join the matooke revolt, thanks to a revolting hotel manager


Remember the Sweet Potato revolution a few Sundays ago?

Here’s the Matooke Revolt – and the Ministry of Tourism and the Immigration Department should pay attention: 

The Sheraton Kampala Hotel had a lot going on this week – including Pivot East 2013, a vibrant collection of tech enthusiasts presenting startups for launch,and a gathering of businessmen under the PTA Bank umbrella; both those groups bringing lots of money into the hotel and promise into the country. (The PTA Bank has financing in hundreds of millions of dollars to give Ugandans with ideas and projects!)

Late on Tuesday afternoon there was also me, as a Pivot East side show, doing a video recording for a youth entrepreneurial mentoring programme.

Mid-recording, a lady friend I hadn’t seen for a while walked past and I interrupted the video to say a quick hi.

Five minutes later and back to my video, I heard raised voices behind me and paused a little when the interviewer lifted his head sharply.

“How many times must we tell you that there is no matooke, madame?” and “You’re sending everybody to ask for matooke. It’s just not available.” said the loud voice.

We interrupted recording again, as it wouldn’t do for any youth mentoring video to include an altercation involving a hungry customer berating a hapless waitress.

The raised, irritated voice went on a little bit about the unavailable matooke till two things struck me as odd: First, why was the customer, at that hour understandably hungry, informing the waitress about the availability (or none) of food? Second, how could the Sheraton Kampala, in Uganda, not have tooke on the menu?

And I turned my head to find a third puzzling point: the loud, irritated voice belonged to Mario Spirto, Bar and Restaurant Manager (of The Equator, at the hotel) and he was addressing the guest – the lady I’d just greeted!

Slightly fazed, she said quite distinctly,“You don’t have a name tag. Please tell me your name…” at which he harrumphed and walked off, but pausing when he heard her complete the sentence with, “…so that I address you properly.”

Watching this was odd. He turned back and flipped her his business card, which I hope read, ‘One-Star Manager‘, because his behavior was very much not the Five-Star rate one would expect the Sheraton to employ.

Passing her a menu card, he went: “You can order matooke after 7pm! It is impossible for us to provide matooke, cassava … local food until 7pm. But we have 70 items on the menu you can order from!” he said.

So she ordered for some fish dish. Which, like his hospitality, didn’t show up at all! (Later on, a Ugandan waitress who had watched the exchange made arrangements to provide the ‘troublesome’ matookedish my friend was craving –and apologised.)

You see, the lady guest habeen out of the country so long she was craving matooke. The PTA Bank event gave her a good opportunity; after checking into the hotel, she called downstairs and was told to pop down for matooke since the buffet lunch had ended.

Only to find Mario Spirto and get a blast of spittle.

The Ministry of Tourism would, I’m sure, want to know why local food isn’t being promoted better at a local hotel; and the Immigration Department may take an interest in the work permit and employment status of a foreigner in hospitality who very clearly lacks the requisite skills, and might make the job available to a Ugandan.

And even if they do nothing, the Matooke Revolt works as follows: let’s ALL OF US go to the Equator Restaurant and order for some matooke, cassava, ensujju and biringannya in a local language of our choice, so that the most local of Ugandan dishes begins to get better recognition than Pizzas, Sandwiches and any other dish that Spirto would happily serve to whoever he thinks is more deserving than a hard-working Ugandan who opts to dine at the Sheraton Kampala.

That way, we will boost the income of local Ugandan farmers and Uganda’s ‘tourism’ overall,even if the restaurant manager job has gone to some spiteful fellow of another nationality…

the budget is here, but the wedding isn’t


CONSIDER the national budget in simple terms – not content-wise, that’s too much for this section of your Sunday; focus on the process and your role, ordinary citizen.

Unfortunately, most Ugandans only know two types of budgets: a) the national budget, which they think is delivered from on high in a briefcase styled on Moses and tablets with the Ten Commandments and; b) the wedding budget. Few go as far as c) Personal budgets. 

We all know how b) works but here’s a refresher: First, your relatives or friends decide to get married and draw up a long wish list covering introduction ceremonies to honeymoon. On that wish list they include the most expensive clothing, day-long limousines, and a banquet feast at Munyonyo or the Serena with food at a plate value that could cover their parents’ feeding for six ordinary months.

Notice links to ‘a) the national budget’?

They then get friends to form the Committee, starting with the Chairman who gleefully takes up his role of organising mostly the reception – the fun part – with a focus on raising funds.

The bagole and inner circle Committee agree the wish list budget, make bookings, then call fundraising meetings. These days, the Launch meeting consists of a party at which drinks and eats are served some times at a cost to raise funds, or free of charge so that invitees are loosened up to pledge big money contributions.

The budget, however, is received as a set of suggestions, and over the next month or two (longer, if tedious) people at weekly meetings will make changes a la, “Why are we going to Munyonyo when your combined monthly salaries can’t cover the one round of drinks?” and “Who are these 500 people you are inviting when your muzigo can only host three people at a time thereafter?” and “Limousines? When you are both boda people? We get Premios!”

The Committee then breaks up into sub-committees for transport, food, drinks, church, clothing, managing crazy ex-girlfriends at that crucial moment in church, and so on and so forth. These sub-committees investigate the suggested costs, negotiate with suppliers and report back to the main committee at every meeting.

You, friends and relatives (who have little choice) attending fund-raisers, take copies of the budget updated weekly and at every meeting contribute money in different ways while questioning decisions and suggesting more changes as above.

By the wedding day, the bagole will have taken on donors or tax-payers via family and friends, and maybe a bank loan. Afterwards, they retire to their muzigo or Kololo bungalow after a honeymoon in Mukono or the Seychelles, with loans to pay off over the next ten years, or maybe a surplus with which to buy land on which to build a house.

Now, go to ‘a) the national budget’ and it’s exactly the same – especially the fact that with ‘b) the wedding budget’, the reading of the budget at the first meeting – the Launch – is not fait accompli.

The Budget Reading is simply the Minister, on behalf of the Executive, the bagole, presenting the government’s wish list, alongside accountability for the past year.

For months before the Reading, the government consults ‘stakeholders’for views and suggestions – but you probably didn’t notice this, as usual, just as in b) above.

The Minister Reads it on behalf of the President, and moves a motion to make Plenary a Committee of Supply – to supply money to the government. For the next few months, Parliamentary Committees scrutinise the budget and meetvarious people, then later present their findings and final recommendations to Plenary sitting as that Committee of Supply.

The Minister of Finance thereafter introduces the Appropriation Bill (to the Budget Committee) to legalise what the Committee of Supply approves, and it is only THEN that the wedding takes place.

So today, after Budget Reading, it’s not over yet and we shouldn’t cry over taxes or allocations.

Your copy of the national budget might be smaller than all the wedding budgets you’ve collected so far this year – so go get it. Read it. Go tell your MPs what YOU think – because it is YOU paying for the wedding.

Certainly not the bagole.

wash your hands or die!


A year ago this week, the national budget 2012/13 arrived without much noise, then a furore erupted months later over the Ministry of Health allocation.

During the melee, the most lucid and calm defence of the Executive’s approach came from Prime Minister Amama Mbabazi who said the government approach to health focussed on primary rather than secondary health care.

As such, he explained, the government planned to spend lots of money on preventing disease rather than treating it, as that would result in a healthier population and save scarce national resources.

Two extreme ends of our social spectrum brought this to mind for me this week:

The first, a series of boda-boda chaps who you will notice ride around the city with their helmets firmly affixed to their handlebars instead of wrapped around their soft-centred yet despairingly thick heads. These fellows are already the most endangered of the human species in Kampala (followed by their passengers) and continue to fulfill jungle law by disregarding obvious safety precautions. To their credit though, they have now improved from the days when they wore baseball caps as a form of protective wear – but they still fill up scarce hospital space.

The first fellow I saw amused me and I tried to take a photograph, but was distracted when I noticed another, then another, and then I realized that MOST boda-boda riders didn’t understand what helmets were for.

The second, a pretty lady wearing a smart, no-sleeves office suit who parked her shiny BMW X5 by the roadside just below the Army barracks at Mbuya on Tuesday afternoon. She was buying roasted maize. By the roadside. Image

I slowed down to confirm what I was seeing and, indeed, she was purchasing a number of cobs of roasted maize from women who had their sigiris standing in the dust by the roadside in Mbuya. She didn’t turn off her car engine all through, and probably burnt the same value of fuel sitting there as the price of the maize she purchased.

The questions came rushing at me like unhelmeted boda-bodas: Didn’t she have a cooker at home – or a sigiri? Did she have no maids to roast maize for her? Had she ever been to school – or paid attention while there? Was she just a well-dressed female driver buying a roadside snack on the way to collect the boss?

Image
Roast maize – not always clean and healthy

Thinking ahead, the thought occurred that like many other people I know this woman might not have a Dr. Spocks or ‘Where There Is No Doctor’ nor a First Aid box at her home. Ergo, when one of her homestead suffered a stomachache due to the roadside maize, she would be driving her X5 to a hospital to see a doctor.

And if you happened to suffer a heart attack or something serious, you would have to queue up behind her and probably die while a doctor induced flatulence in her, then moved on to thirty concussed boda-boda riders.

Your cause of death: Ignorance of woman in X5 buying roasted maize by the roadside + boda-boda.

The stupidity (it’s okay – we’ve all done stupid things like this before, but this is 2013 and we can’t be buying food off the roadside, especially if we are driving X5s!) of these two categories of people is often replicated in different ways in between.

The act of neglecting to wash one’s hands after using the toilet or just before eating, for example, is as bad as eating roadside food in Kampala without a populated first aid box at home. But there is the hidden kind that only comes to you after someone points it out: For years, I allowed the courier-cleaner-odd-job fellow at my office to also purchase my snacks from wherever I fancied them – until the day I asked myself what his home environment was like, when cholera had broken out in parts of Kampala.

I started paying close attention to his habits, and it took me just under an hour of close observation to withdraw snack-purchasing duties from his docket, because his hands kept bunching up the front of his over-sized trousers.

His peer was even worse, because of how eager he was to run errands and gather up tips. This second chap once interrupted a car washing task to go and fetch a Rolex from a nearby stand, and returned with the car-washing rag in one hand and the Rolex (wrapped, if that helps your imagination of this) in the other. Think: what really – the truth – makes office sumbusas so spicy?

(Roundabout now, you should be doing a mental checklist of which one of your workers you should issue with protective clothing and equipment.)

I then resorted to ordering for eats from nearby restaurants and cafes but they had a habit of deploying soft-headed boda-boda chaps who stacked the food next to their helmets, not far from their more smelly personal bits…I had to develop stricter rules.

But rules sometimes don’t work – as my garbage collection service provider has explained to me repeatedly. We’ve been engaging in a running battle for a couple of years because his staff do not wear gloves when gathering up garbage – but he’s always sworn that they are all issued with gloves and boots. I accosted the filthy fellows one Saturday morning to interrogate them and they quickly confessed that they had gloves but found them a bother to wear. Mutual bewilderment ensued – theirs at my lugezigezi, mine at their casual handling of death.

My garbage collector’s staff, however, have a higher life expectancy than the KCCA garbage collection fellows who are also bare-handed at work but then tend to dangle themselves perilously off the back of whatever garbage truck they are riding – either out of excitement at the trucks being new; or because the putrid smell gets them high.

Now, if one of those chaps is married to the woman roasting maize in Mbuya, or your office tea girl…or your X5-driving wife is serving you roadside maize as a tea-time snack… you can see how the amount of money allocated to the Ministry of Health might easily be a waste of resources.

Uganda Budget Speech – By Maria Kiwanuka


1.

II. INTRODUCTION

Madam Speaker, in fulfillment of Article 155(1) of the Constitution and in exercise of the powers delegated to me by H.E the President, I beg to move that Parliament resolves itself into a Committee of Supply to consider:

i. The Revised Revenue and Expenditure Estimates for the Financial Year 2012/2013;; and

ii. Proposals for the Estimates of Revenue and Expenditure for the Financial Year 2013/2014.

Madam Speaker, in March this year, Uganda’s long-term collective development aspirations as embodied in the Vision 2040, was launched by His Excellency the President. Vision 2040 provides a

2.

I. PREAMBLE

Your Excellency the President,
Your Excellency the Vice President,
The Right Honourable Speaker of Parliament, His Lordship the Chief Justice,
The Right Hon. Deputy Speaker of Parliament, The Right Hon. Prime Minister,
The Right Hon. Leader of the Opposition Honourable Ministers,
Honourable Members of Parliament, Distinguished Guests,
Ladies and Gentlemen.

 

roadmap to transform Uganda from a low income to a modern middle income country within 30 years. Vision 2040 requires a fundamental change on the way of doing things by Government and the Private Sector, to unlock the binding constraints to Uganda’s progress.

  1. Madam Speaker, there are no quick answers to the challenges that face us today. The economic and social challenges we are working to address happened over several years and will take time to resolve. This requires patience and coordination. The Financial Year 2013/14 Budget seeks to continue towards socio-economic transformation, one step at a time.

  2. Madam Speaker, consistent with our National Development Plan, the ruling Movement Party Manifesto and in pursuit of the Vision 2040, the theme for next financial year’s budget is The Journey Continues: Towards Socio-Economic Transformation for Uganda”. The Financial Year 2013/14 Budget, like the one last year, will continue to focus on translating the Government’s strategic priorities into practice over the next year. Scarce resources have must allocated to reflect key Government strategic priorities within existing resource constraints.

    FINANCIALYEAR2012-13KEYACHIEVEMENTS

  3. Madam Speaker, the interventions that I pronounced last year sought to restore macro-economic stability, accelerate infrastructure development, increase agricultural production and productivity, improve the business climate, and achieve better service delivery, particularly in education and health. A detailed report of sector performance during the last year is provided in the Financial Year 2013/14 Background to the Budget. I wish to highlight the progress achieved in key areas.

  1. Madam Speaker, the economy rebounded significantly growing at 5.1% last year. Inflation subsided and was recorded at 3.6% as at end-May 2013, a marked reduction from double digits at the start of the financial year. The volatility of the Uganda exchange rate subsided and currently averages around U. Shs. 2575.

  2. Government registered significant progress in the implementation of budget for financial year now ending. In the works and transport sector, 845 kms of several national roads were fully or substantially completed;; or have their construction on schedule. Construction of a further 88 km of national roads will commence shortly having had their contracts signed. In addition, the designs for 723 kms of several national roads has been completed, and procurement for contractors will commence. The rehabilitation of the Marine Vessel Kaawa was completed during the year, and now operates between Port Bell and Mwanza.

  3. Madam Speaker, in the Energy Sector, the 250 MW Bujagali Hydropower project was fully commissioned during the financial year. In addition a number of small renewable hydropower projects delivering a total of 68.5 MW to the national grid have been

    commissioned. A total of total of 2,322 km of transmission lines were laid under several Rural Electrification schemes.

9. Madam Speaker, during the year, over 35,000 farmers directly benefited from provision of improved maize seed, in addition to accessing inputs such as fertilizers, under the commodity approach. Furthermore, a total of 13,486 kg of foundation seed for Arabica coffee, beans, maize and rice, were distributed to seed companies and farmer groups. To enhance irrigation for water for production, the rehabilitation of all the three irrigation scheme of Mubuku, Doho and Agoro is substantially complete.

10. Madam Speaker in order to improve accessibility to tourist sites, road access to several tourist areas is being rehabilitated. In order to enhance hospitality standards, 20 East-African Community – accredited hotel assessors were trained and the inspection of hotels accommodation was completed, to enable hotel grading and classification to be undertaken next financial year. The Hotel Training Institute at Jinja also had 390 students graduated in May 2013.

11. Madam Speaker, to improve human development, an additional 6,172 Health Workers were recruited to work at Health Centers and the remuneration of Medical Officers at HC IVs was enhanced. Government also increased salaries for Primary School Teachers by 15%, and Science Teachers in Post Primary Education and Training Institutions received a 30% increase in wages.

12. Madam Speaker I will detail some of these achievements when I return to the sector priorities for next year.

III. FINANCIALYEAR2012/13ECONOMICPERFORMANCEANDOUTLOOK

ECONOMICPERFORMANCE

13. Madam Speaker, over the last year the Uganda economy has proved resilient and demonstrated strong signs of growth. At a global level, Uganda recently regained her credit rating of B+ with a stable outlook, by Standard and Poor’s. Uganda’s higher credit rating is important because it lowers our cost of borrowing on international markets. The achievement is remarkable because it happens at a time when major economies are being downgraded.

GDP Growth

14. Madam Speaker, economic growth has rebounded strongly during the year. The economy expanded by about 5.1%. This performance is significantly higher than the 3.4% recorded in the previous year. The construction sector grew by 8.2% and electricity supply by 10%. The manufacturing sector recovered strongly growing by 4.2%, compared to a decline of 0.3% the previous year. During the last year, the agricultural sector output grew by 1.4%, improving from a modest 0.8% the previous year. The recovery in agricultural production was driven by a bumper harvest and favorable prices, which signaled the potential of food for household security and incomes for most Ugandans and the region.

Inflation and Interest Rate Developments

  1. Madam Speaker, inflation has declined substantially and reached 3.6% in May 2013, compared to 18.0% at the start of the financial year. The drop in inflation is a result of increased production, in addition to the improvements in the global economic prospects. To this end Government will accelerate supply-side measures to remove production bottlenecks.

  2. Overall interbank interest rates declined to 8.6 per cent in March 2013 from 26.2 per cent in January 2012. This was a result of a drop in the Bank of Uganda policy reference interest rate, which has translated into lower commercial bank lending rates during the financial year. Commercial bank lending rates have also reduced, from nearly 30 percent in August 2011 to an average of about 24 percent by end March 2013. Commercial bank lending rates are still high because of the non-performing loans which have increased slightly from 3.4 % in March 2012 to 4.7% in March 2013.

External Sector

17. Madam Speaker, the stock of our foreign exchange reserves amount to US$ 3.3 billion or 4.5 months of future import demand of goods and services. This reflects an improvement in our reserve position of about US$ 2.6bn one year ago which was equivalent to 4.2 months of imports. The balance of payments recorded a surplus of US$ 417 million on account of stromg performance of foreign direct investment and other investment inflows which increased to US$ 1.76 billion and US$723.4 million, respectively;; and remittances from Uganda working abroad amounting to US$ 767 million.

