The Finance Minister Matia Kasaija

According to the NBFP, Uganda’s economy grew at 6.5% in real terms during FY 2018/19 and after rebasing of GDP, the size of the economy increased to Ushs 128.5 trillion up from the initial estimate of Ushs 108.5 trillion. Real GDP growth is projected at 6.3% and 6.2% in FY 2019/20 and FY 2020/21 respectively and is expected to reach 7.0% by FY 2024/25.

The overall focus of the budget strategy for FY 2020/21 is to address challenges hindering the speed of economic transformation, rural economic development, expansion of the industrial base, job growth and delivery of essential social services under the theme: “Sustainable Industrialization for inclusive growth, employment and wealth creation.”

The total resource envelope for FY 2020/21 is projected to be UShs. 39,640.8 billion (39.6 trillion) and it comprises of both domestic and external sources down from Ushs.40,487.9 billion (40.4 trillion). This is largely on account of reduction in external financing.

In order to ensure alignment of the budget to the objectives of the third National Development Plan, the interventions for FY 2020/21 will fall under strategic clusters namely: Increasing production and productivity in the productive sectors of the economy, enhancing private sector competitiveness as well as consolidation and increasing of the infrastructure stock.

Other clusters are: Improving social service provision and regional equity, improving the effectiveness of governance and maintaining peace and security.

The commitment towards debt sustainability will be through reducing reliance on debt by increasing domestic revenue through the operationalization of the domestic revenue mobilisation strategy (DRMS) among other measures.

As at end of June 2019, the stock of public debt amounted to US$ 12.55 billion of which external debt was US$8.35 billion (approx. Ushs 30.85 trillion) and domestic debt was US$ 4.2 billion (Ushs 15.51 trillion). This is equivalent to 36.1% of GDP in nominal terms and 27.3% in present value terms

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The Uganda Revenue Authority (URA) is to start collecting all the tuition and other fees paid by students in public Universities in abid to curb misuse of funds by management.

The directive was given by the Ministry of Finance and a single account which will be run by URA is yet to be opened on which students will send-in all their dues.

Acoording to the ministry of finance spokesperson, Mr Jim Mugunga, said that the new strategy will help fight the vice of ghost students, bureaucracy and costs in public universities.

“We realised that there was abuse of funds in our institutions of learning because some of the tuition is being collected but not used. Some tuition is stolen while some money just disappears. So, let URA collect this money, let this money come as government revenue and let it be budgeted for and appropriated,” Mr Mugunga told Daily Monitor by telephone yesterday.

He decried the current system that makes it difficult for government to do followups on complaints of money laundering and fraud.

“Once we get to know how much each institution is collecting, we shall facilitate timely release of money back to the universities to take care of students, staff and institutional support,

“Tuition is actually government revenue and not money that belongs to universities. Historically, when revenue collection was not streamlined, the ministry had allowed institutions to collect on its behalf as we built internal capacities and get most institutions networked and strengthened. URA is, therefore, ready and the most suitable agency to handle this task,” ” he added.

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How will the 2018-2019 budget affect the local person

Member countries of the East African Community are preparing to simultaneously table the 2018-2019 Budgets in their respective parliaments. In Uganda, finance minister Matia Kasaija will present a 30.9 trillion Uganda shilling (USD$8 billion) budget. Sarah Logan an Economist, at the International Growth Centre examines the economic context of Uganda’s annual budget and the associated challenges.

What is the context in which this year’s budget is being tabled?

The Ugandan government is facing pressure to deliver on many fronts. Economic growth slowed in recent years, averaging 4.5% in the five years to 2016. That’s down from an average of 7.8% in the previous five year period. Curtailed growth was due to lower commodity prices. Uganda’s main commodity exports of coffee, cotton and copper all experienced diminished world prices.

Other contributing factors were an increased incidence of drought and the conflict in neighbouring South Sudan, Uganda’s main export trade partner. Relatively high population growth, averaging 3.4% in the five years to 2016, eroded much of the gains from economic growth in recent years, resulting in declining GDP per capita and increased poverty.

Constraints to growth and productivity remain notable, particularly in agriculture and manufacturing. These sectors are hampered by infrastructure gaps, high interest rates that have made borrowing expensive, and difficulties accessing high quality inputs. These constraints have had a marked impact on micro, small, and medium enterprises, which constitute 93.5% of Ugandan firms. Such limitations pose obstacles to achieving production at scale, which is needed for firm growth.

