Uganda reads Ush52.7 trillion budget as Public debt grows to Ush80.8 trillion

Date:

  1. Uganda’s Finance Minister Matia Kasaija has read a budget of Ush52.7 trillion for the next Financial Year 2023/2024, under the theme : “Full Monetisation of Uganda’s Economy through Commercial Agriculture, Industrialisation, Expanding and Broadening Services, Digital Transformation and Market Access”
  2. Verbatim, Kasaija read the budget as follows:
  3. Madam Speaker, in my statement I will address the following:
    1.  Performance of the economy during the Financial Year 2022/2023 as well as our future economic prospects;
    1. Accountability for the Financial Year 2022/2023 budget;
    1. Fiscal year 2023/2024 budget priority interventions; and
    1. The financing strategy for Financial Year 2023/2024 budget.
  1.  RECENT ECONOMIC PERFORMANCE
  2. Madam Speaker, Uganda’s economy has remained resilient, and is on a steady recovery path. The economy this year is projected to have grown by 5.5% compared to 4.6% last year. This year’s performance compares favorably with the average growth rate for Sub-Saharan Africa estimated at 3.6% for calendar year 2023. The size of the economy is estimated at Shs. 184.3 Trillion, compared to Shs. 162.9 Trillion last year. This is equivalent to US$ 49.4 billion compared to US$ 45.6 billion last year.
  3. This expansion is on account of good performance of the Services sector which grew at 6.2%, compared to 4.1% in the previous year. Agriculture has also performed strongly growing by 5.0%, despite the dry spell in the first quarter of the financial year. In particular, food crops, livestock and fishing performed well. Industry grew at 3.9%, driven largely by manufacturing and construction activities, especially in the oil and gas industry.

Inflation and Interest Rates

  • Madam Speaker, inflation is reducing steadily on account of well-coordinated fiscal and monetary policy. Inflation has significantly decreased since October 2022 when it peaked at 10.7%. Last month, the pace at which prices were rising slowed down to 6.2%. Prices of key items such as soap, sugar, fuel at pumps, among others, have significantly reduced.
  • With respect to the cost of money, commercial bank lending interest rates have increased slightly to 19.3% in April 2023 from 18.8% in April 2022. This was mainly caused by the increase in the Central Bank Rate to 10% since October 2022, in order to fight inflation.
  • To reduce the cost of money for the private sector, Government has taken a deliberate policy to reduce domestic borrowing which is a major driver of commercial bank lending rates.  In addition, Government has also provided long-term and affordable capital through the Uganda Development Bank, Emyooga, the Agricultural Credit Facility and the Small Business Recovery Fund to large, medium, small and micro enterprises. A total of Shs 2.77 trillion has been provided to date.

Private Sector Credit

  • Madam Speaker, despite the increase in interest rates, total private sector credit increased from Shs. 19.5 Trillion in May 2022 to Shs. 20.5 Trillion in April 2023, representing annual growth of 4.8%. The growth in lending to industry and agriculture was 6.2% and 3.3%, respectively. Trade and personal lending recorded annual growth of 14.1% and 19.1%, respectively, in the same period. This underscores the ongoing Government interventions to ensure that agriculture and industry access adequate and affordable financing on a sustainable basis.

The Exchange Rate

  • Madam Speaker, the Uganda Shilling has remained stable against major global currencies, despite the strengthening of the US dollar. Between April 2022 and April 2023, the Uganda Shilling depreciated by 5.8% against the US Dollar, compared to an average depreciation rate of 8% within the East African region. The stability of the exchange rate is due to the increase in Foreign Direct Investment inflows into the oil and gas sector, significant recovery in Tourism, and the recent good performance of exports.

External Trade

  1. Madam Speaker, by April 2023, Uganda’s exports of merchandise goods amounted to US$ 4.2 billion compared to US$ 3.1 billion over the same period over the previous financial year. This represents a 35.5% increase, mainly driven by an increase in exports of gold, coffee, fish, sugar, beans, maize and light manufactured products to regional markets.
  2. The NRM Government has provided support through different initiatives to boost exports. These include the provision of long term and affordable capital, investment in transport infrastructure and energy in particular, plus building of industrial parks.
  3. These efforts have started yielding results. Manufactured exports have re-emerged as a major contributor to merchandise exports. For example, in 2022 Uganda exported sugar worth US$ 163 million; cement worth US$ 87 million; plastics worth US$ 61 million; soap US$ 31 million and beer worth US$ 29 million. There were no exports of any of these items as recently as 2006.
  4. Madam Speaker, by April 2023, Uganda imported goods worth US$ 7.1 billion compared to US$ 5.8 billion in the same period of the previous financial year. This is a 22.4% increase, mainly driven by a rise in private sector imports, particularly in the oil and gas sector, plant and machinery for manufacturing, as well as the effect of imported inflation.
  5. At a regional level, by April 2023, we have recorded a trade surplus with our East African Community trading partners of US$ 1.0 billion. Tanzania remains the only EAC trading partner where we recorded a bilateral trade deficit of US$ 154 million. Our trade balance will be strengthened further as we continue to boost exports and enhance domestic manufacturing capacity to replace some imports.

Foreign Direct Investment, Remittances and Tourism

  1. Foreign Direct Investment inflows to Uganda amounted to US$ 1.5 Billion by April 2023. Workers’ remittances increased to US$ 1.3 billion in calendar year 2022 compared to US$ 1.1 billion the previous year. It is estimated at US$ 1.2 billion by April 2023. This helps to finance our foreign exchange requirements, such as imports and debt service. Tourism revenue increased to US$ 847.8 million by April 2023 from US$ 777.8 million in the same period a year ago.