Private sector credit

18. Madam Speaker, private sector credit expanded by about 15% during the year, compared to 11% in the previous year. Domestic currency lending stagnated as a result of high lending rates and other factors, including the temporary closure of the land registry, in preparation for its computerisation. With the resolution of these issues, domestic currency lending is now showing signs of recovery.

Financial Sector Development

  1. Madam Speaker, access to financial services is key to encouraging savings and providing credit for investment purposes. The financial sector in Uganda has experienced rapid growth. Commercial Banks now number 22 with combined outlets of 360 branches across the country. In addition, four (4) Microfinance Deposit-taking Institutions (MDIs) have been registered with Bank of Uganda and two (2) MDIs have upgraded to Commercial banks status. In addition Rabobank’s investment in DFCU Bank is testimony of the confidence the international financial community has in Uganda’s financial sector.

  2. In order to increase access to micro finance, Government has implemented the Rural Financial Services Programme since 2008. As a result, membership to financial cooperatives has grown from 650,000 in 2008 to about 1,150,000 as at end December 2012. There has also been increased implementation of the Village Savings

and Loan Associations (VSLA) and Savings and Credit Cooperatives (SACCOs) programs by both Non-Governmental Organizations (NGOs) and Government, and increase in use of mobile money services.

21. Madam Speaker, access to financial services is key. The financial sector will be deepened by proposing amendments to the Financial Institutions Act to allow new innovations in financing. These innovations include agent banking, Islamic banking, micro insurance, and mobile money. The monitoring and supervision of micro-finance institutions will be enhanced to improve management and governance, and ultimately build trust and confidence. Government will also formulate a Microfinance Regulatory and Supervisory Framework to regulate and provide guidelines on the provision and accessing of financial services by all microfinance institutions.

Investment

22. Madam Speaker, driven largely by private sector, the investment rate rose to 25.2% of GDP compared to 24.5% in the previous year. While the trend in investment is encouraging, key findings from the Investor Survey Report (2012) estimates survival rates of investments in Uganda at 46%. This is on account of projects being negatively affected by high cost of borrowing, limited access to credit, and energy and transport infrastructure bottlenecks. The survey reveals that the most binding constraints to investors are poor infrastructure such as inadequate all-weather roads, reliable power, and piped water;; and a skilled human resource.

23. Madam Speaker, during the year, Government tabled the Public– Private Partnerships (PPP) Bill before Parliament. The proposed law aims to efficiently mobilize Private Sector investment in the development of key infrastructure projects that boost competitiveness. Preparatory work for some PPP projects was started, including the relocation of Kigo Prison;; and the Uganda Police housing project

ECONOMICOUTLOOK Macroeconomic Objectives

24. Madam Speaker, ultimately, the maintenance of macroeconomic stability is vital for Uganda’s long-term economic growth and structural transformation. The macroeconomic objectives underlying the budget strategy next year and over the medium term, are therefore the following:

  1. The achievement of real economic growth of at least 7% per annum;;

  2. Keep annual consumer price inflation to within single digit;;

  3. The maintenance of a prudent level of foreign exchange reserves of at least five months import cover, to mitigate

    external shocks and;;

  4. The maintenance of a competitive real exchange rate to

    support the growth of exports.

  1. Madam Speaker, the economy is expected to accelerate its recovery to an estimated growth rate of 6.0 percent per annum next financial year. This continued recovery in growth is premised on maintaining macroeconomic stability, and improving resource mobilization and utilization. In addition, investment in priority sectors including the commencement of major infrastructure projects will spur economic growth.

  2. Inflation is projected to average about 6% p.a next financial year and around 5% over the medium term. The exchange rate, which is a key determinant of economic competitiveness and has a major effect on the resource envelope, is expected to remain stable owing to the improvement in the trade balance.

Financing Infrastructure

27. Madam Speaker, increased investment needs will require non- traditional approaches to supplement our domestic revenues. In addition to traditional grants and concessional loans, other non- traditional financing sources such as limited non-concessional borrowing, contractor facilitated finance or suppliers’ credit, and using the external and domestic debt markets will be judiciously used to finance key infrastructure investments.

28. Madam Speaker, Government will increase external borrowing to scale up essential investments in infrastructure, particularly in roads, railways, energy and water for production. Preference will be given to contracting debt on concessional terms in order to maintaining debt sustainability. I wish to reiterate that non- concessional borrowing for consumption expenditures is not productive, as it does not generate the necessary returns required to enhance growth and development. Any future borrowing therefore, both from external or domestic sources, will only be secured for financing the productive sector, specifically to address our infrastructure needs.

Business Climate

29. Madam Speaker, in order to simplify business licensing, I am pleased to announce that an e-licensing registry was launched on June 11th, 2013. Uganda Registration Services Bureau (URSB) will host and coordinate all relevant stake holders in transitioning their processes to an online service. The total saving anticipated from the implementation of this portal is Ushs 32.1 billion. KCCA implemented a 25% reduction in Trade License fees that was issued by the Minister of Trade, Industry and Co-operatives. KCCA further streamlined the time taken to issue a Trade License through decentralization of issuing authority and this has reduced the time from 60 days to 4 working days. These reforms translate into annual cost savings of Ushs 23.4 billion.

Employment

30. In order to partly address the challenge of unemployment, Government has implemented the Youth Venture Capital Fund to enable youth start up enterprises. Over 5,200 small businesses have been supported through this scheme and U. Shs. 21 bn had been disbursed to eligible youth by the end of May 2013.

IV. FINANCIAL YEAR 2013/14 BUDGET STRATEGY

31. Madam Speaker, in the next year, Government will accelerate implementation of interventions aimed at improving competitiveness and reducing the cost of Doing Business. Key aspects to this strategy will be the acceleration of investment in infrastructure.

Infrastructure Development Strategy

32. Madam Speaker, Infrastructure Development will address gaps to reduce the cost of doing business, promote private sector growth and create jobs. Improved infrastructure will stimulate increased output in the productive sectors through Value Addition, particularly in Agriculture, Manufacturing and the Services. Accelerating road infrastructure development will enable connectivity between centers of production, processing and national and regional markets, that increases Uganda’s export earnings. Increased electricity generation, transmission and distribution infrastructure will increase productivity.

Business Environment

33. Government will continue improving the business climate for better private sector competitiveness. Government of Uganda will continue to further efforts in reforming the licensing regime by unnecessary laws and regulations in order to streamline and simplify the business registration and licensing processes. Government will eventually fully automate these two processes. In order to increase the security to land ownership rights and enhance the role of land markets country-wide a further 21 zonal land offices, especially in northern Uganda, will be rolled out.

34. Madam Speaker, the computerization of the land registry was completed during the year. The digitization of land titles has improved the security, retrieval and time for carrying out transactions requiring land titles. Six zonal land offices have been operationalized to improve access and reduce cost of processing land titles.

35. To enhance private sector competitiveness, Government commenced implementation of business licensing reforms, following a review of licensing laws and regulations in various sectors. The total estimated saving from the reforms carried out this Financial Year is UGX 54.56 billion, representing 7.52% reduction from the total cost of 725.73 billion from the previous Fiscal Years.

36. In addition several Commercial Laws enacted by Parliament had their regulations operationalized. Other key enabling legislation such as the PPP Bill, the Bio-technology and Bio-safety Bill, the Free Zones Bill, Anti-Counterfeits Bill, Insurance Amendment Bill;; Anti– Money Laundering Bill and the Investment Code (Amendments) Bill, are before Parliament. Madam Speaker, I am appealing that these laws be enacted expeditiously to further enhance competitiveness.

Tackling Unemployment and Job Creation

37. Madam Speaker, creating work opportunities for young people remains one of our most pressing development challenges. In the words of former British Prime Minister Margaret Thatcher, “…young people ought not to be idle because it is very bad for them and for the country. There are few worse things that society can do to its young than to leave them in limbo…” The skills gaps that exist between the education system and the job market will be addressed through re-aligning the curriculum and establishing partnerships between the private sector and educations institutions.

38. While regulation of the labour market through promulgation of legislation for a minimum wage seeks to protect workers’ rights, this should not detract from the importance of creating employment of the vast majority of the unemployed. The first step to ensuring strong protection of workers’ rights is the creation of as many job opportunities as possible, while ensuring security and safety at work. The rest will ultimately follow.

39. Youth unemployment in Uganda is widespread due to a number of different causes:-

  1. A demographic “Youth Bulge”

  2. A mismatch between the mostly academic focused

    curriculum being taught under UPE and USE on one hand and the more technical based skills demand from the market place,

  1. A prevailing mindset that “it is government’s job to provide jobs” as well as free basic education and healthcare;;

  2. An overall global economic context where governments (including Uganda) are rationalizing their operations i.e. moving away from state-subsidized enterprises and shifting to market-based economy.

40. All these factors are happening against global economic crisis which has impacted foreign investment and the capacity of the domestic private sector to quickly expand job opportunities. Fortunately Uganda has a comparative advantage for agriculture production which is relative labour intensive and includes opportunities for all workers (rural as well as urban).

41. Our overseas Uganda diaspora is also another solution of how to fight unemployment. The diaspora send home foreign exchange and we often highly skilled. They can be engaged to enhance not only to provide financial inflows, but also in efforts to collect the best international lessons in employment generation e.g. upgrading skills levels, exchange of knowledge and technical employment initiatives especially higher-knowledge industrial start-ups.

42. Therefore, government (including the ministries responsible for Economic Development, Labour and Foreign Affairs) will collaborate with the private sector, the Uganda overseas diaspora and international development partners. This collaboration will develop a well-designed employment market programme to address the various identified causes and formulate multi solution packages including basic education shifts, relevant technical education and quality assurance measures opportunities and modalities to include skills, knowledge and experience of the Uganda diaspora.

43. Madam Speaker, the Budget Priorities for Financial Year 2012/13 continue to prioritise the following:-

44.

  1. Productive Infrastructure

  2. Agriculture Production and Productivity

  3. Human Resources Development especially in technical skills

The strategy will entail the following:-

  1. Creation of Jobs opportunities in agriculture and industry

  2. Provision of rural electrification to agro-industries

  3. Empowering agricultural production

  4. Ensuring food security, enhanced household incomes and creating market surplus for agro-processing and exports

  5. Facilitating growth of the service sector

  6. Increase competitiveness at national and regional level.

V. FINANCIAL YEAR 2013/14 REVENUE AND EXPENDITURE FRAMEWORK

45. Madam Speaker, before I elaborate the sector priorities for the next year, I would like to present the revenue and expenditure framework for the FY 2013/14 Budget. The framework has been developed in line with the recent trends in the domestic, regional and international economy. In particular, the framework has been impacted by GDP sluggish recovery of the global economy, the performance of domestic revenues and expected level of external support from development partners.

46. Next financial year, total resource inflows in Financial Year 2013/14 are projected to amount to Shs 13,169bn. Domestic sources will contribute Shs 10,509bn representing 81.1% of the total budget resource for the year. The Uganda Revenue Authority will collect taxes amounting to Shs 8,486bn;; and Non-Tax Revenues of U. Shs 275 bn will be collected. The Budget will also be financed by issuing Government securities worth Shs 1,040bn on domestic markets;; and net Government drawdown from our savings of Shs 708bn.

47. Total external financing of the Budget will amount to Ushs 2,660bn, equivalent to 20 per cent of the total while project aid amount to resources. Budget support comprises of Shs 213 bn while Project aid amounts to Shs 2,447bn, an increase of Shs.234bn over the financial year now ending. There is need to examine non- traditional sources of financing in light of declining budget support.

48. The resources available to finance discretionary Government expenditure next year, therefore amount to Ushs 9,498bn, excluding project aid and statutory external and domestic debt repayments which amount to Shs 2,695bn. The total resources available for discretionary Government expenditure next financial year represent an additional Shs 1,427bn above the level in the year now ending.

 

VI. FINANCIAL YEAR 2013/14 SECTOR PERFORMANCE AND PRIORITIES

49. Madam Speaker, the sector performance over this year serves as a basis for priorities for next year. There has been significant progress with implementation of the priority interventions that I announced in last year’s budget statement. This progress has contributed to economic recovery significantly, following the challenges of increasing prices and volatile exchange rates that Uganda and the East African region has faced. I now wish to elaborate the sector priorities for next year.

50. Madam Speaker, the Financial Year 2013/14 Budget will continue prioritising the creation of an enabling environment for growth, development and socio-economic transformation. Sector priorities to achieving these goals are as follows:-

  1. Aggressively continue to invest in infrastructure development particularly in Transport and Energy;;

  2. Support Increased Agricultural production and enhancing productivity;;

  3. Enhance Scientific Innovation for Industrialisation and Private Sector Competitiveness;;

  4. Improve the Quality and Access in Social Service Provision in Health Water and Education;; and

  5. Enhance Transparency and Accountability to improve Value for Money and fight Corruption vigorously in Public Service Delivery.

 

A. INFRASTRUCTURE DEVELOPMENT

51. Madam Speaker, Government will continue to build Uganda’s stock of infrastructure to serve as the springboard for economic growth and development. Interventions in this area will include the improvement of transport, provision of electricity, the development of the oil and gas sector and enhance information and communication technology.

Transport Infrastructure

52. Madam Speaker, in accordance with Government’s priority accorded to transport infrastructure, I have allocated Ushs 2,395 bn to the roads and works sector next financial year, an increase from U. Shs. 1,650.75 bn this year. The additional allocation to Roads and Works budget totals Shs 744.7 billion over the last year’s provision.

53. During the forthcoming financial year, we have prioritized clearing of outstanding contractual obligations for completed roads, completion of ongoing projects and commencing construction of new ones. Government will also accelerate efforts to rehabilitate the country’s railway network, and improve the quality of water transport on the major water bodies. The key interventions to be undertaken next year include the construction and rehabilitation of major strategic national roads, new bridges, equipping local government road units, and the maintenance of district and community roads. This is aimed at stimulating increased agricultural production, improving connectivity to Tourist site and facilitating national and regional trade.

 

Roads

Road Construction

54. Madam Speaker, the construction of various national roads has progressed satisfactorily:

  1. A total of 518 kms of national roads were fully or substantially completed. These are:-

    1. Kabale – Kisoro – Bunagana/Kyanika (101 km)

    2. Masaka – Mbarara (154 km)

    3. Busega – Masaka (120 km)

    4. Nyakahita – Kazo (143km)

  2. A total of 327 km of national roads have their construction on schedule. These are:-

    1. Fort Portal – Bundibugyo-Lamia (104km) with the Fortportal – Sempaya section being fully completed.

    2. Overlay of Kawempe – Kafu (166 km)

    3. Jinja – Kamuli (57km).

  3. A total of 88 km of the following national road project have had contracts signed and land compensation is underway. These are:-

    1. Mbarara – Kikagati – Murongo Bridge (74km).

    2. Mbarara Bypass (14 km).

55. Madam Speaker, a total of 626 km of national roads have completed designs for upgrade from gravel to tarmac. These are:-
i. Muyembe– Nakapiripirit, and Moroto – Kotido road

 

(200km);;

ii. Rwenkunye – Apac – Lira – Kitgum – Musingo road (230km);;

  1. Hoima – Butiaba – Wanseko road (111km);; and

  2. Kayunga – Galiraya road (85km).

56. In addition, the design for dualling of Kibuye-Busega – Mpigi (30km) and Kampala Northern Bypass (17km) has been completed. The design of Kampala – Jinja Expressway (80km) is being finalised.

57. Madam Speaker, in the next year, the construction of 1,363 Kms of the following ongoing roads projects will be accelerated:-

i. Atiak-Afogi (104km);;
ii. Fort-Portal–Bundibugyo

(103km);;
iii. Nyakahita–Kazo(68k);;

iv. Kazo–Kamwenge (75km);; v. Mbarara–Kikagati

(74km);;
vi. Malaba–Bugiri (82km);;

vii. Tororo–Mbale (49km);; viii. Mbale–Soroti (103km);; ix. Jinja-Kamuli(58km);;

x. Moroto-Nakapiripiriti (95km);;

xi. Gulu–Atiak (74km);;
xii. Vurra–Arua–Koboko –

Oraba (95km);;

xiii. Hoima–Kaiso–Tonya (85km);;

xiv. Ishaka-Kagamba (35.4km);;

xv. Kampala-Masaka Intermediate Sections (51km);;

xvi. Rehabilitation of Mukono–Jinja (52km);;

xvii. Mbarara–Ntungamo (59km);;

xviii. Ntungamo-Kabale- Katuna (65km);;

xix. Kayunga-Galiraya (88.5km);; and

xx. Kampala–Entebbe Expressway(51km).

58. Madam Speaker, Government will also commence the construction of 837 km of the following new road projects:-

  1. Atiak-Nimule (35km);;

  2. Kyenjojo-Fort Portal

    (74km);;

  3. Mbarara-Bypass (14km);;

  4. Dualing of Kampala Northern Bypass (17.5km);;

  5. Masaka-Bukakata (41km);;

  6. Kamwenge-Fort Portal (66km);;

  7. Ntungamo-Mirama Hills (37km);;

  8. Kigumba-Bulima- Kabwoya road (135km);;

ix. Rehabilitation of Mukono-Kayunga- Njeru road (94km);;

x. Rehabilitation of Kafu- Karuma road (88.5km);;

xi. Rehabilitation of Kamudini-Gulu road (65km);;

xii. Ishaka-Katunguru Road (56km);;

xiii. Designing of Zirobwe- Wobulenzi road (23km);;

and

xiv. Design of Seeta-Kiira – Matugga – Wakiso / Najanankumbi – Busabala (64km).