In recent budgets, the government has significantly raised investment in public infrastructure (notably in transport, works, and energy) to address these constraints. It’s also tried to cater for relatively rapid urbanisation. But long project timescales, poor project selection and execution, and absorptive capacity constraints mean that maximum gains from these investments have not been realised.

These investments have also necessitated greater government spending in recent years, financed by increased borrowing from both domestic and external sources. As a result government debt has grown to 38.6% of GDP, up from 19.2% in 2009. But debt remains within the confines of what is considered sustainable.

What are the most challenging factors heading into this budget?

Working out the right balance between investing in infrastructure and social sectors is a key challenge. While more spending on infrastructure development is vital, it has necessitated budget cuts to arguably already underfunded social sectors, including health and education. But the right balance cannot be judged on budget allocations alone: these figures don’t take into account off-budget financing, which is common in social sectors.

International targets (where they exist) are also of limited value in guiding allocations as spending needs vary across countries and over time.

Another key challenge is how to fund the budget. The National Budget Framework Paper envisions both external and domestic borrowing, as well as the use of domestic tax and non-tax revenues. Government’s domestic borrowing has contributed to raising interest rates, making borrowing more expensive.

Consequently, a growing portion of government spending now goes on servicing its debt obligations, estimated at 12.3% of total revenues for 2018/19. In time, this figure should be lowered, thus opening up funds for spending on development priorities.

Domestic tax and non-tax revenues are generally a preferred source of budget funding as they do not incur debt. The contribution from these sources is expected to rise to 53% through anticipated improvements to tax administration and compliance. This is a positive sign.

What policy highlights would you want to see and why?

Continued investment in energy and infrastructure should be pursued, but it is necessary to improve the efficiency of these public investments. For example, up to 60% of the works and transport budget was reportedly not spent.

The government has recognised in its National Budget Framework Paper that issues around under-execution of development projects need to be addressed and it is working on ways to better allocate funds based on absorptive capacity. The government is also cognisant of the need to provide funds to cover operations and maintenance costs in coming years to slow infrastructure deterioration.

The government has acknowledged the need to raise the country’s tax to GDP ratio, which at 13.5% is relatively low. The Uganda Revenue Authority is exploring several avenues to improve tax administration and compliance.

More could be done to expand the tax base and minimise distortions through, for example, greater focus on value added tax – one of the more progressive tax instruments – rather than import tariffs. Imports are vital as inputs for manufacturing, and restrictions on imports reduce firms’ productivity and competitiveness.

Rwanda’s experience with raising value added tax through mandatory usage of electronic billing machines is valuable in this regard.

How are Uganda’s growth prospects looking?

In coming years, GDP growth is set to accelerate as recent and ongoing public inves begin to yield returns.

Also read related:

• Parliament passes 2018/19 financial year budget
• Uganda likely to miss middle income target, report

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Hon Mutonyi Masaaba Rose Bubulo County West. Photo by parliament

The Ugandan Parliament has ordered government to avail Shs 5 billion that will be used to repair the dilapidated Ugandan Embassy in Brussels, Belgium.

The member of parliament for Gulu municipality, Hon. Lyandro Komakech told parliament during a plenary sitting on Thursday 12 April 2018 that the state of Uganda Chancery in Brussels is in a dilapidated state requiring the Ministry of Finance to avail 5 billion shillings  to rehabilitate the building.

Hon. Reagan Okumu of Aswa county also highlighted the uneasy situation under which the Ambassadors representing Uganda were operating, portraying a bad image of Uganda internationally. He also told parliament that things were worse abroad saying that he  visited Rome, the Ambassador was traveling in a very old vehicle that got stuck, caused traffic and needed to be towed away.

Bubulo East MP, Rose Mutonyi Masaba who is also the Chairperson of the Foreign Affairs Committee of parliament stated that government has kept a deaf ear towards the matters concerning Brussels building. She added that Uganda had lost Prime land which some foreign Governments had availed for construction of missions in Abuja Nigeria, Guangzhou in China among others.

The speaker of Parliament Rebecca Kadaga noted the need to improve Uganda’s embassies abroad and asked the Ministry of Finance to avail the required funds saying Uganda was given prestigious addresses abroad by those governments which needed to be kept shining to keep the good image of Uganda.