Employment

  1. Madam Speaker, the November 2022 National Labour Force survey puts the size of the Labor force at 23.5 million people. Out of these, 10 million were employed, representing 42% employment rate.  Another 8.2 million, equivalent to 35%, were engaged in subsistence agriculture and 9 out of every 10 employed Ugandans were working in the informal sector. Close to 380,000 employment opportunities have been created under the Presidential Initiative on wealth and job creation – Emyooga.
  2. Madam Speaker, the target of Government is to create over 2.5 million jobs in the next five years. This will be achieved by effectively implementing the Parish Development Model, industrialization, wealth creation and full monetization of the economy. I will elaborate how we will implement these initiatives later.

Fiscal Performance

  1. Madam Speaker, the fiscal deficit is estimated at 5.1% of GDP this financial year, lower than the 7.4% last financial year. This is due to a reduction in both recurrent and development expenditure and increased grants. The fiscal deficit has been financed through domestic borrowing and external loans.
  2. Total domestic revenue collections amounted to Shs 21.7 Trillion by May 2023 and are projected to be Shs 25.6 Trillion by close of the financial year. Total domestic revenue is equivalent to 13.9% of GDP and covers 68% of total expenditure, including interest payments on our public debt, but excluding the principal repayment of both external and domestic debt.
  1. ECONOMIC GROWTH STRATEGY AND OUTLOOK
  2. Madam Speaker, the economic growth strategy underlying the budget for the next financial year and the medium term includes:
  3. Increased domestic revenue mobilization and a reduction in non-concessional borrowing to ensure debt sustainability;
  4. Effective implementation of the Parish Development Model and Emyooga initiatives;
  5. Effective implementation of the various export strategies and enhancing access to global and regional markets;
  6. Support for the private sector by reducing the cost of doing business through:
    1. Construction of the Standard Gauge Railway and the rehabilitation of the Meter Gauge Railway;
    1. Development of small scale solar-powered irrigation schemes to address climate change and ensure food security;
    1. Maintenance of both tarmac and murram roads;
    1. Continued investments in industrial parks and energy transmission lines;
  7. Provision of affordable credit for micro and small enterprises and low-income groups through the Small Business Recovery Fund, Emyooga and Microfinance Support Centre; and funding for medium to large enterprises through the Uganda Development Bank.
  8. Provision of quality seedlings, pesticides, fertilizers, storage and marketing in the agro-industrialization value chain in order to increase agricultural production and productivity;
  9. Rapid development of oil and gas production, specifically the construction of the East African Crude Oil Pipeline and the National Oil Refinery;
  10. Expansion of our skilled labour force to meet the demand of a diversified economy especially industrial skills;
  11. Mitigation of the negative impact of climate change on the economy and livelihoods; and
  12. Implementation of the Greater Kampala Metropolitan Infrastructure Development Master Plan; and
  13. Maintenance of peace and security of persons and property as the bedrock on which the above are based.
  14. Madam Speaker, as a result of these interventions, Uganda’s economy is projected to grow at 6% in financial year 2023/2024. Over the next five years, the economy is projected to grow at an average of 6.5-7% per year.
  1. FINANCIAL YEAR 2023/2024 BUDGET PRIORITIES
  2. Madam Speaker, the budget for next financial year is aimed at achieving the following broad objectives:
  3. Urgent completion of key public investments with higher multiplier effects on the attainment of NDPIII targets and the NRM 2021 – 2026 Manifesto;
  4. Enhanced revenue mobilization and collections;
  5. Full-scale operationalization of the Parish Development Model (PDM); and
  6. Enhanced government efficiency and effectiveness through rationalization of public expenditure, payroll audit, etc.
  7. The key priorities funded to achieve these objectives are the following:
    1. Boosting household incomes and micro enterprises;
    1. Commercializing agriculture to enhance production and productivity and improve competitiveness of agricultural products;
    1. Supporting private sector growth;
    1. Investing in the People of Uganda;
    1. Improving the stock and quality of Infrastructure; and
    1. Expediting implementation of strategic interventions in innovation, research and development, and the minerals, oil and gas industry.
  8. Madam Speaker, in order to effectively implement these strategic priorities, the Government shall ensure peace and security, good governance and the rule of law, as the bedrock for economic activities.
  9. I now turn to detail the key actions we will be undertaking in these strategic priorities.

Boosting Household Incomes and Micro Enterprises

  • Madam Speaker, the Parish Development Model (PDM) will boost household incomes as well as the development of micro-enterprises. Since the launch of the PDM in February 2022, a total of Shs. 590.2 billion has been disbursed to all the 10,459 parishes nationwide, translating into Shs. 50 million per parish. The balance will be disbursed by end this month. Next financial year, the Parish Development Model has been allocated Shs. 1.1 Trillion.
  • The Emyooga initiative will further boost household incomes and micro enterprises at parish and sub-county levels by directly funding parish and sub-county level enterprise groups. By March 2023, seed capital worth Shs. 249 billion had been disbursed to 6,721 constituency-based Emyooga SACCOs. Over 600,000 individuals had successfully applied for credit from their Parish-based Associations.  Nearly half (46%) of these were women, youth (25%) and PWDs (4%).
  •  These SACCOs have also mobilized savings of Shs. 76 billion, and a further Shs. 80 billion recovered from the loans given to beneficiaries. This demonstrates the sustainability of the Emyooga initiative. Next financial year, Shs. 100 billion has been allocated to the Emyooga initiative.
  • Madam Speaker, in order to grow local enterprises, 19 skilling centers have been established across the country under the Presidential Industrial Hubs initiative. So far, 28,750 trainees have successfully completed training in skills programs and 6,110 are under-going training in various fields.
  • This initiative has also empowered the ghetto and less privileged urban youths across all the five city divisions through 9 skilling centers in Kampala Capital City Authority. These include: Wandegeya Market, Mulago Community Hall; All Saints Church of Uganda Mutundwe; Our Lady of Fatima Catholic Church Nakulabye; Luzira Prisons; Sub-Way Crested Towers; Wabigalo Parish Community; Butikirwa Kigoowa-Ntinda; and Makerere Community Hall. This support will continue over the medium term.
  •  Madam Speaker, Shs. 60 billion has been allocated for skilling the youth in next financial year.