59. Madam Speaker, I have also allocated funds for the clearance of outstanding payments for the following completed roads:-

  1. Kabale – Kisoro – Bunagana/Kyanika (101km);;

  2. Matugga-Semuto (41km);;

  3. Kampala-Gayaza-Zirobwe (44km);;

  4. Jinja-Bugiri (72km)-Retention;;

  1. Masaka-Mbarara (149.2km);;

  2. Busega-Muduuma-Mityana (57km);;

  3. Kawempe – Kafu (166km);; and

  4. Kampala-Masaka, Package A (63km).

60. Madam Speaker. Government is also negotiating financing from the World Bank, African Development Bank and Islamic Development Bank to commence the upgrade of the following roads next year:-

i. Kapchorwa-Suam;; ii. Rukungiri-Ishasha;;

iii. Olwiyo-Anaka-Gulu-Kitgum;; iv. Musita-Nankoma-Majanji;;

v. Kamuli-Bukungu;;
vi. Mukono-Kyetume-Katosi;;

vii. Soroti-Katakwi-Moroto;; viii. Mbale-Igale-Lwakhaha;;

ix. Tirinyi-Paliisa-Kumi-Ngora;; x. Atiak-Adjuman-Moyo;;

xi. Nabumali-Butaleja-Namutumba
xii. Mpigi-Kabulasoke-Maddu-Sembabule

xiii. Nyendo-Sembabule

61. Madam Speaker, the construction of some roads is behind schedule, as a result of delays by the contractors to mobilise machinery, land compensation, delayed environmental approval by NEMA and delayed completion of design reviews. This underscores the need to improve procurement, contracting and implementation of Government projects. The affected projects include:

  1. Mbarara – Katuna (124km);;

  2. Tororo – Mbale (49km);;

  3. Mbale – Soroti (102km);;

  4. Vurra-Arua-Koboko- Oraba (92km);;

  1. Ntungamo–Mirama Hill (37kms);;

  2. Moroto–Nakapiripiriti (93.3kms);;

  3. Kampala-Entebbe Expressway (51km);;

(35.4km);;

x. Atiaka-Nimule (33Km). Jinja – Mukono (52Kms).

 

  1. Gulu- Atiak (74km);;

  2. Ishaka–Kagamba xi.

Road Maintenance
62. Madam Speaker, I propose to allocate an additional Ushs 72.7bn

to the Uganda Road Fund to enhance funding for national road maintenance. The total allocation in the Road Fund now amounts to Ushs 352.98bn. The Uganda Road Fund will fund routine maintenance of 22,500km of District and Town Council roads and 4,500km of Kampala Capital City Authority (KCCA) and Municipal Roads as well as removal of bottlenecks on 30,000km of Community Access roads.

63. A further 1,670 km of paved roads and 9,000 km of unpaved roads will undergo routine maintenance by the Uganda National Roads Authority. An additional 750 km of unpaved roads will be re- graveled and the periodic maintenance of various bridges undertaken. District roads will also be maintained using recently acquired road equipment at district road units. Furthermore, Independent Parallel Bid Evaluation that has contributed to the reduction in national road costs will be extended to national road maintenance to enhance value for money. Proposals to amend Road Fund Act will be tabled in Parliament next year to ensure adequate and timely provision of funds for road maintenance and rehabilitation, as this will increasingly require support given the large investments in road development.

64. Madam Speaker, with support from the World Bank, Government will next financial year commence the rehabilitation and reconstruction of the road network in 14 Municipalities across the country. These include Arua, Gulu, Lira, Moroto, Soroti, Mbale, Tororo, Jinja, Entebbe, Masaka, Mbarara, Kabale, Fort Portal and Hoima. In addition, Kampala Capital City Authority will continue to be supported to improve the road network within the city and accelerate the programme for introduction of the Rapid Bus Transit System in order to decongest the city

Bridges

65. Madam Speaker, over the last year the following progress was recorded in respect of bridge construction:

a. Bridges Completed

  1. Daca, Ore, Eventre and Uzungo on Wandi-Yumber road

  2. Apak bridge in Lira;; and

  3. Bulyamusenyu Bridge;;

  4. Construction of the Atiak – Moyo – Afoji (Bridges) bridges is

    at advanced stages and will be completed by July 2013;;

     

 

 

66. Madam Speaker, during the forthcoming year, the following works on bridges will be undertaken:

  1. Rehabilitation of the existing Nalubale Bridge and the construction of Second Nile Bridge is scheduled to commence;;

  2. Construction of the Apak and Birara Bridges.

  3. Construction works of the Ntungwe and Mitaano Bridges

    (Kanungu).

  4. Complete construction of the Muzizi and Awoja bridges

  5. Complete construction of seventeen (17) bridges in North and North Eastern Uganda including Olyanai, Obalanga, Alipa, Ajeliek, Ojanai, Opot, Akol, Airogo ( all in Kumi);; Balla, Abalang, Agali and Enget (Lira);; Kochi and Nyawa (Moyo), using funding from the Islamic Development Bank.

  6. Commence construction of Nyacyara, Goli, Nyagak, Enyau, Pakwara, Anyao and Alla bridges in West Nile.

67. Madam Speaker, I have also provided resources to re-construct the bridges destroyed by the recent floods in various parts of the country, such as the Mubuku and Kilembe bridges in Kasese district.

Railway Transport

68. Madam Speaker, in the rail sub-sector, the implementation of the following interventions to revitalize railway transport will be accelerated next year:

 

 

 

  1. Fast-tracking the rehabilitation of Tororo- Packwach and Kampala Kasese railway lines;;

  2. Commence design of Gulu – Atiak – Nimule – Juba railway, to be constructed jointly by the governments of Uganda and South Sudan;;

  3. Complete design of the Standard-Gauge Kampala–Malaba railway line (251km).

In-land Water Transport

69. Madam Speaker, Lake Victoria is central to Uganda’s overall economic objectives. The Lake is an essential factor is our regional integration strategy. Bordered by Uganda, Kenya and Tanzania with river access to Rwanda and Burundi, it is home to over 30 million people living around its shores. It is a pivotal part of Uganda’s alternative (Southern route) for export and imports to and from Indian Ocean. Connecting us via Mwanza and then road or rail to Dar-es-salaam;; or even to Kisumu Kenya and then to Nairobi and Mombasa by road or rail.

70. The development of water transport on Lake Victoria will enable the following objectives to be met:-

  1. Ensure a strategic alternative route to the sea

  2. Facilitate transportation of agricultural produce

  3. Support Uganda’s geographic location to be inland distribution hub to Rwanda, Burundi, South Sudan and DRC

     

 

 

71. Revitalization of Lake Victoria by rebuilding port infrastructural and carrying out a definite navigational survey as well as environmental measures will enable the Lake to become a major waterway by facilitating and lowering the cost of transport to both domestic and regional destinations. Together with my four Colleagues from other EAC countries, we are seeking multilateral assistance for a regional integration development project with Lake Victoria at its centre. As a positive sign in support of the revitalization of the Southern route to the Indian Ocean through Dar es Salaam, the rehabilitation of the Marine Vessel Kaawa was completed during the year, and is operating between Port Bell and Mwanza.

72. Madam Speaker, during the year the Lwampanga – Namasale ferry was commissioned and the rehabilitation of the Laropi ferry is underway. The Kayunga (Kasana) and Mbulamuti (Bugobero) ferry is undergoing trials and the construction of landing sites is being completed. One of the two new Kalangala Infrastructure Services (KIS) ferries was launched;; and the ferry previously used in this area will be refurbished and deployed to the Kiyindi – Buvuma crossing.

73. Madam Speaker, in the next year Government will continue to improve the inland water facilities by providing ferry services and constructing landing sites. The Obongi-Sinyanya and Kayunga- Mbulamuti ferries will be commissioned and construction of the New Kampala Port at Bukasa will commence. These interventions will

 

 

 

improve connectivity of various parts of the country and the entire East African region, and ultimately reduce transportation costs.

Electricity

74. Madam Speaker, the 250 MW Bujagali Hydropower project was fully commissioned during the last financial year. In addition a number of small renewable hydropower projects delivering a total of 68.5 MW to the national grid have been commissioned. These include Buseruka (9MW), Nyagak I (3.5MW), Kisizi (0.26MW), Bugoye (13MW), Mpanga (18MW), and Ishasha (6.5MW).

75. The detailed feasibility study and engineering designs for the 188 MW Isimba Hydropower Project was completed, and arrangements for its financing are underway. With support from the Government of Japan, the pre-feasibility study for the 600MW Ayago Hydropower Project was completed and the detailed engineering designs are being prepared. The construction of the Karuma Hydropower Project (600MW) has faced procurement challenges, but will commence in next financial year. In addition, the Global Energy Transfer Feed-in- Tariff (GETFiT) East Africa Pilot Project was launched, and will support construction of a further 15 mini-hydropower projects that will deliver a total of 125MW over the next three years.

76. Madam Speaker, under the Rural Electrification schemes a total of 2,322 km were under construction. These include:

i. Mubende-Kyenjojo (156Km)

ii. Rakai-Isingiro;; Lyantonde-Lumbugu;;

 

 

 

Kaliro-Lwebitakuli;; and Sembabule-Lwemiyaga (283 km)

  1. Kabale-Kisoro (166 km)

  2. Rwachikoko-Awere-

    Laloi( 58km)

  3. Gulu-Adjumani-Moyo(

    238km)

  4. Apala-Adwari-Kiru-

    Morulem (109km)

  5. Ibanda-Kazo (137 km)

  6. Soroti-Katakwi (96km)

  7. Ayer-Kamdini-Bobi

    (90km)

  8. Ntenjeru and Environs

    (75km)

  9. Ruhiira Millenium

    Project (106 km)

  10. Nkonge-Kashozi (177

xiii. Masindi-Waki-Buliisa (178km)

xiv. Gulu-Acholibur with Paicho-Patiko-Palaro

tee-off (118km)
xv. Opeta-Achokora (58

km)
xvi. Wakiso/Mpigi/Mityana

/Busuunju (43km)
xvii. Lwengo/Mbarara/Isingi

ro/Ibanda/Kiruhura

(58km)
xviii. Bushenyi/Buhweju/Ka

sese/Kyenjojo (48 km) xix. Rukungiri/Kanungu/N

tungamo/Kabale (78

km)
xx. Kasese District Rural

electrification (28 km)

km)
77. Consequently, a number of district headquarters were connected

to the main grid. These include: Nakapiripit, Amudat, Kaberamaido, Dokolo, Amolatar, Ntoroko, Alebtong, Moroto, and Napak, Kiruhura, Kyegegwa and Katakwi.

78. Furthermore, the following community schemes have been under implementation:-

 

 

 

  1. Kikubamitwe Village, in Luwero (3 km)

  2. Rusekere Secondary School in Fortportal

    (0.6 km)

  3. Namazige-Kasenge in

    Mukono (1 km)

  4. Simba Farms in Ibanda

    (0.2km)

  5. Cougar Industries Ltd

    in Mukono (0.6 km)

xxvi. Nine resettlement villages in Bujagali,

Jinja (15.9 km)
xxvii. Omagoro Village in

Kumi ( 1 km)

79. Commencing next financial year, the electricity utility distributor Umeme has been required to install [15,000] pre-paid meters in order to ensure increased efficiency in electricity use, and also reduce distribution system losses through further investment in the distribution network.

80. Madam Speaker, I have allocated an additional Ushs 25.73bn to the Rural Electrification Programme to facilitate the extension of electricity to the under-served areas of the country including the district headquarters.

Oil and Gas

81. Madam Speaker, during the last year the following legislation for prudent management of Uganda’s oil resources framework was passed by Parliament. This legislation includes the following:-

i. The Petroleum (Exploration and Production) Bill 2012

 

 

 

ii. The Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage) Bill 2012

82. Madam Speaker, there is need to expedite the consideration of the Public Finance Bill 2012, still pending before Parliament, which contains the framework for management of petroleum revenues, among other reforms.

83. Madam Speaker, next year, the construction of the Kenya – Uganda and Uganda – Rwanda Oil pipelines using the Public Private Partnership arrangement will be fast tracked. I have also allocated an additional Ushs 3.0 billion to National Environment Management Authority to conduct the Environmental Impact Assessment for the Gas and Oil exploration and development in the Albertine region.

Minerals

84. In order to promote mineral investment, a Geological and Mineral Information System (GMIS) to host geological and mineral data has been established. This will provide a one Stop Centre for all geological and mineral information country wide, which is now accessible to potential investors. In addition, a computerized mining registry will expedite mineral licensing, the timely generation of revenues and provide transparency and accountability in the management of mineral rights.

85. In the forthcoming year and the medium term, Government will undertake the following interventions to enhance mineral development:-

 

 

 

  1. Promote optimal use of minerals and mineral trade for social improvement of the people.

  2. Provide technical services in the field of geosciences to guide national planning and development.

  3. Ensure best mining practices and accountability.

  4. Promote mineral value addition and trade to increase

    revenues.

  5. Gazette geo-sites and geo-parks;; and

  6. Complete preparation of an earthquake administration policy, and an earthquake disaster management plan

ICT, Science and Technology

86. Madam Speaker, during the year, Government completed the readiness for commercialization of the first two phases of the National Backbone Infrastructure (NBI) that enables access to the information superhighway by telecommunication companies and public institutions connected to the Infrastructure. The Business Process Outsourcing (BPO) Centre has continued operations, providing 100 jobs during the year, and an additional 150 jobs will be added next financial year.

87. The e-Government Master Plan was developed in collaboration with Government of Korea. The plan provides priority Information Technology projects for implementation, so as to improve service delivery. Cabinet also approved the strategy for the rationalization of IT initiatives and services in government so that IT programmes in Government in across government can reduce implementation costs.

 

 

 

During the year, regulations for Cyber Laws have been approved and their enforcement will commence next financial year.

88. Madam Speaker, innovations in Information and Communication Technology, Science and Technology are no longer an option in today’s global competitive economic environment. Science and Technology has been a major factor behind the success of the world’s fastest growing economies in South East Asia and Latin America. Unprecedented developments in Information and Communication Technology have permitted the growth of products and services with a significant increase on factor productivity and firm profitability.

89. Madam Speaker, in the next year, Government will continue to support Scientific and Technological innovation to drive value addition, increase our competitiveness in the global market and create employment among other benefits. The National Backbone Infrastructure will deliver bulk Internet bandwidth to connected Government at a cheaper cost and Information Technology (IT) service use will be mainstreamed across Government to avoid duplication and minimize cost. This will also improve Information Security, and reduce incidences of electronic fraud. The 700km third phase of the re-designed National Backbone Infrastructure will be implemented. This will provide connectivity to the Rwanda-backbone through Katuna;; and the Tanzania-backbone through Mutukula, hence allowing alternative access to the coastal internet submarine cable.

 

 

 

90. Digital Television transmission will be implemented and Cyber laws operationalized. Government shall also develop and disseminate Business Process Outsourcing (BPO) operations standards;; and setting up Information Technology Parks to host BPOs and related ICT service companies Government will establish fully serviced Industrial and Information Technology (IT) parks in various regions of the country over the medium term.

B. AGRICULTURAL PRODUCTION AND PRODUCTIVITY

Agriculture

91. Madam Speaker, agriculture continues to play a critical part of our economy. The sector employs about 66 per cent of Uganda’s total labour force, and the vast majority of our population and directly and indirectly depend on it. It not only generates incomes and a livelihood for the majority of Ugandans, but has a great potential to transform the economy.

92. Agriculture is a private sector activity, for which Government will continue to provide support towards its further development in research, seed multiplication and certification, and disease control. Other key interventions relate to provision of extension services and support for agro-processing to agricultural produce. This will be done with an emphasis on rolling out the Commodity Based Approach that focuses on Ten (10) key food security and household income commodities. The commodities are maize, beans, coffee, market fruits and vegetables, rice, bananas, fish, dairy and beef cattle.

 

 

 

93. Madam Speaker, during the year, Over 35,000 farmers directly benefited from provision of improved maize seed, in addition to accessing inputs such as fertilizers, under the commodity approach. Furthermore, a total of 13,486 kg of foundation seed for Arabica coffee, beans, maize and rice, were distributed to seed companies and farmer groups. The rehabilitation of all the three irrigation scheme of Mubuku, Doho and Agoro is also substantially complete.

94. Next year, Government will reform the National Agricultural Advisory Service (NAADs) to create a single spine Extension system aligned to the relevant Directorates in the Ministry of Agriculture. NAADS will also develop a rural agri-business initiative to disseminate knowledge on how to promote profitable agriculture enterprises across the country.

95. In an effort to increase the availability of improved seed for farmers, Government has adopted a concerted approach to ensuring the availability of improved seed varieties and animal breeds. Building on successes in improved seed varieties and breeds by the research organisations, improved seed and breeds will be multiplied and distributed extensively across the country. The multiplication of improved seed will be implemented with the coordination between the ministries of Agriculture, Local Government and Finance, together with the Uganda Prisons Service.

 

 

 

96. Furthermore, on-going efforts to rehabilitate large scale irrigation schemes and promotion of small scale and affordable irrigation technology will be accelerated. The rehabilitation of the Olweny, scheme will commence next year, together with 33 schemes in other districts. Feasibility studies are planned for the rehabilitation of Atera, Labori, Odina and Kiige irrigation schemes. This will reduce excessive reliance on natural weather for agricultural production.

97. Madam Speaker, I have allocated Ushs 394.4bn to the Agricultural Sector next year. I have also provided an additional Ushs 9.2bn to strengthen Fisheries Department in enforcing fishing regulations and standards.

C. TOURISM DEVELOPMENT

98. Madam Speaker, in order to improve accessibility to tourist sites, road access to Kidepo Valley National Park is under maintenance and works on the Ishasha – Katunguru road have commenced. Contractors for the Kisoro-Mgahinga, Kyenjojo-Hoima-Masindi and Kabwoya – Kyenjojo roads are being procured.

99. In order to enhance hospitality standards, 20 East African Community accredited hotel assessors were trained and the inspection of hotels accommodation was completed and their Grading and Classification will be undertaken next financial year. 182 students were enrolled at the Hotel Training Institute at Jinja, and a further 390 students graduated in May 2013.

 

 

 

100. In support of domestic tourism, two multi-stakeholder platforms in the Kigezi and Busoga regions were launched to spearhead the identification of local tourist products and their development. Government will continue to support tourist platforms as vehicles for promoting domestic cultural and other product development in related.

