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Making Sense Of the Uganda Ugx 40.5 Trillion Budget for F/Y 2019/2020

As a norm, government annually sets priorities and allocates resources for implementing these priorities. The policy document through which these priorities are set, expected revenues and spending proposed is the national budget.

The budget is also the most important mechanism used by governments to influence social, economic and political life of people. Uganda’s budget process has for years been commended for being participatory, transparent and efficient.

Authorities at Ministry of Finance, Planning and Economic Development (MoFPED) say, the budget is formulated under four key arrangements: the sector-wide approaches (SWAps), the medium-term expenditure framework (MTEF), the poverty action fund (PAF), and the fiscal decentralization process, all of which are anchored on the national development plan (NDP).

This year’s budget majorly pursues growth and transformation; it is designed to create wealth and deliver services to Ugandans. The 2019/2020 Budget themed ‘Industrialization for Job Creation and Shared Prosperity’ is structured along six major thematic areas including; Harnessing key growth Sectors of Agriculture & Agro-Industry, Tourism, Oil, Gas & Minerals; Enhancing Private Sector Growth and Development; Promoting Human Capital Development; Strengthening Public Sector Investments; improving governance and sustaining security; developing a financing framework anchored on both an effective domestic revenue mobilization strategy and a responsive debt management strategy.

Economic transformation is change in the structure of the economy from a subsistence economy to an industrial and advanced society. Rapid industrialization has historically been the precursor of economic transformation. No country has ever transformed from a peasant subsistence economy to an industrial and advanced society without developing the industry particularly manufacturing. As long as we continue exporting cheap, raw, primary commodities, our present situation will not change.

For a budget to be transformative it must do the following: First, it must invest in sectors that encourage structural change towards higher productivity sectors and jobs, that is, industries especially manufacturing firms. Second, it invests in technological upgrading to achieve productivity and growth within sectors e.g. irrigation and fertilizers to boost agriculture and industrial upgrading.

In addition, it employs industrial policy that takes explicit account of job quality, quantity and access. It also invests in improved education quality and training, social protection services, increases access for disadvantaged, vulnerable and other groups of society to economic opportunities. The budget should also be concerned with micro-level, rather than macro-level transformation.

Parliament on Friday May 24, 2019 received Budget estimates for the Financial Year 2019/2020, amounting to Shs40.48 trillion of which Shs27.27 trillion (69 per cent) is to be allocated by Parliament and Shs12.8 trillion is for statutory expenditure charged directly on the Consolidated Fund. The Minister of Finance shall read the budget to the public on 13th June 2019.

According to the approved budget, 27.957 trillion Shillings is Recurrent (10.5 trillion) and Development (17.3 trillion) expenditure while 12.53 trillion is Statutory expenditure charged directly on the Consolidated Fund. The 40.48 trillion Budget is up from the current 2018/2019 financial year budget of 32.7trillion Shillings.

The budget is to be financed by domestic revenue collections amounting 20.487 trillion Shillings, resources from the Petroleum Fund amounting 445.8 billion, Domestic Financing 2.32 trillion, Domestic Debt Refinancing 6.18 trillion, external budget support 675.2 billion, external project support 9.42 trillion and others. Domestic and External Financing constitutes 74.5 percent and 25.5 percent of the total resource envelope, respectively.

In terms of sectoral allocation, Works and Transport has been allocated 16.2 per cent of the budget the largest share of Shs6.4 trillion, followed by Security at 9.1 per cent (Shs3.61 trillion), Ministry of Education Shs3.28 trillion, Energy and Mineral Development Shs2.95 trillion, Ministry of Health Shs2.5 trillion, Accountability Sector 1.9 trillion, Justice Law and Order Sector at 1.6 trillion, Local Government Sector 1.2 trillion, Water and Environment 1.04 trillion, Agriculture Shs 1.01 trillion, taking one trillion shillings.

The other sector allocations are Tourism with 157 billion, ICT 123 billion, Trade and Industry with 171 billion, Science and Technology 159 billion, Lands and Housing 193 billion, Social Development 218 billion and others.

There was an increment in the agricultural sector budget from Shs892.9b in 2018/19 to Shs1.4 trillion in 2019/20 Financial Year; Ministry of Works has increased its claim from Shs4.7 trillion to Shs5.3 trillion, maintaining their lead in allocations for development and services delivery.

Finance State Minister, David Bahati said the decrease in health budget is due to reduction in gratuity and projects completion. “The reduction on the budget of health is on gratuity, and gratuity is paid after verification…the second is exiting projects; when projects end, allocations decrease,” he said.

The committee projected Uganda’s economy to post a GDP growth of 6.3 per cent in the next financial year from the earlier projection of 6.0 per cent. The committee also noted that the economic outlook seems favorable, but highlighted that the cost of doing business is still high, partly because of relatively high-power tariffs, tax rates, costs of borrowing, and limited access to long-term financing. Therefore, it is important to note some potential risks to this favorable economic outlook.

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