Commercializing Agriculture

  • Madam Speaker, during this financial year, additional funding amounting to Shs. 110 billion was provided for food security interventions in Government institutions with farms including the UPDF, Uganda Prisons, Ministry of Agriculture, the National Agricultural Research Organisation and the National Agricultural Genetics Resource Center and Databank.
  • The priority actions to commercialize agriculture next financial year include the following:
    • Support agricultural research for the development of climate resilient crops and animal species;
    • Promote environmental conservation, restoration and protection of degraded water catchment areas and forest cover;
    • Construct small, medium and large-scale irrigation schemes in water stressed areas. These will include the construction of earth dams at Unyama in Gulu, Namalu in Nakapiripirit, Sipi in Bulambuli, Kabuyanda in Isingiro, among others;
    • Implement large-scale mechanization and irrigation; and
    • Improve farmer mobilization, education and partnerships with large commercial farmers for the production of strategic commodities, such as coffee maize and tea to meet national and international demand.
  • Madam Speaker, Shs. 2.2 trillion, has been allocated for food security, irrigation, climate change mitigation, value chain development, agricultural research and disease control, among others.

Supporting Private Sector Growth

  • Madam Speaker, the private sector has been directly supported through industrial parks’ development, promoting Small and Medium Enterprises (SMEs) and facilitating tourism.

Industrial Development and Investment

  • Eight government owned industrial parks are currently operational. These are Namanve, Jinja, Bweyogerere, Mbale, Soroti Mbarara and Kasese, Luzira. In addition, there are three industrial parks developed under a Public Private Partnership arrangement at Kapeeka, Mukono and Buikwe. Uganda Investment Authority has acquired 12 square miles for industrial development provided by various Local Governments in the 18 zones across the country.
  • Uganda’s global reputation as an investment destination has been boosted significantly in the recent past.  Uganda has been named the Number One investment destination in East Africa, by the AIM Global 2023 Abu Dhabi. In addition, our country has been ranked among the top ten African countries for best investment destination in Africa by the African Development Bank. It is now also ranked first in East Africa for capital market growth by ABsa Bank.

Small and Medium Enterprise Development

  • Madam Speaker, SMEs in the manufacturing and export sectors will be supported by the US$ 200 million World Bank Investment for Industrial Transformation and Employment (INVITE) Project that will provide grants and concessional credit to qualifying SMEs.  These SMEs will access new and innovative financing products with long term financing of up to 15 years. This intervention aims at increasing Ugandan manufactured export products, generate direct and indirect jobs for more than 200,000 workers, and safeguard existing jobs for 530,000 workers.
  • Madam Speaker, an allocation of Shs 209.3 billion has been provided through the INVITE Project for next financial year.

Tourism 

  • Uganda has increasingly been recognized as a tourism destination and is ranked by CNN as one of the top 10 best tourist destinations in the World. We will continue to promote domestic and inbound tourism, including the use of digital platforms. Uganda will also be marketed as a global and regional center for Meetings, Incentives, Conference and Exhibitions (MICE). Hospitality standards will be enforced through licensing, grading and classification of tourism facilities. Shs. 249 billion has been allocated for the promotion of Tourism.
  • Madam Speaker, all the private sector interventions I have detailed above have been allocated Shs. 2.4 Trillion.

Investing in People

  • Madam Speaker, Uganda has registered visible improvements in healthcare outcomes, access to knowledge, and a decent standard of living. On average, a Ugandan now lives longer – 64 years up from 53 years just as recently as 2015, attains more years of schooling and enjoys a higher income per capita than ever before.

Health

  • Access to health care by Ugandans remains a key priority.  Consequently, 381 Health Center IIs have been upgraded to Health Center IIIs. In addition, 250 Health Center IIIs have been upgraded to Health Center IV and equipped, and are now functional, largely supported by the Uganda Intergovernmental Fiscal Transfers Program (UGIFT), which is co-funded by the World Bank.
  • Construction and equipping of 31 new Health Center IIIs in sub counties without any health facility is 90% complete. The health referral system has also been enhanced by fully functionalizing 143 Intensive Care Units (ICUs) and 5 High Dependency Units (HDUs) in National and Regional Referral Hospitals across the country.
  • Next year, the Mulago Super Specialized Hospital and the new state-of-the-art Intensive Care Unit at the Uganda Cancer Institute will be fully operationalized. They will provide specialized care to all Ugandans and reduce medical referrals abroad. In addition, all existing Health Center IVs and Health Center IIIs will be facilitated to offer quality healthcare to all Ugandans. In this respect, health worker supervision and management will be strengthened to reduce absenteeism. After the ongoing audit of the payroll, the ban on health worker recruitment will be lifted. Government will in the next few weeks resolve the plight of medical interns and doctors designated as senior house officers, in view of their important role in supporting the healthcare system. In the meantime, I have provided Shs. 22.6 billion to clear outstanding arrears for medical interns and senior house officers for the financial year ending June 2023.

