscal and monetary policies to mitigate the impact of price shocks; (5) construct additional fuel storage infrastructure in the medium term, and stock them adequately; and (6) expediting commercial oil production and development of the oil refinery.”
“The construction of the East African Crude Oil Pipeline (EACOP) is expected to commence in the coming financial year.
The capacity of the Uganda National Oil Capacity to invest in oil and gas development has also been enhanced.
While there have been negative campaigns against the development of the crude oil pipeline, the government will develop Uganda’s oil and gas resources in a responsible and sustainable manner for the benefit of all Ugandans,” he said.
Kasaija conceded he expected another shortfall in tax revenues this financial year, but the good news is that during the 10 months from July 2021 to April 2022, there was a 38% increase in tax payers with 686,000 new taxpayers being added to the register.
He assured Ugandans that the government will be pouring billions, if not trillions into those areas that will help realize the stated theme.
Just over UGX1 trillion is going into the PDM along with other funds that target small enterprise development.
He said, “The Micro, Small, and Medium Enterprises (MSMEs), I implore you to take advantage of the Economic Recovery programmes and the opportunities that come with petroleum and other public infrastructure investments, to re-strategize, recover your businesses, expand, and formalize.
This way, you will be able to benefit more from the now bigger EAC market and create decent and better-paying jobs for our young people.”