The Speaker also recommended that money from inflows from the embassy in Kenya be channeled to financing the rehabilitation of the Ugandan embassy in Brussels, rather than being deposited in the consolidated fund. Kadaga demanded that the Minister assures Parliament that funds meant for missions would not be cut after the budget is approved.

The Minister of State for Finance (Planning), Hon. David Bahati (NRM, Ndorwa West) said the ministry had allocated Ushs 5 billion in the next financial year, to cater for the Uganda embassy in Brussels. He promised that the money would not be reallocated following the approval of the budget. He also noted that all Government institutions  receive 95%  of money allocated to them every financial year but the ministry will ensure that embassies receive 100 percent of money allocated to them in the budget.

Read Also: Shs 700 millions needed for oxygen in referral hospitals

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Francis Gimara, the President Law Society of Uganda

Lawyers, Insurance companies, Human Resource Managers, Insurance Brokers and the Actuarial Association of Uganda have opposed a move by Ministry of Finance to withdraw the Pension Reform Retirement Benefits Sector Liberation Bill 2011 from Parliament, saying that the reforms will increase domestic savings and enhance investments.

Addressing a press conference this week in Kampala, the managers of these organizations led by Gimara Francis, President Uganda Law Society, say that the ministry should allow reforms in the pension sector so that workers can save their money with the scheme of their choice.

He wonders the motive behind with drawing of the bill yet the committee of finance has gathered sufficient views to make a report to Parliament.

The bill seeks to leave 19% savings with National Social Security Fund and the 5%savings will go to other private players.

The same bill was withdrawn from Parliament in 2014 by Government on claims that it had duplicated issues in the disputed law.

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Soroti District Woman MP, Angelina Osege

Members of Parliament have put Uganda’s missions abroad  on the spotlight over their failure to  remit  funds collected from the sale Visas and rental fees of the country’s properties abroad to the consolidated fund.

The MPs says officials in these missions bank the collected funds from the Non Tax Revenue but that these funds do not reflect at the consolidated fund.

Angelina Osege, the Soroti District Woman, who also Chairs the Parliamentary Public Accounts Committee said on Thursday that there have been many anomalies detected at the Uganda mission in Nairobi where by 276 million shillings was collected and that there are no receipts acknowledging funds from the people from whom the Non Tax Revenue is collected.

Keith Muhakanizi the Permanent Secretary Ministry of Finance.

While interfacing with the Ministry of Finance officials led by the Secretary to Treasury, Keith Muhakanizi, MPs who included that for Ntungamo Municipality, Gerald Karuhanga and Jessica Ababiku of Adjuman district questioned the Accountant General, Lawrence Semakula and Muhakanizi, over their non action yet money is being lost in Uganda’s missions abroad.

Later Semakula admitted that there is an anomaly and apologized before saying the they are going to ensure it is rectified.

“Actually as we speak, the ministry has directed the all accounting officers to encourage paying of visas through E-visa payment so as the fund is reflected to the consolidated fund directly. This is already a step towards streamlining these issues and I believe we shall rectify it,” he said.

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Matia Kasaija, the minister of finance

The Ministry of Finance has authorized the Uganda National Drugs Authority (NDA) to hike verification fees for imported drugs as a means of boosting locally produced drugs.

The NDA has been charging 2% verification fees on imported drugs but this will now be raised to 12%.

Speaking during a meeting on improving Uganda’s competitiveness in doing business, Finance Minister, Matia Kasaijja, said many Ugandan companies have built capacity but marketing their products locally has been a challenge due to tough competition from multinational pharmaceutical companies.

He says this directive which takes effect this financial year is anticipated to create local competition as well as promote the Buy Uganda Build Uganda policy.

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According to statistics from the National Planning Authority, of the total current number of 130 ministries, department and agencies, only 27 have successfully submitted their strategic plans that have already been  approved.

Speaking during annual planner’s forum last week, the state minister for finance, David Bahati, said that ordinarily the budget follows planning, but that in Uganda ministries budget are most times approved without proper plans.

He said that in these August releases, no ministry, department or agency will be given money without presenting a strategic plan.

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Ms Sarah Birungi Banage, (R) the assistant commissioner – public and corporate affairs of URA.