101. Madam Speaker, the key constraints to Uganda’s tourism include poor physical connectivity to tourist sites, inadequate tourist information, low levels of ICT provision of tourist services, inadequate specialised human resources for the hospitality industry and our low investment in building and marketing the country as a tourism brand.

102. Next financial year, Government will continue to provide the necessary facilities and establish a conducive investment climate for tourism development through the following interventions:

  1. Develop a comprehensive Tourism Sector Development Action Plan;;

  2. Continue supporting the hotel, tour and guide businesses to provide world-class hospitality business;;

  3. Support skills training of critical tourism sector human resources including the re-construction of the Uganda Hotel and Tourism Training Institute at Jinja;;

    D. INCREASING SOCIAL SERVICE DELIVERY

     

 

 

103. Madam Speaker, social welfare indicators such as literacy, safe water coverage, and the reduction in infant and maternal mortality rates, depict progress of society’s well-being and human development.

Education

104. Madam Speaker, during the year, Government enhanced salaries for Primary School Teachers by 15%, and 30% for Science Teachers in Post Primary Education and Training Institutions. In an effort to reduce teacher absenteeism, the percentage of teachers at task improved from 60% in 2011 to 77% in 2012. In addition, head teachers at task improved from 63% in 2011 to 70% in 2012.

105. Madam Speaker I have allocated over UShs 1,801 bn, representing 13.3 per cent of the total budget to the education sector to impart the necessary skills and knowledge required to tap the creative abilities of individuals, in order for them to lead a better life and enhance society’s wellbeing. The following interventions will be undertaken in the Education Sector to increase access to quality and appropriate education:-

  1. Accelerate Government investment in vocational and business training including supporting the Private sector to provide the youth with the requisite skills for job creation.

  2. Forge a strong relationship between education institutions and private companies to design and provide appropriate training programmes in line with the needs of the labour market.

  3. Provide adequate infrastructure, in-service teacher training,

    strengthened supervision, through a diversified mix of housing,

     

 

 

training and professional development and a clear career structure through the scheme of service at all levels to improve the quality of teaching and learning;;

  1. Promote science and technical education through provision of incentives for science, mathematics, technical and vocational education, supporting science and research development, encourage the private sector to support science education and equipping schools with science laboratories;;

  2. Bridge the gender gap in access to education by creating girl friendly school environment such as separate sanitary facilities, and non-tolerance to sexual harassment among others;;

106. Madam Speaker, Government will also implement key interventions in the education sector to enhance efficiency and effectiveness, and address the quality. These are the following:-

a. Students Loan Scheme: Government will implement the Student Loan Scheme initially for Science, Medical and Engineering students in higher institutions of learning. The Student Loan Scheme will also be complemented by the Bonding of students to Government employment after their respective courses, which will serve towards the repayment of the Student Loan. I have allocated an additional Ushs 5.0 billion towards operationalization of the Student Loan Scheme.

b. Teachers SACCOs: In line with the Government policy of encouraging savings, improve access to credit and uplift the

 

 

 

welfare of Teachers, I have allocated a total of Ushs 5.0 billion to support Teacher SACCOs across the country.

Health

107. Madam Speaker, an additional 6,172 Health Workers were recruited for Health Centers and the remuneration of Medical Officers at HC IVs was enhanced to Shs. 2.5m per month inclusive of consolidated allowance. The construction and equipping of the Government of Japan-funded Kabale and Hoima Regional Referral Hospitals was completed. Procurement is underway for contractors for Mulago National Referral Hospital rehabilitation and the construction of the Kirudu and Kawempe hospitals.

108. In addition to the seven immunizable disease vaccines, the Pneumococcal Conjugate Vaccine (PCV) against pneumonia was launched in April, 2013 with support of the Global Alliance for Vaccines Initiative (GAVI), and immunization campaigns were conducted in 49 districts.

109. Madam Speaker the reduction in morbidity and mortality from the major causes of ill health and premature death and reduction of disparities in the provision of health services is a major focus next year. The following interventions will be implemented:-

i. Develop and Implement a comprehensive Strategy for Malaria Eradication to build on current efforts of prevention, diagnosis and treatment

 

 

 

  1. Continue improvement in health infrastructure by rehabilitating and equipping National and Referral Referral Hospitals and Health Centres;;

  2. Recruit key health care personnel to ensure adequate staffing, especially to increase access to quality maternal and child health care.

  3. Provide staff housing for health workers with special attention on under-served areas;;

  4. Formulate an appropriate legal and regulatory framework for the establishment of the national health insurance scheme;;

  5. Accelerate the ongoing campaign to prevent and control communicable and non-communicable diseases through immunization, awareness campaigns and provision of equipment.

  6. Equip key health facilities such as Uganda Heart Institute, Uganda Cancer Institute and Uganda Blood Transfusion Services among others, and partnering with the private sector to establish facilities for highly specialized treatment.

  7. Improve the governance and efficiency in health service delivery through increased joint supervision and monitoring in collaboration with non-Governmental health institutions.

Safe Water Coverage and Sanitation

110. Madam Speaker, to increase the benefits of access to safe, water and sanitation facilities, Government has undertaken the following key activities, over the last year:

 

 

 

  1. Construction of piped water supply construction works in Kiruhura (95%), Kazo (92%), Kakuto(70%), Kakyanga (80%), Lyantonde (80%);;

  2. Completion of Phase One of the Tororo-Manafa Gravity Flow Scheme;; and continuation of construction of the Kanyampanga Gravity Flow Scheme.

  3. Bore holes drilling in several districts including Namayingo, Lira, Mubende, Apac, Oyam, Kaliro, Butaleja, Luwero, Namutumba, Kumi, Ngora, Kaberamaido, Lwengo, Kaliro and Tororo among others.

  4. Implementation of Piped water schemes in the towns of Nakasongola, Kalungu, Wobulenzi, Rakai, Kinoni, and Mbirizi

  5. Rehabilitation of water works is at various stages in the districts Wakiso Luwero, Masindi, Mityana, Buikwe, Kagadi, Kakumiro, Kiboga, Mubende, and Butambala among others.

  6. Progress with Construction of the Lubigi Sewage System;;

111. Madam Speaker, in order to increase access to quality water and sanitation, Government will focus on the following interventions next year:

  1. Upgrade Ggaba Water Works treatment facilities and construct Namasuba Hill reservoir

  2. Construct motorised boreholes (deep wells) and large Gravity Flow Schemes and provide rainwater harvesting technologies;;

  3. Complete construction of the Lubigi Waste Water Treatment Plant, and rehabilitate Bugolobi sewage treatment plant;;

     

 

 

  1. Commence construction of Nakivubo and Kinawataka Waste Water Treatment Plants, and

  2. Continue provision of sanitary Ecosan toilets in schools, and mobilize communities for better hygienic practices, such as hand washing.

E. STRENGTHENING ACCOUNTABILITY IN PUBLIC SERVICE DELIVERY

 

Madam Speaker, the challenge of service delivery in Uganda is not

112.
lack of sufficient financial resources, but the achievement of maximum efficiency and effectiveness in the utilization of limited resources. Challenges to service delivery include delayed implementation of Government projects, lack of adherence to financial management procedures, corruption and misappropriation of public resources. The Government’s is committed to improving transparency and accountability in order to achieve enhanced service delivery, for which has undertaken several reforms.

113. Madam Speaker, I am happy to report progress has been made, even as we continue to fully reform the system. It will take time but Uganda will get there. In order to tackle the weaknesses in institutional governance and improve service delivery, Government will undertake the following measures next financial year:-

i. Strengthen the accountability and anti-corruption institutions such as the Inspectorate of Government, Auditor General’s Office, Uganda Police, the Judiciary and Public Accounts Committees, among others;;

 

 

ii. Institute an elaborate system of sanctions for delayed accountability. The Ministry of Finance will enhance its emphasis on quarterly performance reporting to monitor programme implementation;;

iii.Rollout the Integrated Financial Management System (IFMS) in all Government Ministries, Departments and Agencies;;

  1. Fully implementation of all modules of the Integrated Personnel and Payroll System (IPPS) to link staff recruitment, payroll and salary processing, retirement and pension management and link the IPPS to the IFMS, to eliminate “ghost’ workers;;

  2. shall improve coordination, monitoring, inspection and evaluation of Government programmes at all levels;;

  3. Coordinate Implementation of the National Identity (ID) Card Project with the National Census and the Electoral process;; and

  4. Review the Public Investment Plan (PIP) projects to include only those for which cost-benefit analysis and feasibility studies have been conducted and for which sources of financing have been secured.

  5. Government will also rationalize the current use of office space by Ministries and Government Agencies and develop a policy so as to move away from renting office space to construction of new Government office buildings.

114. Madam Speaker, the Ministry of Finance has fully supported a Private Members Bill to seek further advancement to fight against Corruption. Other relevant Bills include the following:-

i. Anti-Money Laundering Bill which is aimed tracking funds

gained from illicit activities and for enhancing global security;;

 

 

 

ii. the Public Finance Bill which explicitly seeks to ensure timely and accurate reporting of Government funds spent and to place individual responsibility on accounting officers for proper management of funds under their control.

115. I have accordingly allocated additional funds to the various anti- corruption institutions such as Office of the Auditor General, Criminal Investigation and Intelligence Directorate, Directorate of Public Prosecution, Inspectorate of Government, Ethics and Integrity to enforce accountability and Accountant General’s Office to facilitate the rollout of the Integrated Financial Management System (IFMS).

116. Madam Speaker, experience from the successful developing countries shows the importance of fiscally sustainable and well- functioning local governments for delivery of public services. Local governments have an advantage of being closer to the recipients of such services, but they may not use this advantage if they lack effective administrative structures and resources. During the last two decades the number of district governments in Uganda has more than doubled. It is now time to implement reforms aimed at improving their performance, in particular increasing value-for- money in the services they provide. This would involve bringing greater stability in the districts and intergovernmental system, enhancing its institutional design, and redesigning funding of the district governments.

117. The following actions will be emphasized in this regard:

 

 

 

i. Reviewthestaffingmodelsofdistrictgovernments.
ii. Enhancement of the district governments’ own-sources of revenues to strengthen bottom-up accountability of district

governments and will help alleviate fiscal pressures.

VII. CONSTITUTIONAL SELF ACCOUNTING BODIES

118. Madam Speaker, the budgetary proposals of the following Self Accounting Bodies have been submitted in compliance with Article 155(2) of the Constitution.

  1. i).  Courts of Judicature

  2. ii).  Electoral Commission

  3. iii).  Inspectorate of Government

  4. iv).  Parliamentary Commission

  5. v).  Uganda Law Reform Commission

  6. vi).  Uganda Human Rights Commission

  7. vii).  Uganda Aids Commission

  8. viii).  National Planning Authority

  9. ix).  Office of the Auditor General

119. In accordance with Article 155(3) of the Constitution, Government has made recommendations on these proposals. I hereby lay both the budgetary proposals and the recommendations of Government before this august House, as required by the Constitution.

120. In order for me to submit a fully financed National Budget for your consideration in accordance with Article 155(1) of the Constitution, the budget provisions of these Self Accounting bodies

 

 

 

are in accordance with the resource envelope conveyed to them in the course of budget preparation, including the presentation of the National Budget Framework Paper to Parliament, in accordance with the Budget Act 2001.

VIII. FINANCIAL YEAR 2013/14 TAX AND REVENUE MEASURES

121. Madam Speaker the objectives of the various measures for the Financial Year 2013/14 are to raise revenues, enhance transparency in collection and enforcement, improve compliance and encourage investment. I will propose amendments to the tax laws to improve tax administration and enhance compliance. I will also highlight decisions reached at the East African Community (EAC) pre-budget consultative meeting.

Income Tax

Expansion of withholding tax agents

122. Madam Speaker, I propose widening the scope of withholding agents to capture non-compliant tax persons engaged in economic activities and not registered for income tax purposes. This measure is expected to generate Shs 5billion. The details are contained in the Income Tax (Amendment Bill) 2013.

Provide collaboration between URA, KCCA and Local Governments in tax collection

 

 

 

123. Madam speaker, I propose to provide a legal framework through which URA will collaborate with Uganda Registration Services Bureau, Local governments and KCCA to identify taxpayers and collect taxes on small businesses which are hard to reach by URA. This is aimed at easing tax administration and enforcing compliance by bringing more taxpayers into the tax net.

Value Added tax (VAT)

Eliminate VAT exemption on Hotel accommodation

124. Madam Speaker, I propose to eliminate the VAT exemption on Hotel accommodation to improve tax administration and generate revenues. This measure will raise Shs.6 billion and details are contained in the VAT (Amendment Bill) 2013.

Eliminate VAT exemption on Supply of water for domestic use

125. Madam Speaker, I propose to apply VAT on the supply of water to improve tax administration and generate revenues. This measure will raise Shs.8 billion and details are contained in the VAT (Amendment Bill) 2013. This should not affect the prices paid by the majority of low-income consumers, as the price of a jerrycan from National Water and Sewerage Corporation (NWSC) will amount to about Shs.40 at communal taps.

Eliminate VAT exemption on Wheat and flour

126. Madam Speaker, I propose to introduce VAT on Wheat and wheat flour to improve tax administration and generate revenue. This

 

 

 

measure will raise Shs.30 billion and details are contained in the VAT (Amendment Bill) 2013.

Rationalizing of exemptions

127. In a bid to improve compliance and administration, I have rationalized the VAT exemptions in line with sector definitions and best practice.

Excise Duty

Increase of excise duty of 50 shilling on petrol and diesel

128. Madam Speaker, I propose to increase excise duty on petrol and diesel by 50 shillings to increase revenue collections. This measure is expected to raise about Shs.72 billion and details are contained in the Excise (Amendment Bill) 2013.

Restore excise duty of 200 shillings on kerosene

129. Madam Speaker, I propose to restore excise duty on kerosene at 200 shillings per litre to discourage the practice of adulterating diesel by mixing it with kerosene. This measure is expected to raise about Shs.15 billion and details are contained in the Excise (Amendment Bill) 2013.

Increase excise duty on cigarettes

130. Madam Speaker, I propose to increase excise duty on cigarettes

from Shs. 22,000, 25,000 and 55,000 for Soft cup (whose local

content is more than 70% of its constituents), other soft cup and

 

 

 

Hinge lid respectively to Shs. 32,000, Shs. 35,000 and Shs. 69,000to collect more revenues. This measure is expected to raise about Shs.3.2 billion and details are contained in the Excise (Amendment Bill) 2013.

Increase excise duty on undenatured spirits

131. In a bid to curb the excise duty evasion by some unscrupulous distillers of spirits, I propose to increase the excise duty from 70% to 140% at importation.

Excise duty on Promotional Activities

Impose excise duty at 20% on revenue from promotion activities

132. Madam Speaker, I propose impose excise duty at the rate of 20% on revenue from activities akin to gambling to expand the tax base. This measure will generate about Shs.8 billion. The details are contained in the Excise Tax (Amendment Bill) 2013.

Introduce an excise duty on money transfers

133. Madam Speaker, I propose to impose an excise tax of 10% on fees charged on transfer of money by mobile network operators and other money transfer operators and widen the tax base. Details are contained in the Excise Bill 2013.

Stamps duty

Stamp duty on Third Party Insurance Policies for motor vehicles

 

 

 

134. Madam Speaker, I propose to impose an extra 30,000 shillings on stamp duty on Third Party insurance Policies for motor vehicles to raise more revenues. This measure will generate about Shs. 12 billion. Details are found in the Stamps Duty (Amendments Bill) 2013.

Fees and Licenses

Increase Motocycle registration fees by Shs.70,000 from Shs.130,000 to Shs.200,000.

135. Madam Speaker, I propose to increase motorcycle registration fees by 120,000 Shillings to raise more revenues. This measure will generate about Shs. 8.64 billion. Details are found in the Finance Bill) 2013

Increase Motor Vehicle registration fee by Shs.200,000=

136. Madam Speaker, I propose to increase motor vehicle registration fees by 200,000 Shillings to raise more revenues. This measure will generate about Shs. 8 billion. Details are found in the Finance Bill) 2013

Non Tax Revenue

Introduce the International Calls Levy

137. Madam Speaker, I propose to impose an International Calls Levy on international incoming calls and generate about Shs.43 billion. Details are contained in the Finance Bill 2013.

 

 

 

Implementation of the revised NTR rates by MDAS

138. Madam Speaker, this FY I propose to revise some NTR rates through the Finance Bill 2013 to raise about Shs.32 billion. Details will be found in the Finance Bill 2013.

139. In order to improve service delivery and expedite the process of payment, the public will be allowed to pay fees and other charges for services performed by MDAs using their mobile phones and internet for those who have access. This will reduce on congestion and time it takes to go the banks and wait for confirmation before getting the service.

Collection of Non-Tax Revenues

140. Following the good performance of Uganda Revenue Authority in the collection of Non-Tax Revenues, I am extending the mandate of the Uganda Revenue Authority to collect all fees and other charges under the Uganda Registration Services Bureau, The Directorate of Citizenship and Immigration and the Ministry of Energy and Mineral Development collection. However, the assessment will remain under the MDAs.

141. As part of encouraging Ministries, Agencies and Departments which collect Non-Tax Revenue, some will be allowed to retain the NTR and use it at source. However, this will be part of the funds appropriated by Parliament to them and their budgets will be reduced by the shortfall in case they fail to meet the targets.

 

 

 

Lotteries and Gaming

142. There has been unprecedented development in the lotteries and Gaming industry in the country. This has necessitated a strong regulatory framework to ensure that investments in the sector flourish but at the same the public, especially minors and those not keen to participate, are protected from unscrupulous dealers. The Ministry of Finance will present necessary amendments to Parliament.

Taxation of the Petroleum value chain

Review the taxation of the value chain for petroleum and minerals sector

143. Madam Speaker, during the coming financial year the value chain for petroleum and minerals sector will be reviewed with the aim of ensuring that Government gets maximum benefit from the sector.

New Tax laws and other reforms

144. Madam Speaker, as part of its efforts to promote investments, welfare of Ugandans, equity and enhance compliance and tax administration, Government has proposed new excise, stamps duty, Lotteries, Gaming and Pool Betting laws and a Tax Procedures Code.

