Uganda’s budget offers distant hope rather than instant relief

0

In recent years, it has become the norm for Ministry of Finance propose a breathless theme to pivot the presentation of the annual budget.

This year was no exception. The government proposes to spend UGX 48.1 trillion ($12.8 billion) for the financial year 2022/23 under the theme “Comprehensive monetization of the Ugandan economy through commercial agriculture, industrialization, expansion and widening of services, digital transformation and market access”.

Of the total projected expenditures, UGX 30,797.3 billion is to be raised by domestic revenue sources, specifically UGX 23,754.9 billion as tax revenue and UGX 1,795.9 billion from non-tax revenue.

Planned domestic borrowing will be capped at UGX 5,007.9 billion while budget support amounts to UGX 2,609.2 billion.

External project financing amounts to UGX 6,716 billion, including UGX 4,625.7 billion in the form of loans and UGX 2,090.5 billion in the form of grants.

During this period of rising cost of living, ordinary Ugandans can be excused for feeling less enthusiastic about waving slogans; even less, if we add impressive figures.

Headline inflation rose from 2.7% in January to 6.3% in May. Pockets are getting lighter by the day and the government’s much-sought relief is not available now, except a promise not to introduce new taxes.

The build-up to Budget Day on Tuesday saw an escalation in public sector wage demands that the government says it cannot afford to meet even as threats of industrial action continue to come and go amid all the quarrels.

Nor do repeated explanations centered on the Covid-19 pandemic and the war in Ukraine.

Launching 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 to “accelerate economic recovery and strengthen productive sectors to improve livelihoods”. .”

He specified the government’s objectives for the coming year and the medium term. The aim is to launch the process of integrating households still engaged in subsistence activities into the monetary economy.

Support businesses and the economy as a whole to recover from the impact of the Covid-19 pandemic and restore lost jobs and livelihoods, as well as protect households from rising food, fuel prices and other essential products using prudent economic policies.

Kasaija made other promises, including reducing the debt-to-GDP ratio to 50% or less, reducing domestic borrowing, increasing funding for anti-corruption institutions, increasing the allocation to repay arrears from suppliers, more money for local governments, Uganda Airlines flights to UK and China. As usual the list is long.

He said the size of the economy is expected to reach UGX 162.1 trillion for the fiscal year ending June 30, 2022.

“That equates to $45.7 billion. Economic activity was more dynamic with a growth rate of 4.6% per year during this financial year, against 3.5% last year.

This shows that the economy is on the way to a full recovery from the Covid-19 disruptions,” he said.

Kasaija said that due to deliberate and prudent economic policies that resulted in a dynamic recovery and resilience of the economy, Uganda’s GDP per capita rose to $1,046 in
current prices.

This equates to UGX 3.7 million per person per year and means that Uganda has reached the lower rungs of the middle income category.

The planned launch of Uganda’s first Earth observation satellite in September is a testament to this achievement.

The main sectors of the economy are recovering rapidly. Services, which now contribute 41.5% to GDP, are expected to grow 3.8%, compared to 2.8% in the previous fiscal year.

This is explained by the continued recovery in wholesale and retail trade, education and tourism services; coupled with the growth of real estate and ICT activities.

He said: “The industrials sector is expected to grow 5.4% from 3.5% in the prior year, largely driven by the recovery in manufacturing and construction activity.

The industrial sector is expected to contribute 26.8% to our GDP. The agricultural sector is expected to grow by 4.3%, largely due to growth in the production of food and cash crops, livestock and the recovery of fishing.

This is the same rate at which the agricultural sector grew last year. The sector contributed 24.1% to total economic output.

Total export earnings of goods and services amounted to $5.74 billion in the 12 months ending April 2022, compared to $6.2 billion in the previous 12 months. However, coffee revenue increased by $279.5 million to $811 million over the same period.

Private sector imports of goods increased significantly to $6.4 billion in the year to April 2022 from $5 billion in the previous 12 months.

This increase is largely attributable to investments in the oil and gas sector. For the same reason, foreign direct investment (FDI) rebounded strongly to $1.36 billion in the year to April 2022 from $892 million in the same period a year earlier.

Uganda’s international reserves at the end of April 2022 increased to $4.54 billion, equivalent to approximately 4.6 months of imports. This is an increase from $3.57 billion in April 2021.

To maintain this momentum, the government wants to move the 39% of households still involved in the subsistence economy towards the monetary economy (Parish Development Model).

Accelerate the implementation of relief and recovery funds to support business recovery and restore lost jobs and livelihoods.

These relief funds include the Small Business Recovery Fund; the Emyooga Funds; Microfinance credit to SACCOs; 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 welfare of ordinary Ugandans, without causing long-term distortions in the economy; and increase investment in infrastructure to facilitate increased production, value addition, and access and entry to national and regional markets.

A package of six aid measures aimed at limiting price increases has also been proposed, starting with helping farmers grow more fast-maturing food and oilseeds to ensure sufficient domestic supplies.

Second – maintain market-based pricing to support a continuous supply of goods and services.

Kasaija said: “This is to ensure that demand does not exceed supply; (3) Accelerate the improvement of alternative fuel import routes across Lake Victoria to avoid possible unnecessary supply disruptions; (4) Use appropriate fiscal and monetary policies to mitigate the impact of price shocks; (5) build additional medium-term fuel storage infrastructure and store it adequately; and (6) accelerate commercial oil production and oil refinery development. »

“Construction of the East African Crude Oil Pipeline (EACOP) is expected to begin in the coming fiscal year.

The ability of the Uganda National Oil Capacity to invest in oil and gas development has also been strengthened.

Although there have been negative campaigns against the development of the crude oil pipeline, the government will develop Uganda’s oil and gas resources responsibly and sustainably for the benefit of all Ugandans,” he said. he declares.

Kasaija admitted that he expects a further drop in tax revenue this fiscal year, but the good news is that in the 10 months from July 2021 to April 2022, there has been a 38% increase. taxpayers with 686,000 new taxpayers added to the register.

He assured Ugandans that the government will pour billions if not trillions into these areas that will help realize the stated theme.

Just over UGX 1 trillion is invested in PDM along with other funds that target small business development.

He said: “Micro, small and medium-sized enterprises (MSMEs), I implore you to take advantage of the economic stimulus programs and opportunities that come with investments in oil and other public infrastructure, to redefine your strategies, recover your businesses, develop, and formalize.

This way, you will be able to take more advantage of the now larger EAC market and create decent and better paying jobs for our young people.

Share.

Comments are closed.