In a press statement released on Thursday, Sarah Birungi Banage, the Assistant Commissioner Public and Corporate Affairs with URA dismissed as false recent media reports suggesting that the beneficiary officials had earlier ‘hatched a plan’ to share the oil bonanza saying the transaction was both legal and had duly been approved through the Attorney General’s office.

The entire team came from URA, Ministry of Justice and Constitutional Affairs, Ministry of Finance, Planning and Economic Development and the Ministry of Energy and Mineral Development.

“It is standard international best practice for employees to receive bonus payments/or honoraria for exemplary performance in both the public and the private sector. Equally under the Ugandan Constitution; the President has a prerogative as a fountain of honor to reward exemplary performance and this has been exhibited in the fields of health, academia, sports among others,” Banage’s  statement reads in part.

The payments which have popularly been referred to as a “presidential handshake” have caused a lot of debate among Ugandans with some members of the civil society and a section of members of parliament calling for an investigation to the transaction saying it didn’t follow the due process of the law.

According to the Observer newspaper, a section of MPs have demanded that the Speaker of Parliament, Rebecca Kadaga, urgently institute a probe into the payments since the involved officers are public servants who draw a monthly salary for their work with government.

Paul Amoru the Dokolo North MP

Dokolo North MP, Paul Amoru, is quoted to have described the payments as “irregular, uncalled for and disturbing” and called for an immediate investigation into the matter.

“For us, as concerned MPs, from the information we have, URA should answer to the Parliamentary committee whose work directly deals with that to help us answer certain questions.It is unprecedented and dangerous,” Amoru said.

He was among MPs who called for a press conference on Wednesday in which a sizeable number of them said they want to clearly understand the source of this money and the person who authorised its payment.

Reports indicate that at least 42 officials benefitted from the bonus for their role in the capital gains tax dispute, in which the Ugandan government was awarded a combined total of USD700m.

However, Banage says there has been a lot of misconstrued information published in some dailies and online publications to the fact that payments were illegal, no approvals were obtained and that government officials ‘hatched a plan’ to share the oil bonanza.

“There is a lot of inaccuracy in the amount of money and the names of beneficiaries some of whom a former and current employees of URA. For example the following people both current and former staff of URA are erroneously included in the circulating lists namely;- Kyomuhendo Irene, Nabwire Agnes W, Nyakwera Jennipher, Nanziri Justine Stella, Wabokha Robert, Sebyala Samuel, Semombwe Charles, Patrick Mukiibi, Kateshumbwa Dicksons, Saka M Henry, and Otonga Michael Ochan,” Banage wrote.

Banage explained that contrary to the public view about the payments, all the legal processes were done before approvals were made as required by the Financial Management Act and that a Commissioner General was appointed to disburse the respective payments.

She added that the payment was a fraction of less than 1% of the total money won in the case.

Media reports have named the civil servants, who benefited, including, Ms Doris Akol, Head of URA (the initiator of the suit), her predecessor Allen Kagina who now runs the Uganda National Roads Authority (UNRA), the former Attorney General, the former Secretary to the Treasury, and the head of Kampala Capital City Authority, Jennifer Musisi, who headed the tax body’s legal department at the time.

In 2010, Heritage Oil sold its interest in Uganda to Tullow Oil at over $1.5bn, and the Ugandan government decided to impose a capital gains tax on the sale. But the oil firms refused to pay and the drawn-out dispute went on to the UK court of arbitration, where it was concluded in 2015.

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The MPs on the Public Accounts Committee Chaired by Angelina Ossege were questioning the ministry of finance for the diversion of 1 billion shillings to Privatization Unit from Uganda Development Bank funds meant for Agriculture Credit Scheme without Parliament’s approval.

Aston Kajara, the minister in-charge of Privatisation.

MPs noted that the privatization divestiture account has no money to run the unit which caused the ministry of finance to divert 1 billion shilling for privatization operation.

The legislators say that privatization unit needs to be closed since most of its work of privatizing government property completed and it’s a dead organization on basis that it has no funds to run its remaining work.

They added that government could be delaying closing the privatization unit with a hidden agenda.

The Director in-charge of Privatization Unit in the Finance Ministry, Moses Mwase told MPs on the committee that the ministry is still consulting cabinet on when this unit will be closed although its staff was down sized and remained with 15 staff only.

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