Education 

  • Madam Speaker, we have registered significant progress in access to education.  Uganda’s literacy rate improved from 70.2% in 2012 to 79% in 2021. Education enrolment in public schools is now 8.8 million children in primary school, 833,000 pupils in secondary, and 174,000 students in tertiary institutions.
  •  To improve delivery of the recently launched curriculum, 3,100 teachers were trained, and inspection of learning institutions was enhanced using the e-inspection system. The Teacher Effectiveness and Learners Achievement (TELA) system has helped reduce teacher absenteeism and improved pupil attendance. The Education Management Information System (EMIS) has been revamped to support data management and decision making in education. To enhance sports development, talent identification, nurturing and professional development have been emphasized.
  • Madam Speaker, the Mountains of the Moon University was operationalized during the year. Upgrading of facilities was completed at Uganda Technical Colleges in the Lira, Elgon, and Bushenyi.
  • Next year, the construction and equipping of two-Unit Laboratories in 21 secondary schools currently without any will commence, in line with the Science Technology Engineering and Mathematics (STEM) Policy. Government will continue with the construction of 115 Seed secondary schools in sub-counties without any, under the Uganda inter-Government Fiscal Transfer programme.
  • Madam Speaker, after the on-going audit of the government payroll, the ban on recruitment will also be lifted to cover the staffing gaps in education.
  • Madam Speaker, Government will continue to support sports activities and entertainment talents, and enforce copyrights for performing artists.

Safe Water

  • Madam Speaker, the national water coverage for safe and clean water for human consumption now stands at 70%, with 67% in rural areas and 72% in urban areas.
  • In rural areas, gravity flow schemes have been completed at Lirima in Manafwa, Lukalu-Kabasanda in Butambala and Nyabuhikye-Kikyenke in Ibanda. Piped water systems have also been constructed at Nyakabingo in Rukungiri, Kabuyanda in Isingiro, and Orom Water Supply System in Kitgum-Lamwo. In addition, 40 solar powered mini piped schemes serving 173,000 persons have been constructed across 15 least served districts inclusing Lyantonde, Sembabule, Yumbe, Rakai, Buyende, Kamuli and Kakumiro.
  • In urban areas, 9 Piped Water Supply and Sanitation systems have been completed in Dokolo, Padibe – Lamwo, Odramacaku -Arua, Kagadi, Morulem and Alerek (Abim), and Kambuga II – Kanungu.
  • Madam Speaker, access to safe and clean water will be enhanced to achieve 85% coverage in rural areas and 100% coverage in urban areas by the year 2025. Next year, the main activities towards this goal include: construction of 1,540 boreholes in 1,050 villages and town wards; building 49 large, 67 medium and 80 small piped water schemes in both urban and rural areas; and the rehabilitation and maintenance of 50 water systems in growth centers.
  • Interventions that build human capital have been allocated Shs. 9.6 trillion.  In addition, the Government together with the World Bank are implementing the US$ 500 million Uganda Intergovernmental Fiscal Transfer programme to construct health centers III and IVs, seed secondary schools, and micro-scale irrigation facilities in Local Governments that do not have these facilities.

Enhancing Infrastructure Stock and Quality

  • Madam Speaker, the stock and quality of infrastructure is a key enabler for economic growth, development and social transformation.

Transport Infrastructure

  • Transport infrastructure development has been a major hallmark of Uganda’s recent economic development. The road sector in 1986 totaled 7,900km. Today, it has expanded twenty-fold to almost 160,000 km. While only 6,700 km of today’s road network is paved, the road network now allows access to even the remotest parts of Uganda.
  • Next financial year, we will substantially complete 16 national road projects including Atiak-Laropi, Moroto-Lokitanyala, Kawuku-Bwerenga, Namugonde-Bugiri, Nsambya-Mukwano, the Kampala Flyover and Rushere Town and Kyamate Access roads. In addition, priority will be accorded to the maintenance of existing road networks, both national and District Urban and Community Access Roads (DUCAR). The Bukungu-Kagwara-Kaberamaido (BKK) Ferry and related landing sites; and Lake Bunyonyi ferries and their landing sites will also be completed.
  • Madam Speaker, emergency repairs of the Kampala – Malaba meter-gauge was completed this year. The full rehabilitation of the Kampala – Malaba and Tororo – Gulu Metre Gauge railways will commence next financial year. 49% of the right of way for the Kampala -Malaba Standard Gauge railway has been acquired. The construction of the Malaba – Kampala Standard Gauge Railway will commence next financial year, for which Shs 535 billion has been provided.
  • Madam Speaker, in the air transport sector, the redevelopment and expansion of Entebbe International Airport is at 85% complete, and is due to be completed by July 2024. The construction of Kabalega International Airport now stands at 91.7% and will be completed by September 2023. We shall also rehabilitate and upgrade the following aerodromes that are under feasibility studies: Kidepo, Pakuba, Mbarara, Gulu, Arua, Kisoro and Kasese.
  • Madam Speaker, an allocation of Shs. 4.5 trillion, representing 13.3% of the total budget, has been budgeted for road maintenance and construction, railway development and rehabilitation, water and air transport development. Of particular significance, an allocation of Shs I billion has been provided to each District, City and Municipality for road grading, murram and compacting. In total, Shs 176 billion has been allocated for this purpose.
  • We have also secured US$ 608.7 million (equivalent to Shs. 2.25 Trillion) to address flooding, traffic congestion, poor road infrastructure, un-signalized junctions and unemployment in the Greater Kampala Metropolitan Area (GKMA) covering Kampala, Wakiso, Mukono and Mpigi districts and their municipalities. This will upgrade 504 km of roads including junction signalization in 8 urban authorities; rehabilitation of 30 storm water drainage points; upgrade 23 markets and construct 25 artisanal parks and industrial work spaces for small scale manufactures.
  • Madam Speaker, in collaboration with the World Bank, Government is implementing the US$ 360 million Uganda Support to Municipal Infrastructure Development (USMID) programme to improve infrastructure and addresse operational challenges in the cities and municipal level.