145. In Financial Year 2013/14, Government will comprehensively review the exemptions in the VAT Act and the Income Tax Act with the aim of eliminating them to increase revenue and improve administration.

 

 

 

146. Madam Speaker, Government will also undertake a study on VAT being collected currently in comparison to its potential (VAT Gap). In addition a similar study will be undertaken on income tax which will form a basis of improving the law to enhance performance and offer better services to taxpayers.

Tax Administration

147. Uganda Revenue Authority has built a strong foundation for obtaining significant improvements in taxpayer compliance and tax revenue performance. Government has invested in Tax administration through building human capacity, modernization of systems and equipment. As a result, tax revenue performance has increased year on year by about 17%.

148. In the coming financial year and over the next three years, Uganda Revenue Authority (URA) will build on this progress to obtain significant increase in tax compliance. The Authority will;;

  1. Intensify its efforts to enforce compliance on the different types of taxpayers i.e. large medium and small.

  2. Continue expansion of the audit coverage to include the bulk of the largest traders and conduct joint audits in the domestic tax and customs departments to detect and sanction non- compliance and fraud in a number of taxes.

  3. Enforce the use of the Tax Identification Number for all traders who receive trading and other licenses and permits from KCCA and Local Governments.

     

 

 

iv. Clean up the VAT register to ensure that only those capable of filing monthly and paying remain on the register.

149. In addition to the revenue targets that the Ministry sets for URA, the Ministry will put in place a wider suite of performance indicators in tax and customs to help URA Management monitor the results of the modernization program on a regular basis.

150. URA needs to have direct access to considerable information to determine a taxpayer’s liability. In this regard, Government is to propose an amendment to the Financial Institutions Act to allow URA to access a taxpayer’s financial records, as an exception to the confidentiality provisions, where a bona fide tax audit or investigation has been initiated.

Decisions made at EAC Pre-Budget Consultations by Ministers of Finance

151. The Sectoral Council of Finance and Economic Affairs considered Pre-Budget issues. One of the key issues discussed was the granting of 0% import duty on Uganda’s raw materials and industrial inputs which under the EAC Customs Union Protocol was to last for a period of five years until 2009. The East African Community has d terminated this facility. However, we secured reduced rates for most of our industrial inputs.

152. Details of the positions agreed to by the Council will be contained in a gazette to be issued by the EAC Secretariat.

 

 

 

IX. REPORT OF TAX EXPENDITURE FOR FINANCIAL YEAR 2012/13

153. Madam Speaker, Article 152 (2) of the Constitution requires me to periodically report to Parliament on the exercise of powers conferred upon me by any law to waive or vary a tax imposed by that law. This is to report that this fiscal year, I did not exercise powers conferred by the Income Tax Act and Value Added Tax Act to waive any tax. However, I exempted Pride Microfinance Limited, a wholly owned Government financial institution, from stamp duty of Shs.48m/-on transfer of property.

154. Madam Speaker, Government has also paid Shillings Seven billion, Nine Hundred Fifty One Million, One Hundred Seventy Eight Thousand, One Hundred Ninety Two Shillings only (Shs 7,951,178,192/=) in respect of Hotels, Hospitals and Tertiary Institutions, and Non-Government Organizations with tax exemption clauses in their agreement.

X. SCHEDULE OF INDEBTEDNESS

155. Madam Speaker, in accordance with the provision of Article 159 (4), Section 13 (1) and (2) of the Budget Act 2001, I hereby lay before the House a report on Government’s total external indebtedness as at 31st March, 2013;; and all the loans contracted the grants that Government received during financial year 2012/13. I wish to call upon Colleagues to spare some time read and discuss the report and provide insights, comments and guidance.

 

 

 

156. With respect to Section 13 (3) of the same Act, I wish to report that Government did not extend any guarantee to any Agency, Company or Statutory Corporation during financial year 2012/13.

157. On the utilisation of loans and grants, I have highlighted key issues in each respective case. Details of the utilisation and the performance of each loan and grant, including the extent of the achievement of the objectives and targets, will be provided in the Ministerial Policy Statements for agencies that received loans and grants, as well as in our poverty monitoring and assessment reports.

158. Madam Speaker, Members of this House are aware that Government has met a number of challenges in the utilisation of loans and grants which have been mobilized. The main challenge is low absorption arising from lack of readiness of sectors to utilise resources. To address the challenges, I propose the following measures:-

i. Streamline budgeting for counterpart funding in Sectors/Ministries to ensure that projects are fully funded.

ii. prioritize project selection by Accounting officers to ensure that sufficient funds are availed to match loan disbursement.

iii.The Accounting Officer are required to provide detailed information on implementation of all programmes under their purview before Parliament approves a new funding to a given sector.

 

 

 

  1. Expedite a loan approval process by Parliament to ensure the conditions existing at the project appraisal have not been overtaken by events and costs have escalated.

  2. With regard to large infrastructure projects, undertake studies and designs in advance of the loan approval to enable project execution to commence immediately;; and if necessary Government finances the studies and designs, for which agencies Ministries must budget appropriately for.

vi.There is need for accounting officers and political Heads of Government Departments to ensure the project develop implementation and procurement plans well in advance of loan approval. In this regard, project Management unit should be staffed with persons who are proactive in decision making and consultation.

vii.There should also be a continuous capacity building of our nationals in project and contract management in order for them to be abreast with donor requirement to enable them manage projects effectively or efficiently.

XI. CONCLUSION

159. Madam Speaker, this year’s budget is historical as over 80% of the resources are internally generated. I wish to thank the private sector for the tremendous support for their contribution. This will enable more resources to be allocated to infrastructure investment which will reduce the cost of doing business to the Private Sector. I wish to pledge that these resources will be utilized efficiently on investment, rather than consumption.

 

 

 

160. Before I conclude my speech, Madam Speaker, I would like to thank very sincerely H.E. The President for his guidance and wise advice in the preparation of this Budget. I also wish to thank the Rt. Hon. Prime Minister, my Colleague Ministers, Development Partners, Private Sector and the Civil Society for your invaluable all for their views and suggestions. I also wish to thank the Ministry of Finance long serving Permanent Secretary and Secretary to Treasury who has since retired and all the officers of my Ministry for their dedication during the entire Budget process.

161. The future our growth will largely dependent on a favorable development climate for private-sector investment in the economy and attraction of foreign direct investment and reduced reliance on foreign aid. We shall continue to align all sector budgets to the National Development Plan by investing heavily in key productive and infrastructure sectors. Madam Speaker, the expenditure priorities, revenue measures and policies announced in this Budget demonstrate the Government’s commitment and determination to rise to the challenges ahead and pursuit of the long term development agenda as envisioned in Vision 2040.

162. Madam Speaker, I cannot move without paying tribute to our sportsmen and women, and especially the gallant national team the Cranes, in their tireless quest to take Uganda to the 2014 World Cup. We all need to inspire with the valour of Stephen Kiprotich when he won Uganda’s first Gold in 40 Years, by all rising up and

 

 

 

supporting them as them seek to further Uganda’s glory at their next match on Saturday! Uganda Cranes Oyee!

163. Madam Speaker, I thank you for your attention and I commend the Bill to the House.

 

I beg to move.

Background To The Uganda Budget 2013/14 – From Maria Kiwanuka & The New Vision


THE REPUBLIC OF UGANDA

THE BACKGROUND TO THE BUDGET 2013/14

“THE JOURNEY CONTINUES: TOWARDS SOCIO-ECONOMIC TRANSFORMATION”

June 2013

INTRODUCTION………………………………………………………………………………………….. 1

CHAPTER 1: GLOBAL AND REGIONAL ECONOMIC DEVELOPMENTS AND PROSPECTS……………………………………………………………… 4

1.1. Global Economic Developments …………………………………………………………………. 4

  1. 1.1.1.  The Global Economic Outlook for Growth ………………………………………………………………………………….. 4

  2. 1.1.2.  International Trade………………………………………………………………………………………………………………….. 5

  3. 1.1.3.  International Commodity Markets…………………………………………………………………………………………….. 7

    1. Energy Prices ………………………………………………………………………………………………………………….. 7

    2. Food Prices …………………………………………………………………………………………………………………….. 8

    3. Industrial Inputs………………………………………………………………………………………………………………. 8

  4. 1.1.4.  Progress towards the Millennium Development Goals…………………………………………………………………. 8

  5. 1.1.5.  International Finance for Development ……………………………………………………………………………………. 10

1.2. Regional Economic Development and Prospects ………………………………………….. 11

  1. 1.2.1.  Economic Developments in the East African Community – A Country by Country Perspective ……….. 13

    1. Kenya…………………………………………………………………………………………………………………………… 13

    2. Tanzania ………………………………………………………………………………………………………………………. 13

    3. Rwanda………………………………………………………………………………………………………………………… 14

    4. Burundi ………………………………………………………………………………………………………………………… 15

  2. 1.2.2.  Trade Integration in the East African Community………………………………………………………………………. 17

  3. 1.2.3.  Working towards a Monetary Union in the East African Community …………………………………………… 18

CHAPTER 2: DOMESTIC ECONOMIC OUTCOMES AND PROSPECTS.20

2.1. Domestic Economic Outcomes in FY2012/13……………………………………………….. 20

2.1.1. GDP Growth………………………………………………………………………………………………………………………….. 20

  1. Agriculture, Forestry and Fishing……………………………………………………………………………………… 22

  2. Industrial Sector…………………………………………………………………………………………………………….. 23

iii. ServicesSector……………………………………………………………………………………………………………….24 iv. GDP by Expenditure ……………………………………………………………………………………………………….. 26

  1. 2.1.2.  Monetary Sector……………………………………………………………………………………………………………………. 28

    1. Interest Rates ……………………………………………………………………………………………………………….. 30

    2. Securities ……………………………………………………………………………………………………………………… 32

  2. 2.1.3.  Financial Sector Performance and Reforms ………………………………………………………………………………. 32

    1. Financial Sector Performance………………………………………………………………………………………….. 32

    2. Capital Markets …………………………………………………………………………………………………………….. 35

    3. Insurance Industry …………………………………………………………………………………………………………. 36

    4. Financial Sector and Pension Reform Initiatives…………………………………………………………………. 37

  3. 2.1.4.  The External Sector ……………………………………………………………………………………………………………….. 41

i. Current Account…………………………………………………………………………………………………………….. 43

2.2. Macroeconomic Outlook …………………………………………………………………………. 46

2.2.1. The Macroeconomic Forecast for FY2013/14 to FY2017/18………………………………………………………… 46

i. Short- and Medium-Term real GDP Growth Prospects………………………………………………………… 47

  1. Inflation Prospects…………………………………………………………………………………………………………. 49

  2. Balance of Payments Prospects……………………………………………………………………………………….. 49

  1. 2.2.2.  The Investment Outlook…………………………………………………………………………………………………………. 49

    1. Foreign Investment in Uganda ………………………………………………………………………………………… 50

    2. Domestic Investment……………………………………………………………………………………………………… 51

  2. 2.2.3.  Key macroeconomic risks ……………………………………………………………………………………………………….. 52

ii

i. DomesticRisks……………………………………………………………………………………………………………….53 ii. InternationalRisks………………………………………………………………………………………………………….54

CHAPTER 3: PUBLIC FINANCE ……………………………………………………………55

3.1. Fiscal Objectives and Fiscal Strategy ………………………………………………………….. 55

  1. 3.1.1.  Government’s Fiscal Objectives ………………………………………………………………………………………………. 55

  2. 3.1.2.  Fiscal Strategy for FY2012/13………………………………………………………………………………………………….. 55

  3. 3.1.3.  Improvements in Public Financial Management ………………………………………………………………………… 56

    1. Public Finance Bill 2012 ………………………………………………………………………………………………….. 56

    2. Improvements to Project Cycle Management ……………………………………………………………………. 57

    3. Management of Oil Revenues …………………………………………………………………………………………. 57

    4. Cross-Cutting Reform Efforts …………………………………………………………………………………………… 57

  4. 3.1.4.  Debt Sustainability Analysis (DSA)……………………………………………………………………………………………. 57

  5. 3.1.5.  The Debt Strategy 2013 and a new Debt Management Framework …………………………………………….. 59

3.2. Performance of the Resource Envelope and Fiscal Outturns FY2012/13…………… 60

  1. 3.2.1.  Performance of the Resource Envelope in FY2012/13………………………………………………………………… 60

    1. Domestic Revenue Performance FY2012/13 ……………………………………………………………………… 60

    2. Impact of Domestic Revenue Measures for FY2012/13……………………………………………………….. 63

  2. 3.2.2.  Expenditure Outturns and the Fiscal Deficit in FY2012/13 ………………………………………………………….. 65

  3. 3.2.3.  Financing Outturns in FY2012/13…………………………………………………………………………………………….. 66

  4. 3.2.4.  Public Debt in FY2012/13 ……………………………………………………………………………………………………….. 67

3.3. Fiscal Projections for FY2013/14 and the Medium Term………………………………… 73

3.3.1. The Fiscal Strategy for FY2013/14 and the Medium Term Budget Framework ……………………………… 73

i. Domestic Revenues………………………………………………………………………………………………………… 74 ii. Grants…………………………………………………………………………………………………………………………..74 iii. Projected Financing ……………………………………………………………………………………………………….. 75

  1. 3.3.2.  Strategies to increase domestic revenues in the medium term …………………………………………………… 77

  2. 3.3.3.  The Outlook for Uganda’s External Resource Envelope ………………………………………………………………. 78

    1. The External Resource Envelope in the Medium Term ………………………………………………………… 79

    2. Sectoral Allocations of ODA in the Medium Term ………………………………………………………………. 79

CHAPTER 4: SECTOR PERFORMANCE AND INVESTMENT PRIORITIES …………………………………………………………………………………………. 81

4.1. Infrastructure Development …………………………………………………………………….. 81

  1. 4.1.1.  Roads…………………………………………………………………………………………………………………………………… 81

  2. 4.1.2.  Railway Transport………………………………………………………………………………………………………………….. 83

  3. 4.1.3.  Inland Water Transport ………………………………………………………………………………………………………….. 84

  4. 4.1.4.  Air Transport ………………………………………………………………………………………………….. ……………………. 84

  5. 4.1.5.  Energy………………………………………………………………………………………………………………………………….. 85

  6. 4.1.6.  Oil and Gas ……………………………………………………………………………………………………. …………………….. 88

  7. 4.1.7.  Information and Communication Technology……………………………………………………………………………. 89

4.2. Human Resource Development ………………………………………………………………… 90

  1. 4.2.1.  Skills development: ……………………………………………………………………………………………………………….. 90

  2. 4.2.2.  Education……………………………………………………………………………………………………………………………… 91

  3. 4.2.3.  Health ………………………………………………………………………………………………………………………………….. 91

  4. 4.2.4.  Water and Environment …………………………………………………………………………………………………………. 92

4.3. Private Sector Development, Employment Generation and Poverty Reduction…. 95

4.3.1. The Business Environment for Private Sector Development ……………………………………………………….. 96

iii

  1. 4.3.2.  Enhancing Agricultural Production and Productivity ………………………………………………………………… 100

  2. 4.3.3.  Harnessing Uganda’s Tourism Potential………………………………………………………………………………….. 102

4.4. Sector Allocations…………………………………………………………………………………. 104

Statistical Appendix…………………………………………………117

iv

List of Figures

Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: Figure 18: Figure 19: Figure 20: Figure 21: Figure 22: Figure 23: Figure 24: Figure 25: Figure 26: Figure 27: Figure 28: Figure 29: Figure 30: Figure 31:

Changes in Global Output across Regions ……………………………………………… 5 Exports of Goods and Services across Regions ……………………………………….. 5 Imports of Goods and Services across Regions ……………………………………….. 5 Evolution of Commodity Prices…………………………………………………………….. 7 Evolution of the Brent Price of Crude Oil ……………………………………………….. 7 Evolution of Prices for Selected Food Commodities ………………………………….. 8 Evolution of Prices for selected industrial Inputs …………………………………….. 8 Country Programmable Aid ……………………………………………………………….. 10 Share of Country Programmable Aid across regions and over time ……………. 11 Net Equity Flows to Sub-Saharan Africa………………………………………………. 11 Change in FDI since beginning of Financial Crisis in 2008 ……………………… 11 Macroeconomic Indicators of EAC Member States at a glance ………………….. 16 Value and Share of Intra-EAC Trade, 2000-2012…………………………………… 17 Real GDP growth at market prices ……………………………………………………… 20 Inflation Rate by major Groups (year on year)……………………………………….. 30 Inflation Developments by Item ………………………………………………………….. 30 Evolution of Interest Rates ………………………………………………………………… 31 Treasury Bond Yield Curve, as at 30th May 2013 …………………………………… 32 Credit and Deposits in Commercial Banks …………………………………………… 33 USE All-Share Index and daily average turnover……………………………………. 36 Shilling/US Dollar Exchange Rate ……………………………………………………… 42 Effective Exchange Rate Developments………………………………………………… 42 Foreign Investment in Uganda …………………………………………………………… 51 Outstanding private sector credit by sector, end of March 2013. ………………. 52 Private sector credit over time in manufacturing and agriculture sectors……. 52 Composition of the Resource Envelope ………………………………………………… 60 Revenue Performance ………………………………………………………………………. 60 Total external debt exposure (in USD billions) ………………………………………. 67 Total, domestic and external debt stock (% of GDP) ……………………………….. 67 Grants and Loans, Outturns ……………………………………………………………… 78 External Resource Envelope, as % GDP……………………………………………….. 78

List of Tables

Table 1: Table 2:

Table 3: Table 4: Table 5:

Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: at

Table 19:

