Finance minister Kasaija to read sh48.1 trillion budget

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KAMPALA — The finance minister Matia Kasaija is scheduled to read the sh48.1 trillion national budget for the financial year 2022/2023 today.

According to budget documents, the Government anticipates to generate sh25.7 trillion from revenue collections and the remaining sh22.4 trillion will come from internal and external borrowing.

This comes against the backdrop of sh3 trillion and sh2 trillion revenue shortfalls the Government recorded in the financial years 2019/2020 and 2020/2021 respectively, mainly because of the COVID-19 pandemic.

In the current financial year, which ends on June 30, the shortfall is estimated in the range of sh900b.

The Government is optimistic that with the full reopening of the economy and various measures for improving enforcement, revenue collections will improve.

The Ministry of Finance, Planning and Economic Development anticipates Uganda’s economic growth rate to rise from the current 3.8% to 6% next financial year.

EDUCATION, HEALTH TAKE LION’S SHARE

The Human Capital Development Programme, which comprises education and health sectors has had its budget increased from sh7.5 trillion, allocated in the current financial year, to sh8.7 trillion in the budget for the next financial year.

This is mainly because of sh495b provided for increasing salaries for medical workers and other scientists, including science teachers.

Other programmes that have received big portions of the national budget include governance and security (sh7 trillion), integrated transport infrastructure (sh4.1 trillion), energy development (sh2.5 trillion) and agro-industrialisation (sh1.2 trillion).

DEBT PAYMENT

The biggest portion (sh17 trillion), which is 35.3% of the total national budget, is earmarked for interest and debt payment.

In their statements on the national budget for the next financial year, opposition leaders in Parliament are concerned that increasingly, the biggest portion of the national budget is going to interest and debt payment, which leaves limited resources for service delivery.

According to reports from the finance ministry, interest and debt payment budget increased from sh8.5 trillion in the 2017/2018 financial year to sh15.1 trillion in the 2021/2022 financial year.

The 2022/2023 budget will mark the third financial year of implementing the National Development Plan Three (NDP III). It is anticipated that at the end of it, 60% of the targets in NDP III will have been realised.

One of the key NDP III targets is to increase the per capita income (average amount of money earned by every Ugandan) from the current $879 (sh3.2m) to $1300 (sh4.8m) by 2025.

Last week on Tuesday during the State of the Nation address, President Yoweri Museveni announced that Uganda had reached the lower middle-income stage with a gross domestic product (GDP) per capita of $1,046 (sh3.7m).

The Government is implementing Vision 2040 in a phased manner through a series of five-year development plans.

In Vision 2040, the Government planned to reach the upper middle-income status with every Ugandan earning $9500 (sh35.1m) and with a poverty rate of only 5%.

SACCOS EAT BIG

According to documents from the finance ministry, the theme for the 2022/2023 national budget is; Full monetisation of Ugandan economy through commercial agriculture, industrialisation, expanding and broadening services and digital transformation.

The ministry indicates that the 2022/2023 national budget theme is derived from the NDP III theme of ‘increased household incomes and improved quality of life of Ugandans’.

As a result, the Government has earmarked a total of sh1,711b as wealth creation funds through various programmes.

The main vehicle for improving household incomes (wealth creation) in the 2022/2023 national budget is the Parish Development Model (PDM), which has been allocated sh1.059 trillion.

Through PDM, the Government will be investing in organised groups such as SACCOS and co-operatives, which are involved in agricultural production at parish level.

A total of sh72.7b has been allocated to the Microfinance Support Centre (MSC) to give low-cost credit to SACCOS. In its reallocations in the budget, Parliament gave an extra sh35b to MSC to give out grants/donations to beginning and struggling SACCOS.

The Government has also allocated an additional sh100b towards Emyooga programme to continue giving out funds to SACCOS, especially in urban areas or groups of people involved in similar economic activities.

The Presidential Initiative on Wealth and Job Creation (Emyooga) was launched in August 2019 as part of the broad government strategy, targeting to transform 68% of homesteads from subsistence to market-oriented production, with the overall objective of promoting job creation and improving household incomes.

The initiative is centred on various 18 categories/enterprises/Emyooga, covering majority of the hitherto, financially excluded Ugandans engaged in similar specialised enterprise categories.

These include market vendors, welders, taxi drivers, carpenters, bodabodas, women and performing artistes.

Other economic empowerment funds in the budget include sh30b to Uganda Coffee Development Authority for distribution of free coffee seedlings and sh30b for cattle restocking in Lango, Acholi and Teso sub-regions.

Another sh20b is for co-operatives, sh120b for the elderly persons, sh50b for Agriculture Credit Facility, sh48.7b to Uganda Development Corporation for establishment of factories, sh34b for Women Entrepreneurship Programme and sh85b for Uganda Development Bank (UDB).

As part of interventions for resuscitating Uganda’s economy from the effects of COVID-19, the Government in 2020 allocated over sh530b to UDB to give low-cost credit to private businesses.

According to UDB executive director Patricia Ojangole, UDB’s capital base has now reached sh1.1 trillion.

WHAT EXPERTS SAY

One of the major criticisms about the 2022/2023 national budget from the Opposition, the civil society and the academia is the fact that over 70.6% of the budget (sh34 trillion) is for recurrent expenditures and only sh14 trillion is for development expenditure.

This means that the bulk of the budget goes into consumptive expenditure like payment of salaries, administrative costs, officials’ travels inland and abroad and little goes into development activities which have high economic returns.

Making a general comment on the 2022/2023 national budget, Makerere University finance lecturer Prof. Sulait Tumwine said: “Having a recurrent budget of sh34 trillion and a development budget of sh14 trillion means we are predominantly a consumptive country that spends more on consumptive items and very less on development. That kind of budget cannot improve the economic welfare of Ugandans and cannot create the millions of jobs needed by the unemployed citizens,” he said.

“Government needs to restructure the national budget and ensure that a minimum of 50% of the national budget is for development expenditures to boost the economy and bring down the cost of doing business. There is need to undertake measures to eliminate corruption because in the current circumstances a big portion of the sh14 trillion earmarked for development expenditures will be lost to syndicated corruption.”

The executive director of the Private Sector Foundation, Stephen Asiimwe, says whereas the allocation of funds to UDB for the private sector is commendable, it is not a magic bullet.

“Beyond UDB, the private sector needs several interventions to help the so many struggling businesses. UDB funds are not accessed by many. A person in Nakapiripirit or a trader in Kikuubo cannot access funds in UDB. Government needs to come up with a marshal plan for resuscitating the economy as many other countries have done,” Asiimwe stated.

Asiimwe said the Government needs to devise interventions in the national budget to address the high cost of borrowing and reduce the cost of doing business in Uganda.

“Reports indicate that non-performing loans in commercial banks have grown to a tune of sh2 trillion. That reflects the reality of the state of our economy. So many businesses are struggling and need to be bailed,” the Private Sector Foundation boss stated.

The spokesperson of Kampala City Traders Association (KACITA), Issa Ssekito, said: “We had hoped for the Government to, in this budget, harmonise the payment of taxes for textile and garments which are charged in kilogrammes. We spoke out on this matter, but it was not incorporated in the budget,” Ssekitto said.

“We had hoped that government would reduce taxes on fuel and raw materials used to produce essential goods, but they have not done it. Where that has not been done, we expect government to reduce on the huge budget for recurrent expenditures and allocate more funds to production so we can produce more goods and services.

A supplementary budget allocating funds to development expenditures can be generated for the first time in the course of executing the budget for the next financial year.”