Power Infrastructure

  • Power generation, transmission and distribution infrastructure have continued to expand. Generation capacity increased to 1378.1 MW as at March 2023 from 1,343.9 MW in March 2022, an increase of 34.3 MW. With the commissioning of the Karuma Hydropower Project planned for September 2023, generation capacity will increase to 1978 MW.  The 6 MW Nyagak III Hydropower project is also due for commissioning by end of this month.
  • In transmission, a total of 417 km of transmission lines were added to the main grid during the year, bringing the total transmission line network to 4,011 Km. To enable evacuation of power from the 600MW Karuma Hydropower project, the 248 km Karuma-Kawanda, the 55km Karuma-Olwiyo, and the 76km Karuma-Lira lines have been completed.  
  • Next financial year, 761 km of transmission lines and associated power sub-stations will be constructed to improve the stability and reliability of the networks. We will also build capacity of the Uganda Electricity Generation and Transmission companies to manage the generation and distribution networks after the expiry of the ESKOM and Umeme concessions.
  • Madam Speaker, next financial year, Shs. 1.3 trillion has been allocated for Electricity interventions.

Digital Transformation

  • Madam Speaker, turning to Digital Transformation, 4,717 km of optic fibre has been laid across the country. Geographical coverage of broad Band services (3G) stands at 66% and 25 broad band sites have been upgraded to 3G providing services to over 700,000 Ugandans. Free wi-fi hotspots have been established at nine border posts namely Lwakhakha, Mpondwe, Mutukula, Busia, Vura, Katuna, and Elegu.
  • Next year, WiFi will be deployed to 820 locations, targeting schools, hospitals, markets in the selected sub-regions. The Greater Kampala Metropolitan Area network will be upgraded to monitor service provision over the national backbone infrastructure. We will also digitally transform public service delivery by connecting all essential services, such as schools, hospitals, tourism sites, and the police to the national backbone.
  •  Madam Speaker, an allocation of Shs. 192 billion has been provided to accelerate digital transformation.

Expediting Strategic Initiatives

  • Madam Speaker, the development of the oil and gas, the beneficiation of minerals and investment in science innovation and research are key strategic initiatives that will significantly support that socio-economic transformation.

Oil and Gas

  • Madam Speaker, the final investment decision for the development of the East African Crude Oil Pipeline was taken on 2nd February 2022. We are fast tracking the construction of the East African Crude Oil Pipeline (EACOP) and the National Oil refinery. In addition, the right of way for the Kabaale (Hoima) – Buloba refined products pipeline, and the financing for the refinery and associated infrastructure will be concluded. Preparatory work for the development of a petrochemical industry at the Kabaale Petro-based Industrial Park will also be expedited.
  • I have allocated Shs.447 billion to fast track the development of petroleum resources next financial year.

Science, Innovation and Research

  • Madam Speaker, Government is supporting several innovation and scientific research initiatives that will propel Uganda industry into the high technology economy. These include (i) vaccines research and development, including therapeutics and diagnostics to enable Uganda to enter into the Pathogen economy (ii) automotive industry technology development, and (iii) chipset and robotics manufacturing.
  • During this year, we enhanced the salaries for scientists by Shs 508 billion. We shall continue to support scientists and innovators to undertake the process of Intellectual Property registration, train and sensitize stakeholders on Intellectual Property.
  • We have provided Shs. 257 billion to support science, innovation and technology development.

Mineral Beneficiation

  • Madam Speaker, in order for Uganda to reap the benefits of minerals resource, Uganda’s mineral deposits will be quantified to ascertain their value before beneficiation. We shall also operationalize the recently approved mineral legislation to regulate Artisanal and Small-Scale Miners (ASMs). For the development of Minerals, an allocation of Shs. 54.3 billion has been provided.