Growth in World Trade Volumes (Projections are in Italics) ……………………….. 6 Poverty Trends by Region, Percentage of Population below USD 1.25 (2005 PPP) 9
Number of EAC Countries meeting Convergence Road Map Criteria ………….. 18 Percentage change in GDP by economic activity at constant prices …………… 21 Monetary and Non-Monetary GDP at constant 2002 Prices (% changes, fiscal years)……………………………………………………………………………………………. 27 Fixed Capital Formation at constant 2002 Prices (% changes, fiscal years)…. 28 Support to SACCOs …………………………………………………………………………. 35 Balance of Payments Indicators in % of GDP ………………………………………… 41 Balance of Payments Summary (in million of USD)………………………………… 42 Export of Goods (in million of USD)…………………………………………………….. 44 Imports of Merchandise (fob, in millions of USD) …………………………………… 44 Macroeconomic Projections to FY2017/18 …………………………………………… 47 External Debt Sustainability Analysis – 2012 DSA ………………………………… 58 Summary of Public Debt Sustainability Analysis – 2012 DSA ………………….. 58 Revenue Performance by different Tax Items (in billion of Shs.)………………… 62 Impact of tax measures for FY2012/13 as of December 2012 ………………….. 63 External Resources (grants only)………………………………………………………… 64 Uganda’s external debt outstanding and disbursed (DOD) and undisbursed, as end-March 2013 (in ‘000s USD) …………………………………………………………. 68 Selected indicators of Central Government Fiscal Operations ………………….. 69

v

Table 20: Table 21: Table 22:

Table 23: Table 24: Table 25: Table 26: Table 27: Table 28: Table 29: Table 30: Table 31: Table 32: Table 33: Table 34:

Central Government Fiscal Operations (1986 GFS format, Shs. billion)……… 70 Central Government Fiscal Operations (2001 GFS format, Shs. billion)……… 71 Central Government Fiscal Operations, Memorandum Items (2001 GFS format, Shs. billion)……………………………………………………………………………………. 72 Medium Term Resource Envelope (in Shs. Billion) …………………………………. 74 Medium term budget support projections by source (in milllion USD ………… 75 Detailed aggregate financing breakdown ……………………………………………… 75 Medium Term Fiscal Framework (in Shs billion) ……………………………………. 76 External resource envelope for the Medium Term in million USD……………… 79 Sectoral Allocation of MTEF Project Support ………………………………………… 80 Roads currently in construction…………………………………………………………. 81 Policy Measures in the Health Sector ………………………………………………….. 92 Uganda’s Performance in the Ease of Doing Business Rankings ………………. 96 Status of Bills related to private sector competitiveness………………………….. 97 Licenses and Administrative Burden per Sector ……………………………………. 99 Sector Budget Allocations, FY2012/13 and FY2013/14………………………… 104

vi

List of Acronyms and Abbreviations

ABS
ACT
ADF AFDB AMISOM ASYCUDA ATM’s BCC

BDS BLRC BOBU BOP BOPD BOU BTTB BTVET CBR CDOs CEO CET CGV CMA CNN CNOOC COMESA CPA DAC DBR DFCU DS

DSA EAC EADB EAMU EASRA EE EFU EIB EPRC EU EUI FDI FPC FRN FY GCI GDP GFS GMIS GoU GSMD GTS HC III HC IV HFO HIPC HTTI ICAO ICT IDA IDB IFAD IFEM IFMS IGAU IMF IPO IPPS JHL JLOS JWG

Asset Backed Securities
Artemisinin-based Combination Therapy
African Development Fund
African Development Bank
African Union Mission in Somalia
Automated System for Customs Data
Automated Teller Machine
Budget Call Circular
Business Development Services
Business Licensing Reform Committee
Bank of Baroda Uganda Limited
Balance of Payment
Barrels of Oil per Day
Bank of Uganda
Background to the Budget
Business Technical Vocational and Education Training Central Bank Rate
Community Development Organisations
Chief Executive Officer
Common External Tariff
Chief Government Valuer
Capital Markets Authority
Cable News Network
China National Offshore Oil Corporation
Common Market for East and Southern Africa Country Programmable Aid
Development Assistance Committee
Domestic Budget Revenue
Development Finance Company of Uganda
Debt Strategy
Debt Sustainability Analysis
East African Community
East African Development Bank
East African Monetary Union
East African Securities Regulatory Authorities
Energy Efficiency
Electricity Fuel and Utilities
European Investment Bank
Economic Policy Research Centre
European Union
European University Institute
Foreign Direct Investment
First Parliamentary Council
Floating Rate Note
Financial Year
Global Competitiveness Index
Gross Domestic Product
Gravity Flow Scheme
Geological and Mineral Information System Government of Uganda
Geological Survey and Mines Department
Global Telecommunications System
Health Centre Three
Health Centre Four
Heavy Fuel Oil
Highly Indebted Poor Countries
Hotel and Tourism Training Institute
International Civil Aviation Authority
Information and Communications Technology International Development Agency
Islamic Development Bank
International Fund for Agricultural development Interbank Foreign Exchange Market
Integrated Finance Management System
Investment Groups Association of Uganda International Monetary Fund
Initial Public Offering
Integrated Personnel Payroll System
Jubilee Holdings Limited
Justice Law and Order Society
Joint Working Group

vii

LDC Less Developed Country
LGs Local Governments
LIBOR London Inter Bank Offered Rate
LIC Low Income Countries
LIS Land Information System
LLGs Lower Local Governments
LPAC Legal and Parliamentary Affairs Committee
M&E Monitoring and Evaluation
MAAIF Ministry of Agriculture Animal Industry and Fisheries MDAs Ministries Departments and Agencies
MDG Millenium Development Goals
MDI’s Microfinance Deposit Taking Institutions
MDRI Multilateral Debt Relief Initiative
MEMD Ministry of Energy and Mineral Development
MFI’s Micro Finance Institutions
MFPED Ministry of Finance Planning and Economic Development MGLSD Ministry of Gender Labour and Social Development MHLUD Ministry of Lands Housing and Urban Development
MJCA Ministry of Justice and Constitutional Affairs
MRA Microfinance Regulatory Authority
MSC Microfinance Support Centre
MTDS Medium-Term Debt Management Strategy
MTEF Medium-Term Expenditure Framework
MTIC Ministry of Trade Industry and Cooperatives
MTN Mobile Telephone Network
MWE Ministry of Water and Environment
NAADS National Agricultural Advisory Services
NBFP National Budget Framework Paper
NDF Nordic Development Fund
NDP National Development Plan
NGOs Non Government Organisations
NHCE National Council for Higher Education
NITA-U National Information and Technology Authority-Uganda NMS National Medical Stores
NSE Nairobi Securities Exchange
NSSF National Social Security Fund
NTB’s Non Tariff Barriers
NTR Non Tax Revenue
ODA Official Development Assistance
OECD Organisation for Economic Co-operation and Development OPEC Organisation of Petroleum Exporting Countries
PAP Project Affected Persons
PAYE Pay As You Earn
PCY Promotion of Children and Youth
PFM Public Financial Management
PHA Public Health Act
PIRT Presidential Investors Round Table
PLE Primary Leaving Education
PPG Public and Publicly Guaranteed
PPP Public Private Partnerships
Pre-FEED Preliminary Front End Engineering Design
PSC Private Sector Credit
PSFU Private Sector Foundation Uganda
PSPS Public Service Pension Scheme
PV Present Value
PWD Persons with Disabilities
RAP Resettlement Action Plan
RIA Regulatory Impact Assessment
RWT Realistic Water Textures
SACCOs Savings and Credit Cooperative Organizations
SAGE Social Assistance Grants for Empowerment
SBU Stanbic Bank Uganda
SCEAMU Sectoral Council on the East African Monetary Union SCM Standard Cost Model
SCP Small Claims Procedure
SDIP Social Development Sector Strategic Investment Plan SME’s Small-Medium Enterprises
SMMRP Sustainable Management of Mineral Resources Project TDS Total Debt Service
TSUs Technical Support Units
TVET Technical Vocational and Education Training
UBC Uganda Broadcasting Corporation
UBOS Uganda Bureau of Statistics
UCC Uganda Communications Commission

viii

UCE Uganda Certificate of Education
UGX Uganda Shillings
UIA Uganda Investment Authority
UIRI Uganda Industrial Research Institute
ULRC Uganda Law Reform Commission
UNCTAD United Nations Conference for Trade and Development UNRA Uganda National Roads Authority

UPE Universal Primary Education
URA Uganda Revenue Authority
URBRA Uganda Retirement Benefits Regulatory Authority URSB Uganda Registration Services Bureau
USD United States Dollar
USE Uganda Securities Exchange
UTL Uganda Telecom Limited
VAT Value Added Tax
VoIP Voice over Internet Protocol
WB World Bank
WEF World Economic Forum
WMO World Meteorological Organisation
WTO World Trade Organisation
XGS Export of Goods and Services
YEC Youth Entrepreneurship Challenge

ix

Introduction

The Vision 2040 has laid the foundation for transforming Uganda into a prosperous and modern society within the next 30 years. Government is mindful of the fact that, in order to achieve this goal, substantial public investment in both physical infrastructure and human capital are required which cannot be all delivered at once. The Vision 2040 is a long journey which will demand all spectrums of our society playing their part and have a shared commitment to devote all our efforts and resources towards this common goal. Government is strongly committed to endure in this quest. The annual national budgets shall prioritise implementing the Vision 2040 strategies and core projects through the five-year National Development Plans. To that end, the theme of the fiscal year 2013/14 Budget is: “The Journey Continues: Towards Socio-Economic Transformation”. Government’s fiscal strategy and expenditure priorities outlined in the Background to the Budget for FY2013/14 therefore reflect the initial steps towards achieving the Vision 2040 goals.

Uganda has recovered remarkably quickly from the marked slowdown of the economy in 2011/12, during which economic growth dropped to its lowest level in more than a decade. Also remarkable is the fact that this performance has been attained despite a very unfavourable global context, with continued recession in Europe and lacklustre growth in other advanced economies. Moreover, the continued decline in Official Development Assistance (ODA) and the withdrawal of budget support by major development partners at the beginning of the financial year would, under normal circumstances, have had a bigger dent on Uganda’s growth. But robust private sector growth, supported by falling interest rates, a sharp decline in inflation, and robust foreign direct investment have largely offset the effects of falling aid inflows. The medium term economic outlook for Uganda is therefore positive, with growth expected to return to 6-7 percent per annum over the next five years. This growth will be further augmented by a gradually recovering global economy. Government will use this new momentum to increase spending on key infrastructure projects, while ensuring maintenance of a sound and stable macroeconomic environment.

Three years ago Government adopted its first five-year National Development Plan which identified a series of structural bottlenecks to accelerate socioeconomic transformation of the country. These bottlenecks include inadequate physical infrastructure, insufficient human resource development, and limited access to critical production inputs in agriculture and manufacturing. The fiscal strategy and investment priorities for the next financial year have therefore been set so as to continue delivering results in the following three thematic areas:

i. Infrastructure development: with a focus on roads, railway, inland water, energy, oil and gas and Information and Technology (ICT);

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  1. Human resource development: focusing on Education, Skills Development, Health and Water;

  2. Private sector development, employment generation and poverty reduction: focusing on enhancing agricultural production and productivity, harnessing Uganda’s tourism potential and improving the business environment for the private sector.

Public investments in these areas are critical to crowd-in further private sector activity. The restoration of stable electricity supply through the commissioning of Bujagali Hydroelectric Power Plant, has already had a positive impact on growth. These achievements underscore the importance of further investments into power generation. Moreover, as demand for electricity continues to increase rapidly, Government will accelerate implementation of key infrastructure projects, most especially the 600MW Karuma hydro-electric power project. Improvements to the transport networks are equally important, as they affect developments cross-cuttingly in a range of sectors, such as agriculture and tourism. The Government has therefore identified a series of strategic tourism corridors which demand additional investments to improve accessibility of major tourism sites across the country. In addition, infrastructure development to facilitate increased regional connectivity will receive renewed attention, as regional trade now accounts for a growing share of Uganda’s export earnings.

Government is committed to improving public financial management. On the one hand, this will require widening the tax base, streamlining the tax code and reducing the number of tax exemptions. On the other hand, this will also imply strengthening existing public financial management systems to allow for increased transparency, improved accountability and better traceability of transactions at all levels of Government. The Public Finance Bill 2012 that has been presented to Parliament aims at delivering on these key objectives.

The Background to the Budget 2013/14 provides a full account of recent economic performance and future prospects, and the Government’s fiscal policy for the next financial year. It also reviews performance of fiscal and physical performance of the execution of the budget during the last financial year. All figures included are as at 10th June 2013 unless otherwise stated. Hence figures may differ slightly from those included in the Budget speech.

The first chapter reviews the international and regional context in which Uganda’s economic performance is intertwined. The ongoing global economic crisis has underscored how events elsewhere can quickly have ramifications in our domestic economy. The analysis of the regional outlook has also been expanded. A brief country-by-country analysis has been included, which allows setting Uganda’s economic developments into a regional perspective. A good understanding of regional events is essential, as the East African Community economic and political integration provides opportunities to be harnessed.

2

The second chapter analyses macroeconomic economic developments in Uganda during FY2012/13 and provides an economic outlook over the medium term. The potential downside risks to this outlook, which could derail economic performance, have also been emphasised in a separate section.

The third chapter analyses public finance performance and the fiscal strategy for FY2013/14. It first provides description of the Government’s overall fiscal strategy amidst an objective of macroeconomic stability and debt sustainability. It then examines fiscal outturns and revenue performance, and provides fiscal projections in terms of expected revenue, expenditure and financing for FY2013/14.

The fourth chapter concludes with an analysis of sectoral performance during FY2012/13 and an account of the Government’s investment priorities for the next financial year. The last part comprises of the statistical appendices.

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Chapter 1: Global and Regional Economic Developments and Prospects

1.1. Global Economic Developments

Last year’s edition of the BTTB highlighted considerable downside risks to the global economy, entailed by extreme events such as a potential break up in the euro area. Recent months have witnessed important efforts by policymakers across the world to diffuse these risks. In Europe, policy efforts centred on regaining investors’ confidence through a combination of measures aimed at rebalancing macroeconomic fundamentals across European member states, achieving financial stability, and reducing structural rigidities at the national level, particularly in Southern Europe. In the United States, policymakers successfully averted plunging off the so called “fiscal cliff”, a combination of automatic spending cuts and expiry of tax exemptions which would have pulled the United States into recession. Japan has also recently appeared to be much more determined to use fiscal and monetary stimuli to end two decades of long stagnation and deflation. In emerging markets, governments have also been more successful than in the past, in preventing the build up of market bubbles due to an excessively favourable environment of high commodity prices, low interest rates, and large capital inflows. This does not mean that all risks to global economic activity have been successfully diffused, but it certainly means that the outlook for the global economy is considerably better today than one year ago.

1.1.1. The Global Economic Outlook for Growth

After a general slowdown in global economic growth since 2008 to 2012, growth appears to be picking up slowly. According to the International Monetary Fund (IMF), the world economy is projected to grow at 3.3 percent and 4.0 percent in 2013 and 2014 respectively, which is a modest increase in the overall trend. In advanced economies, growth is mixed and only expected to recover gradually. This outlook is driven by greater investor confidence in financial markets following decisive policy interventions to improve monetary conditions and fiscal sustainability in advanced economies. In fact, unprecedented low policy interest rates and the use of non-conventional monetary policy instruments termed ‘quantitative easing’ have fuelled strongly increasing equity prices both in Europe and the United States. However, to date this has resulted in only very slow improvements in the availability of credit and a modest expansion of real economic activity. A more pronounced acceleration of economic growth is therefore still subdued by weak domestic demand, continued fiscal consolidation exercises by European governments, and reducing debt exposure towards sustainable levels.

In emerging markets, growth decelerated from 7.5 percent in 2010 to 5.1 percent in 2012. This was largely on account of weakening exports to advanced economies and policies aimed at moderating the economy and the effect of high commodity prices and large capital inflows. Gradually improving demand from advanced economies and continued solid domestic demand,

4

Index (2006=100)

Index (2006=100)

however, suggest that growth will pick up reaching 5.7 percent in 2014. Sub- Saharan Africa is similarly expected to continue growing at a strong pace in 2013 and 2014 due to high domestic demand in private investment and consumption with a small deterioration in the growth outlook in oil exporting countries, as commodity prices are expected to recede.

Figure 1: Changes in Global Output across Regions

10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

-1% 2007 -2%
-3%
-4%

2008

2009

Advanced Econmies

2010 2011 2012

Emerging and Developing Economies

2013* 2014*

Sub-Saharan Africa

page14image11120

World

page14image21064 page14image21224 page14image21384 page14image21544

Source: IMF, World Economic Outlook Database 2013

1.1.2. International Trade

The financial and economic crises which started over four years ago have been characterised by largely synchronized trade trends. Globally, international trade fell substantially between 2008 and 2009 but recovered strongly thereafter, with the total volume of global exports and imports surpassing pre- crises levels (see figures 2 and 3). This recovery in trade was particularly robust in emerging economies and even stronger in Sub-Saharan Africa, where the value of exports rose by more than 40 percent between 2009 and 2010. In advanced economies, both exports and imports increased more moderately but have already grown above pre–crises levels.

Figure2:ExportsofGoodsandServicesacrossRegions Figure3:ImportsofGoodsandServicesacrossRegions

150 140 130 120 110 100

90

page14image30544

2006 2007 2008

World

2009 2010 2011

Sub-Saharan Africa

page14image36512 page14image36672

Advanced Economies page14image37384Emerging Econmies

page14image37608

150 140 130 120 110 100

90

page14image39520

2006 2007 2008

World

2009 2010 2011

Sub-Saharan Africa

page14image45488 page14image45648

Advanced Economies page14image46360Emerging Econmies

page14image46584

Source: WB, Word Development Indicators 2012 Source: WB, Word Development Indicators 2012

In 2012, however, world trade volumes have again slowed down as advanced economies have further contracted their import demand. At the same time, emerging and developing economies have mitigated some of the effect of the reduction in the demand for imports from advanced economies. Going forward, trade is expected to gradually expand as the global economy gradually picks up speed, particularly in developed countries with world trade volumes increasing 3.6 percent and 5.3 percent in 2013 and 2014 respectively.

5

Table 1: Growth in World Trade Volumes (Projections are in Italics)

Source: IMF, Global Economic Outlook Database 2013

Stagnant demand from advanced economies is particularly worrisome for developing countries that strongly rely on European and U.S. markets. In this context, it will be particularly important for developing countries to continue diversifying export markets through greater South-South cooperation and the promotion of intra-regional trade. A marked contrast to earlier global economic crises, however, is that a global protectionist outbreak has been avoided. A recent report by the World Bank notes that 21 percent of overall trade-restrictive measures have been removed since 2008.1 It remains critical that governments continue pursuing multilateral agreements that will mitigate the use of trade-restrictive measures and promote trade openness. In December 2013, trade ministers will meet in Bali for a ninth ministerial conference for further discussion on the Doha Development Agenda, which is now entering its twelfth year. While the prospects for ending the Doha Round at this conference remain dim, it is being viewed as pivotal to achieving a comprehensive agreement in the areas of trade facilitation, trade with least developed countries, and agriculture. The potential benefits of a comprehensive trade agreement are huge. In terms of market access, the potential welfare boost of what has been negotiated so far could amount to USD 160 billion.2

page15image13240   page15image13960 page15image14120

2012

page15image15128 page15image15288

2013

page15image16464 page15image16624

2014

page15image17960

World Trade Volumes (goods and services) 2.5 3.6 5.3

page15image22472

Imports

page15image23648 page15image23808   page15image24360 page15image24520   page15image25240 page15image25400   page15image26280

Advanced Economies 1.0 2.2 4.1

Emerging and Developing Economies 4.9 6.2 7.3

page15image32776

Exports

page15image33952 page15image34112   page15image34664 page15image34824   page15image35544 page15image35704   page15image36584

Advanced Economies 1.9 2.8 4.6

Emerging and Developing Economies 3.7 4.8 6.5

page15image43048

1 See Chapter 1 of the Global Monitoring Report 2013 published by the World Bank.
2 See Hoekman, 2011: “The WTO and the Doha Round: Walking on Two Legs” Economic Premise 68, World Bank, Washington DC.

6

1.1.3. International Commodity Markets

Since 2005, commodity prices
have experienced an overall
increasing trend characterised by
substantial volatility, as
illustrated in figure 4. The
economic and financial crises led
to a major decline of prices for all
commodities. Between 2009 and
2011 price increases accelerated
due to a combination of supply
disruptions in oil exporting
countries (particularly in the Middle-East and North Africa), higher demand from emerging economies, and weather related supply shocks. However, in 2012 commodity prices started to decline again, due to continued weak demand in advanced economies and higher supply of oil and gas. This trend is expected to continue in 2013 and 2014.3

i. Energy Prices

Energy prices are expected to fall slightly during 2013, led by falling prices for crude oil (figure 5). The price of oil has remained remarkably stable over the last three years, albeit still at historically high levels. While the continuing geopolitical events in the Middle East and Africa have supported high oil prices due to supply disruptions, low world aggregate demand has prevented

oil prices to rise even further. More recently, however, the rebound of production in Libya and rising oil output in Saudi Arabia and Iraq have eased pressures on the supply side. In addition, according to data from the OECD, production from non-OPEC countries is expected to increase in 2013 by one million barrels per day. Whilst the global economy continues to grow below full potential, particularly in advanced economies, the improvements in the production of oil are expected to translate into moderately lower oil prices in 2013 and 2014.

3 The Global Economic Outlook 2013 of the IMF reports that futures prices of main commodities show broad declines. Commodity markets thus expect declining prices over the near future.

Figure 4: Evolution of Commodity Prices

200 180 160 140 120 100

page16image19608

2005 2006

Energy

2007

2008 2009 2010 2011

Food & Beverages

2012 2013 2014

Industrial Inputs

page16image27872 page16image28032 page16image28192

Source: IMF, Global Economic Outlook Database 2013

Figure 5: Evolution of the Brent Price of Crude Oil

page16image30272

120 100 80 60 40 20 0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: IMF, Global Economic Outlook Database 2013

page16image38208

7

USD a barrel

Index (2005=100)

ii. Food Prices

Both 2008 and 2011 experienced
unprecedented spikes in the prices of
most basic commodities, along with an
apparent increase in price volatility.
More recently, overall food prices have
fallen, but with uneven declines among
different commodities. In 2012, prices
for cereals and vegetable oils reached
their all time high, while prices for
sugar and coffee fell by more than 20
percent. These differences in the
evolution of food commodity prices are
mainly driven by differing stock-to-use
ratios (i.e. total stock of inventories as share of total consumption), which are currently particularly low for cereals. In 2013 and 2014, prices for food commodities are expected to decline, but considerable upside price risks remain. These are low inventories, adverse weather conditions, potential policy responses to high prices such as export restrictions, as well as increases in bio-fuel production which could divert crops away from food uses.

iii. Industrial Inputs

Since 2011 prices for industrial inputs have declined as global industrial production has slowed. In recent years evolution of industrial input prices has been tightly aligned to developments in China, which consumes the majority of industrial inputs. As China’s economy gradually moves towards the provision of services, demand for industrial inputs is expected to decline. In addition, subdued economic activity in advanced economies due to tight credit conditions and low aggregate demand will further dampen industrial production on a global level. Prices for main industrial

inputs are therefore expected to edge downwards in 2013 and 2014.

1.1.4. Progress towards the Millennium Development Goals

Growth can never be a goal by itself, but needs to translate into higher well- being and socio-economic progress of populations around the globe. Therefore, as the global economy recovers only gradually from economic and financial crises, policymakers need to ensure that socio-economic progress towards achieving the Millennium Development Goals (MDG) is not endangered and that efforts to meet most of the targets by the deadline in 2015 continue throughout. This will require not only additional resources

Figure 6: Evolution of Prices for Selected Food Commodities

240 220 200 180 160 140 120 100

80
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Cereals Vegetable Oil page17image23464Meat Sugar Coffee Tea

page17image23872 page17image32192 page17image32352 page17image32512 page17image32672 page17image32832

Source: IMF, Global Economic Outlook Database 2013

Figure 7: Evolution of Prices for selected industrial Inputs

340 320 300 280 260 240 220 200 180 160 140 120 100

80

page17image37512

2005 2006 2007 2008

Timber

Copper

2009 2010

Cotton

Aluminum

2011

2012 2013 2014

Rubber

page17image49864 page17image50024 page17image50184 page17image50344 page17image50504

Source: IMF, Global Economic Outlook Database 2013

8

towards meeting the MDG targets, particularly in areas where progress has been lagging behind, but also rebuilding adequate policy buffers that would mitigate the downside risks of a more protracted global slowdown extending through 2015.

Progress has been particularly strong in reducing extreme poverty around the globe.4 Current estimates by the World Bank indicate that 970 million people will continue to live below USD 1.25 a day, compared to almost 2 billion people in 1990. On a global scale this implies that the first MDG goal of halving the proportion of people living in extreme poverty has already been met, but a regional comparison reveals that poverty reductions have been very uneven in different parts of the world. East Asia and the Pacific have experienced the strongest decline in extreme poverty, with poverty rates today five times lower than in 1990. On the contrary, poverty in Sub-Saharan Africa declined only from 56.5 percent to 48.5 percent between 1990 and 2010 (table 2).

Table 2: Poverty Trends by Region, Percentage of Population below USD 1.25 (2005 PPP)

Source: WB, Global Monitoring Report 2013

However, less than two years away from the deadline set by the international community to attain the MDGs, only four out of 21 MDG targets have been met. Progress has been particularly slow on those MDGs related to education and health. Accelerating progress towards the attainment of these MDGs is strongly needed, especially because they are strongly complementary to other development objectives. For instance, a vast literature shows that a reduction in nutritional deficiencies at an early stage in a child’s development will lead to better educational outcomes over the long term. Similarly, improving access to sanitation will have a major impact on reducing child mortality, as it is estimated that around 1.7 million people die each year because of poor sanitation, and 90 percent of those are children under the age of five.5

On a regional perspective additional efforts will particularly be required in Sub-Saharan Africa, which is off track to meet all of its MDG targets. It should also be acknowledged, however, that Sub-Saharan Africa started from positions that required the most absolute progress and that significant progress has been made in absolute terms. In face of an uncertain economic

4 Other areas where MDGs have already been met or are on track include access to safe drinking water, with over 88 percent of the world’s population having access to an improved water source compared to 76 in 1990, and the elimination of gender disparities in primary education

5 The Global Monitoring Report 2013 published by the World Bank provides a detailed account of progress made for each MDG indicator.

page18image24440   page18image25160 page18image25320

1990

page18image26496 page18image26656

2005

page18image27664 page18image27824

2010

page18image29000 page18image29160

2015

page18image30496

East Asia 56.2 16.8 12.5 5.5

Europe and Central Asia 1.9 1.3 0.07 0.4

Latin America and the Caribbean 12.2 8.7 5.5 4.9

Middle East and North Africa 5.8 3.5 2.4 2.6

South Asia 53.8 39.4 31 23.2

Sub-Saharan Africa 56.5 52.3 48.5 42.3

Total 43.1 25 20.6 15.5

page18image48256

9

outlook in advanced economies with considerable downside risks, continued and quicker progress in Sub-Saharan Africa will hence require a combination of policies that balances the rebuilding of buffers with the need to maintain adequate fiscal space for development expenditure.

1.1.5. International Finance for Development

Over the last decade, official development assistance (ODA) has been an important source of development financing in many developing countries. Between 2000 and 2009 total country programmable aid (CPA), which measures direct receipts of ODA by developing countries (excluding indirect receipts, emergency aid, and in-donor costs for managing aid), experienced steady growth figuring an overall increment of more than 55 percent (8). More recently, however, this trend has been reversed reflecting the effects of the recession which has hit donor’s aid budgets, leading to an overall reduction of 4 percent of CPA in real terms compared to 2009 levels.

This reversal in the previous trend highlights that the economic and financial recession has already squeezed aid budgets of donors and indicates that pressure may mount further in years to come. A Survey of the Organisation for Economic Development and Co-Operation on donor’s spending plans between 2012 and 2015, confirms that overall ODA is expected to

further decline from 2013 onwards. However, this slow-down is likely to be different across regions. While Latin America and Eastern Europe appear to suffer the biggest cuts in aid, ODA to Africa is expected to increase.6 It appears that scarce resources are increasingly being directed to countries most in need at the expense of other emerging nations. Sub-Saharan Africa is by and large still the region with highest density of Low Income Countries (LIC) and is thus likely to benefit from this process of geographic concentration of donor efforts. Figure 9 illustrates how the geographic distribution of aid flows has changed between 2000 and 2011. Although not yet very pronounced, a change in the distribution of funds to countries in regions with higher presence of LIC is already discernible. Sub-Saharan Africa and South & Central Asia are the only regions that have gained in importance as recipients of ODA between 2000 and 2011 with increases from 30 percent to 36 percent for the former and 16 percent to 21 percent for the latter region.

6 See Outlook on Aid: Preliminary Finding from the OECD DAC Survey on Donors’ Forward Spending Plans 2012-2015 (http://www.oecd.org/dataoecd/45/25/50056866.pdf).

Figure 8: Country Programmable Aid

120 100 80 60 40 20 0

page19image23840

Bilateral

Multilateral

page19image29768 page19image29928

Source: OECD, Country Reporting System Database 2013

page19image30776

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Billion USD (2011 constant prices)

Figure 9: Share of Country Programmable Aid across regions and over time

2000

Middle East Oceania Europe 5% 2% 8%

North Africa 7%

page20image3592

South & Central Asia 16%

Far East Asia 20%

South America

Sub-Saharan Africa 30%

North & Central America

Middle East 11%

South & Central Asia 21%

Far East Asia 12%

2%

North Africa 4%

2011 Europe Oceania 5%

page20image12032

South
America 5%

Sub-Saharan Africa 36%

North & Central America

6%6% 4% Source: OECD, Country Reporting System Database 2013

1.2. Regional Economic Development and Prospects

In 2012, 14 out of the 30 fastest growing economies in the world were in Sub- Saharan Africa. Overall, real GDP in the region grew at 5.1 percent in 2012 with over a third of countries growing at more than 6 percent. With the exception of South Africa, economic activity in Sub-Saharan Africa has therefore managed to withstand contagion from the global economic slowdown in 2012, mainly supported by the benefits of sustained economic reforms, robust domestic demand due to rising incomes and to a lesser extent high commodity prices. These factors are expected to sustain robust growth in the medium term, as the region attracts increased investment both from foreign as well as domestic sources.

Figure 10: Net Equity Flows to Sub-Saharan Africa Figure 11: Change in FDI since beginning of Financial Crisis in 2008

Note: Portfolio Equity includes net inflows from equity securities other than those recorded as direct investment and including shares, stocks, depository receipts, and direct purchases of shares in local stock markets by foreign investors. Source: WB, World Development indicators Database 2013

50 40 30 20 10

0

2005 2006 2007 2008 2009 2010 2011 -10

Foreign Direct Investment, net Inflows

Portfolio Equity, net Inflows

page20image29696 page20image33984 page20image34144

10% 5% 0% -5% -10% -15% -20% -25% -30%

Low and Middle Income

page20image36704 page20image40320 page20image40480 page20image40640

Sub-Saharan Africa

World

Foreign direct investment (FDI) to Sub-Saharan Africa has remained high and, with the exception of 2009, has continued to increase every year since 2006 (figure 10). This increase came despite a global decline in FDI in face of the financial crisis. Whereas globally FDI flows declined by almost 25 percent, there was positive growth to Sub-Saharan Africa of 6 percent between 2008 and 2011. This remarkable resilience is a reflection of longer time horizon investment decisions and higher rates of return on investment in the region. The World Investment Report 2012 finds returns on FDI in Africa to be 43 and

11

Billion USD, current prices

Nominal Growth

33 percent higher than in Latin America and in Asia respectively.7 A recent survey conducted by the Economist Intelligence Unit found that 60 percent of firms not currently present in the region indicated their intention to expand into Sub-Saharan Africa over the next 3-5 years.8 In addition, 2012 experienced the discovery of major gas reservoirs along the East coast of Africa, while several new commercially viable oil wells were drilled in West and East Africa, which will further attract investment into the region and sustain high growth in years to come. This promising outlook is not only built on a booming extractive industry and the discovery of more natural resources. A recent report by the World Bank suggests that also services, notably among infrastructure in construction, transportation, electricity and telecommunications and water, are increasingly attracting FDI.9

These rising investment flows are expected to induce higher consumer spending, as real incomes grow and the middle class establishes itself as the main driver of an expanding consumer sector. In Nigeria, for instance, wholesale and retail trades grew by 8.5 percent in the first half of 2012.10 While the high interest rates of 2012 in a number of East African countries, notably in Kenya and Uganda, led to a slump in private consumption, more recent product specific data suggests that consumer spending is also regaining speed in East Africa, as monetary policy becomes more accommodative.11

These economic developments present a positive economic outlook for Sub- Saharan Africa. However, there are challenges. These relate to inadequate infrastructure to promote intra regional trade and connectivity, unemployment of particularly the youth, and how to leverage Africa’s resources to finance critical investments, and developing the required technical skills. A longer than expected recession in the Euro Area, an excessively fast fiscal consolidation in the United States, or weaker growth than expected in China, could have considerably negative effects on investment flows and on exports and therefore derail some of the region’s growth prospects. Building up the adequate policy buffers as well as diversifying export markets is therefore cornerstone to a strategy which aims to reduce and mitigate these risks. The East African Community project is such as a strategy which can go a long way in insulating its members from these external risk factors and allow the region to achieve its full economic potential.12

7 See UNCTAD, 2012: “World Investment Report 2012”, United Nations Conference for Trade and Development, Geneva.
8 See Economist Intelligence Unit, 2012: “Africa cities rising”, EUI, London.
9 See World Bank, 2013: “Global Economic Prospects January 2013” WB, Washington DC

10 See World Bank, 2013: “Global Economic Prospects January 2013” WB, Washington DC. 11 Vehicle Registrations in Uganda are up by 25% in the period July to April compared to the same period last year.
12 For a recently published report on the regional trade potential in the EAC see WB, 2013: “Uganda Economic Update: Bridges Across Borders”, World Bank, Washington DC.

page21image25376

12

1.2.1. Economic Developments in the East African Community – A Country by Country Perspective

Since the East African Community Treaty was signed in November 1999, significant progress has been made. However, while a customs union and a common market have already been established, further convergence is required to attain a functioning economic integration and ultimately a political federation. But problems and challenges in each of the five EAC member states are not identical and further integration will require firm commitments of all parties involved. This section sheds light on the most recent efforts by EAC member state governments to overcome these constraints and work toward a better and more effective community at the service of it citizens.

i. Kenya

The successful conclusion of the Kenya economy removed the key risk to the economy, which is expected to grow at 5.3 percent in FY2012/13. With the smooth political transition following the elections, Kenya’s GDP growth is expected to accelerate to 6.1 percent in FY2013/14 and 6.5 percent in FY2014/15. In addition, FDI inflows into the country have been strong during the past year, which will be further boosted by the recent discovery of oil in the northern Turkana region. This discovery has made Kenya a major venue for oil exploration within East Africa. The consequential increase in imports of capital-goods for oil exploration, however, may offset some of the recent improvements in the current account balance. Oil production is expected to start in 6-7 years.

In recent years, the Kenyan authorities embarked on a fiscal consolidation exercise by increasing domestic revenue and pursuing a primary balance of 2 percent of GDP. In FY2012/13, a new tax on financial transfer fees, including mobile money, was introduced. In addition, a new VAT Act is currently being debated in Parliament which is expected to increase tax revenue. These efforts have already led to a reduction in the debt-to-GDP ratio, which is expected to fall to 43.7 by the end of 2012/13. Monetary policy has led a gradual reduction in the central bank’s policy rate, as inflationary pressures have eased from the spike in FY2011/12 which affected the majority of countries in the region. The build up of an external buffer through international reserves was slightly more moderate than in earlier years, as the Central Bank of Kenya was forced to intervene to contain depreciation pressures in the months preceding the election. Gross reserves are nevertheless expected to reach 3.8 months worth of imports.

ii. Tanzania

The Tanzanian economy continues to perform strongly and has been achieving the highest growth rates in the EAC region over the past two years. Projections confirm that this trend is likely to continue with real GDP growth expected to reach 6.7 and 7.0 percent in FY2012/13 and 2013/14, respectively. The restoration of power supply, which had suffered severely due to a reduction in the hydropower generation capacity following low water levels in Tanzania’s dams, will contribute to achieving these expectations.