Maintaining Security, Good Governance and the Rule of Law

  • Madam Speaker, security, good governance and the rule of law are the bedrock for the success of our socio-economic interventions. In order to guarantee the security of persons and property, the capacity of security and intelligence agencies will be strengthened to address any security threats, and build national defense capability.
  • In order to enhance good governance, Parliament’s legislative and oversight role will be strengthened to ensure proper use of public funds, among others. Furthermore, we will ensure compliance with rules and regulations in public financial management, and implement Parliament’s recommendations on the use of public funds.
  • To improve efficiency and effectiveness of Government, we will further automate financial management systems. These include the Program Budgeting System for budget preparation, monitoring and reporting; the Integrated Financial Management System for budget execution, the Human Capital Management for personnel and payroll management, e-Government Procurement, e-Passport and the one border posting among others.
  • Madam Speaker, the Integrated Bank of Projects has recently been re-launched to improve Public Investment Management, including the tracking of project performance. Projects whose implementation has unduly delayed without sound reason will be removed from the Public Investment Plan.
  • Madam Speaker, the rationalization of Government agencies will commence in financial year 2024/25. In addition, Government has stopped the creation of any additional administrative units and agencies.
  • Madam Speaker, to enhance access to justice, the target is to reduce court case backlog by about 6,000 cases by end-June 2024 from the 50,000 outstanding cases. A total of 117 districts already have complete frontline criminal and civil justice service delivery points comprising a police station, court, prison, prosecution services, and legal aid services, among others. The target is to have 119 districts with Justice service delivery points by end-June 2024.
  • The construction of the Supreme Court and Court of Appeal buildings in Kampala and the Soroti and Rukungiri High Court buildings will be completed. In addition, the High Court buildings in Alebtong, Budaka and Lyantonde and the Magistrate Court buildings in Karenga, Patongo and Abim will also be completed.
  •    Madam Speaker, the functions which include enactment of legislation, oversight and accountability roles will further be strengthened. In this regard, the construction of Parliamentary Chambers is on-going.
  • Madam Speaker, security, governance, the legislature and the administration of justice have been allocated, Shs. 9.1 trillion next financial year, up from Shs. 8.1 trillion this financial year.
  1. FISCAL STRATEGY FOR FY2023/24 AND THE MEDIUM TERM
  • Madam Speaker, the fiscal strategy for next financial year prioritizes enhancing revenue collection, the rationalization of public expenditure and ensuring long term debt sustainability. This will reduce reliance on external financing for socio-economic transformation. Therefore, the fiscal strategy will focus on the following:
    • Continuing effective implementation of the Domestic Revenue Mobilization Strategy;
    • Repurposing the national budget to achieve high multiplier effect of government interventions on the economy, and improve the efficiency and effectiveness of government programs and projects;
    • Mobilizing external concessional loans and utilizing non-concessional loans for projects with high economic and financial returns;
    • Limiting domestic borrowing to an average of 2.2% of GDP in the short to medium term to avoid crowding out the private sector through rising interest rates; and
    • Reducing the budget deficit to within a maximum limit of 5% of GDP, and gradually converging towards the EAC target of a deficit of 3% of GDP.  Next financial year, the budget deficit will be reduced to 3.5% of GDP.
  • In order to live within our means, we have reduced consumptive expenditure. During next financial year, there will be no purchase of new vehicles for political leaders and public officers except for hospital ambulances, medical supplies or distribution, agricultural extension services, security and revenue mobilization.  Travel abroad has also been restricted to statutory functions and for critical legal and resource mobilization functions. We will also regulate expenses on workshops and seminars.
  • Madam Speaker, during this year, domestic arrears worth Shs. 661 billion were settled. Government is committed to paying verified suppliers, court awards and compensation for ranches. Next financial year, Shs. 200 billion has been allocated to settle domestic arrears.
  • Madam Speaker, to improve absorption and utilization of external loans and grants, Government has undertaken the following measures:
  • Requiring Accounting Officers of Ministries, Departments and Agencies to provide quarterly physical performance briefs to Ministry of Finance, Planning and Economic Development and Office of the Prime Minister, on performance of externally financed projects under their jurisdiction.
  • Ensuring project selection, design, approval, and analysis is undertaken before the project is approved for funding;
  • Providing a dedicated fund for land acquisition and right of way instead of earmarking funds for particular projects to address delays in compensation
  • Commencing project implementation only on sites where there are no ‘right of way’ and other physical encumbrances;
  • Requiring all environmental and social safeguards to be enforced by the Ministry of Gender, Labour and Social Development and the National Environmental Management Authority during project design;
  • Enhancing dialogue with development partners to ensure smooth implementation of externally funded projects; and
  • Placing all project coordinators on performance-based contracts to improve accountability for project performance.

Domestic Revenue Mobilization for FY 2023/24

  • Madam Speaker, domestic revenues for FY 2023/24 are projected to amount to Shs 29.7 Trillion, of which Shs 27.4 Trillion will be tax revenue and Shs. 2.3 billion will be Non-Tax Revenue. This represents a revenue effort of 14.3% of GDP.
  • Under the Domestic Revenue Mobilization Strategy, the objective is to improve revenue collection to between 16 and 18% of GDP over the next five years from about 13.5% of GDP currently.  Next financial year priority has been placed on improving tax administration, including use of ICT to fight tax evasion, and rationalizing tax exemptions to improve their effectiveness and reduce revenue leakage.
  • Madam Speaker, Government is undertaking the following tax measures and reforms in tax administration to further improve revenue mobilization.
  • Tax Measures for Financial Year 2023/24
  • Madam Speaker, no major changes in taxes rates have been proposed for next financial year, apart from measures to improve the governance of tax exemptions. The focus will be to expand the tax base without increasing the burden on the same taxpayers.

Rationalization of Tax Exemptions

  • Madam Speaker, to reduce revenue losses from exemptions, next financial year, we will commence the rationalization of tax exemptions. However, we will continue to provide tax exemptions based on the following:
  • Apply the criteria, including minimum requirements, for application of any new tax exemptions
  • Assess the costs and benefits of all tax exemptions to ensure adherence to initial objectives; and
  • Streamline and clarify the roles and responsibilities in the governance of tax exemptions;
  • Madam Speaker, the respective provisions in the tax laws that provide the following exemptions have been repealed:
  •  Deductions allowed for accelerated wear and tear on plant and machinery; normal depreciation will apply henceforth; and
  • Exemptions on VAT for diapers, inputs for processing hides and skins into finished leather; and inputs into iron ore smelting into billets.

Tax Law Amendments

  • Madam Speaker, the tax laws have been amended to improve the tax system and ensure fairness. These measures have generated Shs 615 billion in additional revenue next year, equivalent to 0.3% of GDP.  The amendments are detailed in the respective tax laws approved by Parliament. I will, however, highlight a few of these amendments.

Income Tax 

  • Madam Speaker, the Income Tax Act has been amended to allow taxpayers who obtain credit facilities from SACCOs, non-deposit taking microfinance institutions, self-help groups, and community-based microfinance institutions to deduct the entire interest on loans from these institutions as a business expense while determining their taxable income.
  • This is the practice for taxpayers borrowing from commercial banks and micro-finance institutions. The objective of this measure is to extend this benefit to borrowers of microfinance institutions and money lenders. This will support low-income individuals and groups to enable them access financial services and improve profitability and survival rate of SMEs.
  • Madam Speaker, in addition, a withholding tax of 10% has been imposed on commissions paid to agent bankers to equalize their tax treatment with other agents operating similar businesses such as mobile money agents.

Value Added Tax

  1. Madam Speaker, the VAT Act has been amended to:
    1. Exempt the supply of concentrates and seed cake from VAT, to incentivize local manufacturing of animal feeds and premixes;
    1. Allow non-resident taxpayers to file returns and pay tax in United States Dollars to facilitate compliance of non-resident taxpayers operating in Uganda; and
    1. Require foreign remote providers of electronic goods and services to account for VAT on goods and services sold in Uganda, so as to bring e-commerce transactions into the tax system.
  2. In addition, the scope of electronic services on which VAT is applicable has been expanded to include among others, films, games of chance, advertising platforms, streaming platforms, cab-hailing services, cloud storage and data warehousing.

Excise Duty Act Amendments

  1. Madam Speaker, the Excise Duty Act has been amended to remove the excise duty of US Dollar 9 cents per minute on incoming international calls originating from the United Republic of Tanzania. This will include Tanzania in the One Area Network comprising the other East African Community member states. Phone users in the EAC will now be able to make and receive calls at local rates regardless of their location within the One Network Area.
  2. Madam Speaker, the size of investment capital required for an investor to benefit from excise duty exemption on construction materials, has been reduced to US$ 5 million from US$ 50 million for Uganda nationals. Foreign investors will be required to have investment capital of at least US$ 50 million in order to benefit from this exemption.
  3. In order to deter under-valuation, excise duty on mineral water, bottled water and other water purposely for drinking has been imposed at 10% or Shs 75 per litre whichever is higher. The Excise Duty Act has also been amended to clarify the taxation of spirits for human consumption on the one hand, and the exemption from excise duty of spirits used as raw materials for the production of disinfectants and sanitizers.

Tax Procedures Code Act Amendments

  1. Madam Speaker, the Tax Procedures Code Act has been amended to waive any interest and penalty on tax arrears outstanding as at 30th June 2023, in order to address requests from taxpayers who have cited hardships caused by the Covid-19 lockdown. This provision is however, limited to taxpayers who come out and pay by 31st December 2023. Where the taxpayer pays part of the principal tax outstanding by the deadline, the payment of interest and penalty shall be waived on a pro-rata basis. After that date, URA will decisively enforce recovery of all taxes and penalties.

Ratification of the Convention on Mutual Administrative Act Assistance in Tax Matters (Implementation) Act

  1. Madam Speaker, Parliament has enacted the Convention on Mutual Administrative Assistance in Tax Matters (Implementation) Act 2023. This is to increase cooperation among tax authorities in the participating countries to tackle tax avoidance and cross-border tax evasion. This will assist URA to receive correct information to deter illicit financial transactions where the country is estimated to lose revenue amounting to Shs 300-500 billion annually.
  2. Tax Administration Reforms
  3. Madam Speaker, sustainable revenue collection requires efficiency in the management and administration of the tax system. The following measures will be undertaken:
  4. Strengthening the Taxpayer Register Expansion Programme framework, which is a collaboration between Uganda Revenue Authority, Uganda Registration Services Bureau, Kampala Capital City Authority and Ministry of Local Government in revenue collection. This framework targets to improve the environment for business formalization and growth;
  5. Supporting Local Governments to enhance their revenue effort, including using electronic systems.
  6. Undertaking VAT field audits, complex audits and strengthening debt recovery;
  7. Leveraging ICT to analyze data and integrating with other Government systems to properly identify taxable transactions and taxpayers;
  8. Improving taxpayer awareness to know their rights and obligations, enhance stakeholder engagements;
  9. Continuing tax education and awareness interventions across regions, sectors and gender;
  10. Further strengthening of URA staff compliance to procedures, guidelines and standards to curb corruption tendencies and minimize revenue leakages, including staff deployment in areas with highest risk for revenue collection;
  11. Utilizing the Alternative Dispute Resolution mechanism by negotiating with taxpayers for settlement of tax disputes out of the court system to avoid delays in resolution of tax disputes;
  12. Using ICT systems such as Electronic Fiscal Receipting and Invoicing System (electronic fiscal devices) and the digital tracking system, tax stamps and rental tax solution and telecom sector activities;
  13. Continuing the ongoing integrity drive to combat corruption and other vices essential for improving revenue collections; and
  14. Intensifying surveillance of wider coverage of porous borders to curb smuggling through extensive intelligence focused operations supported by use of drones and body cameras.

Strengthening Regional Integration and Trade

  1. Madam Speaker, budget consultations with our regional Ministers of Finance were held on 8-12 May 2023 in Arusha Tanzania and agreed to make some changes in the EAC taxation structure.
  2. Madam Speaker, to make our industries more competitive, attract investments, and remove the remaining barriers to trade among African countries, we agreed as EAC partner states to change the taxes paid on goods coming from outside the EAC as follows:
  3. 0% duty levied on imports of raw materials and capital goods;
  4. 10% duty charged on imports of intermediate goods;
  5. 25% duty charged on imports of finished goods not readily available in the region;
  6. A maximum rate of 35% duty charged on imports of finished goods readily available in the region; and
  7. Small adjustments to promote import substitution and value addition of our local industries.

Public Debt

Public Debt Stock

  1. Madam Speaker, Uganda’s public debt stood at Shs. 80.8 trillion, equivalent to US$ 21.7 Billion as at end December 2022. Of this amount, external debt was Shs 47.9 trillion equivalent to US$ 12.9 billion while domestic debt was Shs 33.0 trillion equivalent to US$ 8.9 billion. Public debt is projected at Shs. 88.9 trillion, equivalent to US$ 23.7 billion by 30th June 2023.
  2. In nominal terms, Uganda’s Debt to GDP is projected to drop to 48.2% this financial year ending June 2023 from 48.6% at the end of June 2022. The reduction is due to the Government commitment to debt sustainability. This is slightly below the Government policy target of not more than 50% of GDP and also below the 52.4% threshold provided for in the Charter for Fiscal Responsibility as at end financial year 2023/24.
  3. Madam Speaker, the debt service to domestic revenue is projected at 34.1% for the financial year ending June 2023 compared to 30.6% in the previous year. The increase in the debt service cost was due to external commercial and domestic borrowing. This takes away money from the budget which would have funded other government priorities such as health and education.

Debt Sustainability

  1. Madam Speaker, to maintain debt sustainability, Government will work to:
  2. Ensure effective implementation of the Domestic Revenue Mobilization Strategy to boost the capacity to increase domestic revenue collection;
  3. Reduce expenditure in areas of lower priority in order to support fiscal consolidation;
  4. Access new source of financing including climate and green financing, leverage private equity for infrastructure investments and scaling up Public Private Partnerships (PPPs), and leverage non-traditional innovative funding structures and identify appropriate credit enhancement mechanism;
  5. Limit non-concessional debt to high impact, high return projects such as Standard-Gauge railway projects, development of industrial parks, power transmission lines, water for production and tourism roads; and
  6. Reduce domestic borrowing.

Measures to deepen the debt market

  1. Madam Speaker, my Ministry has been working with the Bank of Uganda to reform the domestic capital market and make it more competitive. These reforms include:
  2. Rolling out the use of a mobile money platform for investing in government treasury bill and bonds to broaden the investor base by enabling ordinary Ugandans to participate, increase competition and reduce the cost of borrowing;
  3. Finalize a framework for creating new and innovative Government Bonds to finance the Budget including: Infrastructure Bond for financing infrastructure projects; Green Bonds for financing climate smart projects; Sukuk Bonds for integrating development finance based on Islamic banking principles; among others.
  4. Madam Speaker, the draft bills to operationalize Islamic banking in Uganda are ready for submission to Parliament. I urge Parliament to expedite their enactment to allow the private sector to access this source of funding.

Resource Envelope for Financial Year 2023/2024

  1. Madam Speaker, the resource envelope for Financial Year 2023/2024 amounts to Shs. 52.7 trillion as detailed below: –
  2. Domestic Revenues amount to Shs. 29.7 trillion of which Shs. 27.4 trillion will be tax revenue and Shs. 2.3 trillion will be Non-Tax Revenue.
  3. Domestic borrowing amounts to Shs. 3.2 trillion.
  4. Budget support accounts for Shs. 2.8 trillion.
  5. External financing for projects amounts to Shs. 8.3 trillion; of which Shs. 3.01 trillion is from grants, and Shs. 5.3 trillion is from loans.
  6. Appropriation in Aid, collected by Local Governments amounts to Shs. 287 billion;
  7. Domestic Debt Refinancing will amount to Shs 8.4 trillion; and
  8. Other financing Shs. 229.0 billion.
  9. Madam Speaker, total expenditure will be Shs. 52.7 trillion. Wages and Salaries will amount to Shs 7.3 trillion and Non-wage Recurrent Expenditure is Shs 13.5 trillion. Government of Uganda Development Expenditure amounts to Shs 6.1 Trillion and external project support financing is Shs. 8.3 trillion. Domestic arrears worth Shs. 215.8 billion will be settled. Appropriations in Aid (AIA) of Shs. 287 billion have been provided for. External debt repayments amounting to Shs. 2.6 trillion and Interest Payments of Shs 6.1 trillion, will be made. Domestic debt financing amounts to Shs. 8.4 trillion
  10. Madam Speaker, I have attached the details of the Resource Envelope and other allocations for FY 2023/2024.
  • CONCLUSION
  • Madam Speaker, this budget is dedicated to those Ugandans who are currently not in the money economy. To those individuals and households whose income per year is below 20 million, they have now the opportunity to utilize the support that the NRM Government has provided under the Parish Development Model, Emyooga and other Government initiatives.
  • This budget supports taxpayers who are recovering from the after-effects of COVID-19. For industrialists and entrepreneurs, it improves the environment within which you are operating. It aims to lower the cost of doing business, reduce the time spent transporting goods, including agricultural produce from farm to markets. It also ensures that what you produce and manufacture is competitive in regional and global export markets.
  • This budget supports the transformation from a raw materials-based economy to a manufacturing and knowledge-based economy. It therefore promotes value addition, business growth, and job creation for the youth, women and all Ugandans.
  • It is a budget that provides opportunity for every Ugandan to have a stake in the economy. I, therefore, dedicate this budget to those Ugandans who are working hard, day and night, to expand and modernize our economy and our country.
  • Madam Speaker, I beg to move.

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