13

However, a majority of the new power generation capacity is fuel-based, which has led to a widening current account deficit due to increased oil and gas imports. In addition, the government company in charge of electricity supplies has faced financial difficulties, as thermal power generation has led to a substantial increase in the cost of electricity provision. This poses a fiscal challenge to the government’s budget, which the authorities aim to address through the construction of a new large natural gas pipeline and several gas- operated power plants. This explains why the government’s debt-to-GDP ratio has remained comparatively higher than in other EAC countries, particularly as it aims to borrow over USD 2.5 billion on non-concessional terms. While most of these resources will be contracted through loans, Tanzania has recently been the first country in Sub-Saharan Africa to place a Floating Rate Note (FRN), which has raised USD 600million directly from international capital markets.13 The FNR allowed Tanzania to raise a large amount of financing in a very short period of time, allowing it to avoid the pitfalls of approaching the loan market, which is not deep enough to provide such large amounts of financing out to 7 years, and the requirements of the Eurobond market, which requires ratings and listings and would take a significant amount of time to execute.14 In addition to increased and more diversified sources of financing, Tanzania is also working towards mobilizing additional resources through enhanced tax efforts, which are embedded in the recently approved Finance Act 2012 and in a new VAT Bill which is currently being prepared.

At 11.4, inflation will be higher in Tanzania than in the rest of the EAC in 2012/13. Unlike Kenya and Uganda, Tanzania did not fight inflation as aggressively and as quickly during the inflationary spike of 2011. As a consequence of delayed actions, the current monetary and fiscal policy stances are tighter than elsewhere in the EAC. The fiscal deficit after grants is projected to be 5.5 of GDP in FY2012/13.

iii. Rwanda

Rwanda’s economy grew at close to 6 percent over the last two years. The economic outlook continues to be robust with an expected growth rate of 5.4 percent in 2012/13. This strong growth performance was underscored by successful reforms in both public financial management and in the business environment. Rwanda currently ranks third among Sub-Saharan African economies in the World Bank’s Doing Business Index and eighth worldwide when it come to ease of starting a new business.15

More recently, however, several bilateral and multilateral donors have delayed substantial amounts of foreign aid to the country. Rwanda’s high dependence on foreign aid (approximately 13 percent of GDP in FY2011/12) makes it

13 A Floating Rate Note is a financial instrument with a variable interest rate, which is tied to a money-market index (in this case LIBOR) with a given maturity.
14 See Standard Chartered, 2013: “Case Study – USD 600m FRN Private Placement due 2020” 15 WB, 2013: “Ease of Doing Business Report 2013” World Bank, Washington DC.

page23image25984

14

vulnerable to aid shocks. While the Government appears to have successfully postponed some spending to later this year, the IMF estimates that more prolonged delays could lower growth by 1.5 percentage points of GDP in 2013. Rwandan authorities are therefore seeking to increase other sources of financing which do not involve foreign aid. A Eurobond issued in April this year raised USD 400 million from international capital markets. These proceeds will be partly used for on-lending to a number of enterprises, such as Rwandair, and to finance the completion of Kigali Convention Centre. Moreover, the Government has established a solidarity fund, which solicits voluntary contributions from Rwandans at home and abroad. Finally, a number of tax policy reforms to support revenue mobilization are being considered. Many of these reforms will however not be immediate. The fiscal deficit after grants for FY2012/13 is therefore expected to be the largest in the EAC region amounting to 6.9 percent of GDP and to fall in FY2013/14 to 2.9.

The reduction in official aid transfers has put downward pressure on the Rwandan Franc. Monetary policy has thus recently tightened due to the risks of an inflationary pass-through of an exchange rate depreciation and rapid credit growth to the private sector. Gross foreign reserves are also expected to fall from 5.2 months worth of imports to 4.6 (albeit sill considerably higher than in the most other EAC member states) as authorities smooth out foreign exchange volatility in response to lower aid transfers to the country.

iv. Burundi

Burundi has faced the confluence of several adverse economic shocks, which have subdued economic activity in the country. As a result, growth is projected at 4.5 percent in 2013, relatively lower than in any other EAC country. As a small and landlocked country, Burundi is particularly vulnerable to spikes in global food and fuel prices. High food and fuel prices in 2012 led to a sharp deterioration of the terms of trade and to surging inflation, reaching almost 18 percent for the year. Aid inflows were lower than expected, adding further pressure on the exchange rate. In addition, Burundi had to cope with the repatriation of 35,000 refugees from Tanzania as well as with spillovers from the conflict in Eastern Congo.

Fiscal policy efforts have centred on sustaining revenue mobilization in this adverse environment and implementing measures to widen the tax base. To this end, income tax, tax procedures and VAT laws, were recently adopted by the Government. At the same time, the country is pursuing efforts to increase its debt management capacities. This is particularly important as a recent Debt Sustainability Analysis showed that Burundi is at high risk of debt distress. The country is also in the process of developing a solid legal framework for Public Private Partnerships (PPP). Meanwhile, the monetary policy stance was tight given the high inflation experienced during 2012. The combination of tighter monetary policy and falling food and fuel prices in 2013, are expected to ease inflationary pressures. Inflation is therefore projected to fall to 9.5 in 2013.

15

Figure 12: Macroeconomic Indicators of EAC Member States at a glance

8 7 6 5 4 3 2

Real GDP growth

page25image3848

2010/11

Kenya

2011/12 2012/13

Tanzania Rwanda

Burundi

2013/14 Uganda

page25image19112 page25image19704 page25image20296 page25image20888 page25image21648

24 22 20 18 16 14 12 10

8 6 4 2

Consumer prices, period average

page25image25784 page25image26376 page25image26536 page25image28808 page25image28968 page25image36448 page25image36608 page25image36768 page25image36928 page25image37088 page25image37248 page25image37408 page25image37568 page25image37728 page25image37888 page25image38648 page25image39408 page25image39568 page25image39728

2010/11 2011/12

Kenya Tanzania

2012/13

2013/14

Rwanda

Burundi

Uganda

page25image43464 page25image44056 page25image44648 page25image45240 page25image46000

External current account, excluding official transfers

0 -5 -10 -15 -20 -25

-30

Kenya

2010/11 2011/12

Tanzania

Rwanda

2012/13 2013/14

Burundi Uganda

page25image51400 page25image64256 page25image64848 page25image65440 page25image66032 page25image66792

Gross International Reserves, in months of imports

5.5 5 4.5 4 3.5 3 2.5 2

Kenya

2010/11

2011/12

2012/13

2013/14 Uganda

page25image72016

Tanzania

Rwanda

Burundi

page25image86528 page25image87120 page25image87712 page25image88304 page25image89064

55 50 45 40 35 30 25 20

Debt Stock, end of period

page25image92528

Kenya

Tanzania

Rwanda

Burundi

Uganda

2010/11

2011/12

2012/13

2013/14

page25image109248 page25image109840 page25image110432 page25image111024 page25image111784

0 -1 -2 -3 -4 -5 -6 -7 -8

Fiscal Deficit, including grants

2010/11

Kenya

page25image115640

2011/12 2012/13

Tanzania Rwanda

2013/14

Burundi

Uganda

page25image131104 page25image131696 page25image132288 page25image132880 page25image133640

Source: IMF Country Reports

16

%GDP %GDP %GDP

%GDP %GDP %GDP

1.2.2. Trade Integration in the East African Community

Intra-EAC trade stood at 12
percent of total trade in 2012, a
fall from 14 percent a decade ago
but an increase from 10 percent
in 2006. The value of regional
trade has increased three fold
from just more than USD 2 billion
in 2006 to more than USD 6
billion in 2012. Imbalances in
regional trade persist, however,
with Kenya accounting for more
than half of intra-EAC exports
and the only Partner State to
enjoy a surplus in trade with the
rest of the EAC. As expected,
there is also significant
heterogeneity between Partner
States’ dependence on regional markets: 39 percent of Rwandan imports are sourced from the EAC, whereas only 3 percent of Kenyan imports are from the regional market. With respect to trade with the rest of the world, the EU remains the region’s largest trading partner, accounting for 17 percent of total trade, followed by China (13 percent) and India (12 percent).

The implementation of the first pillar of East African Community integration process, the Customs Union, commenced on 1st January 2005 with Rwanda and Burundi joining in 2009. The phased reduction in internal tariffs concluded in 2010, and trade between Partner States is now free from import duties. A common external tariff (CET) is also in place, meaning goods entering the EAC are charged at the same rate of duty across all Partner States. Exemptions to this tariff regime remain, however, and the persistence of non-tariff barriers (NTBs) continues to hamper trade between Partner States. Negotiations toward a Single Customs Territory, in which all customs affairs are harmonised and jointly administered thereby greatly reducing the burden of internal border checks, have recently commenced.

The second pillar of EAC integration, the Common Market, adds free movement of services, people and capital to the free movement of goods already provided by the customs union. The Common Market also caters for the Right of Residence and the Right of Establishment for EAC citizens in other Partner States. The high degree of openness positions Uganda well in respect of its own implementation of the Common Market Protocol (commenced on 1st July 2010), but the slow process of legal reform and resource constraints have meant that many practices which discriminate against citizens of other Partner States remain in place.

Complementary provisions, such as the harmonisation of educational curricula, elimination of work permit fees and portability of social security benefits, have also languished.

Figure 13: Value and Share of Intra-EAC Trade, 2000-2012

7 page26image2429616

14 12 10 8 6 4 2

page26image25600 page26image27200 page26image28968 page26image29128

6
5
4
3
2
1 00

Volume of Intra-EAC trade, left axis

Intra-EAC Trade (% of total trade), right axis

page26image31592 page26image31752 page26image31912 page26image32072 page26image32232 page26image32392 page26image32552 page26image35160 page26image35320

Source: UNCTAD Statistical Database

17

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Billion USD (current prices)

in%

1.2.3. Working towards a Monetary Union in the East African Community

The establishment of monetary union poses many challenges for the design of fiscal and monetary policy in the region. EAC member states face different development challenges and are often confronted with country-specific economic shocks. The occurrence of such country-specific shocks in a monetary union can greatly weaken monetary transmission channels and price stability, if fiscal policies are uncoordinated. Strong coordination mechanisms are thus paramount to prevent this from happening.

In 2007, the East African Community Council adopted an indicative timetable for the establishment of East African Monetary Union (EMAU) by 2015, which included a fiscal convergence road map to bring countries’ fiscal deficits and total debt stocks within an acceptable range. In its first phase, this convergence road map targeted overall deficits of 6 percent of GDP when excluding grants and 3 percent of GDP when including grants. In a second stage, overall deficits would then fall to 5 and 2 percent of GDP respectively. There was no explicit target on debt apart from a sustained pursuit of debt sustainability. Compliance with these criteria has been low and decreasing since 2007, as depicted in table 3.

Table 3: Number of EAC Countries meeting Convergence Road Map Criteria

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

page27image18088

Phase 1 (2007-2010)

page27image19344 page27image19504   page27image20056 page27image20216   page27image20936 page27image21096   page27image21648 page27image21808   page27image22360 page27image22520   page27image23240 page27image23400   page27image24280

Fiscal deficit excluding grants no more than 6 percent of GDP

220110

Fiscal deficit including grants no more than 3 percent of GDP

231031

page27image35016

Phase 2 (2011-2014)

page27image36272 page27image36432   page27image36984 page27image37144   page27image37864 page27image38024   page27image38576 page27image38736   page27image39288 page27image39448   page27image40168 page27image40328   page27image41208

Fiscal deficit excluding grants no more than 5 percent

00

Fiscal Deficit including grants no more than 2 percent

21

Source IMF Programme Staff Reports

This low compliance with targets in the initial convergence roadmap has highlighted a number of challenges. Firstly, given the large volatility of aid, a majority of EAC countries would find it almost impossible to meet both objectives simultaneously. Secondly, targeting both the fiscal deficit including and the fiscal deficit excluding grants implies that if grants are larger than 3 percent of GDP, a country would have to save the surplus resources to meet both criteria. Thirdly, low compliance was also the result of the financial crisis, which saw fiscal deficits in the EAC expand in order to support demand.

Taking stock of these lessons, EAC Heads of State directed the east African Community Council to revise the roadmap criteria and to expedite negotiations for a Protocol on the Establishment of the EAMU. To this end, the Sectoral Council on the Monetary Union (SCEAMU) met in February 2013 to provide guidance on a number of outstanding issues including (i) the scope

18

of the EAMU, (ii) the institutions necessary for the proper functioning of the EAMU, (iii) macroeconomic convergence criteria, (iv) management of foreign reserves, (v) funding mechanisms, (vi) necessary transitional arrangements, (vii) overdraft facility to governments, (viii) harmonization and coordination of taxation. Negotiation of these issues is expected to be concluded by the end of this year.

19

Chapter 2: Domestic Economic Outcomes and Prospects

2.1. Domestic Economic Outcomes in FY2012/13

Uganda’s economy has been on the recovery path during fiscal year 2012/12, in contrast to very slow economic growth recorded in the previous year. The strong rebound in economic growth was primarily due to the speedy restoration of economic stability resulting from measures that reduced excess liquidity in the economy as well as close coordination of fiscal and monetary policies. Inflation has fallen close to the five percent medium term target, credit to the private sector is increasing, and external reserves have increased to 4.2 months worth of imports of goods and services. The exchange rate has been stable, while allowing gradual movements to reflect changes in demand and supply of foreign exchange market. Interest rates have also reduced to pre – July 2011 levels. In summary, the restoration of macroeconomic stability has strengthened the foundation for faster economic growth and a strong rebound in investor confidence.

2.1.1. GDP Growth

Real GDP is projected to grow at 5.1 percent in FY 2012/13. While this is lower than the average of 7.1 percent realised during the last decade, it is a marked increase on the 3.4 percent registered in FY2011/12. The improvement in the performance of the economy during the FY2012/13 was mainly due to the strong growth in construction; transport

and communication; manufacturing and real estate activities. This growth was supported by a steady supply of electricity throughout FY2012/12 relative to the erratic supply in FY2011/12.

Figure 14: Real GDP growth at market prices

10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

page29image18088

2008/09 2009/10 Agriculture, Forestry & Fishing

2010/11
Industry page29image25048Services page29image25280Total GDP

2011/12

2012/13

page29image26304 page29image26464

Note: 2012/13 based on estimates. Source: Uganda Bureau of Statistics

20

in%

Table 4: Percentage change in GDP by economic activity at constant prices

Total GDP

Agriculture, Forestry & Fishing

Industry

2008/09 2009/10 2010/11 2011/12 2012/13

page30image8264 page30image8424 page30image8584 page30image8744 page30image8904 page30image9064 page30image9384 page30image9544 page30image9704 page30image9864 page30image10024 page30image10184 page30image10344 page30image10504 page30image10664 page30image10824 page30image10984 page30image11144 page30image11304 page30image11464 page30image11624

7.3

2.9

5.9

2.4

6.6

3.4

5.1

page30image15240 page30image15400 page30image15560 page30image15720 page30image15880 page30image16040 page30image16200 page30image16360 page30image16520 page30image16680 page30image16840 page30image17000 page30image17160 page30image17320 page30image17480 page30image17640 page30image17800 page30image17960 page30image18120 page30image18280 page30image18440 page30image18600 page30image18760 page30image18920 page30image19400 page30image19560 page30image19720 page30image19880 page30image20040 page30image20200 page30image20360 page30image20520 page30image20680 page30image20840 page30image21000 page30image21160 page30image21320 page30image21480 page30image21640 page30image21800 page30image21960 page30image22120 page30image22280 page30image22440 page30image22600

1.2

0.8

1.4

page30image24424 page30image24584 page30image24744 page30image24904 page30image25064 page30image25224 page30image25384 page30image25544 page30image25704 page30image25864 page30image26024 page30image26184 page30image26344 page30image26504 page30image26664 page30image26824 page30image26984 page30image27408

Cash crops 9.8 -1.1 -1.5 8.2 3.9

page30image28576 page30image28736 page30image29160

Food crops 2.6 2.7 0.7 -1.7 0.2

page30image30328 page30image30488 page30image30912

Livestock 3.0 3.0 3.0 2.8 2.8

page30image32040 page30image32200 page30image32624

Forestry 6.3 2.9 2.8 3.3 2.8

page30image33752 page30image33912 page30image34336

Fishing -7.0 2.6 1.8 1.9 1.9

page30image35624 page30image35784 page30image35944 page30image36104 page30image36264 page30image36424 page30image36744 page30image36904 page30image37064 page30image37488 page30image37648 page30image37808 page30image37968 page30image38128 page30image38288 page30image38448 page30image38608 page30image38768 page30image38928 page30image39088 page30image39568 page30image39728 page30image39888 page30image40048 page30image40208 page30image40368 page30image40528 page30image40688 page30image40848 page30image41008

5.8 6.5 7.9

2.5

6.8

page30image42592 page30image42752 page30image42912 page30image43072

Mining & quarrying 4.3 15.8 18.6 5.7 -1.0

page30image44280 page30image44440 page30image44864

Manufacturing 10.0 6.6 8.0 -0.3 4.2

page30image45992 page30image46152 page30image46576

Formal 12.0 6.1 9.1 -2.2 4.7

page30image47704 page30image47864 page30image48288

Informal 4.4 8.2 4.5 5.9 2.5

page30image49416 page30image49576 page30image50000

Electricity supply 10.6 14.5 10.7 7.4 10.0

page30image51168 page30image51328 page30image51752

Water supply 5.7 4.4 4.0 4.1 4.2

page30image52920 page30image53080 page30image53504

Construction 3.7 5.9 7.8 3.2 8.2

page30image54632 page30image54792 page30image54952 page30image55112 page30image55272 page30image55432 page30image55912 page30image56072 page30image56232 page30image56392 page30image56552 page30image56976 page30image57136 page30image57296 page30image57456 page30image57616 page30image57776 page30image57936 page30image58096 page30image58256

Services

8.8 8.2 8.2

3.6

4.8

page30image60608 page30image60768 page30image60928 page30image61088 page30image61248 page30image61408 page30image61568 page30image61728 page30image61888 page30image62048 page30image62208 page30image62368 page30image62528 page30image62688

Wholesale & retail trade; repairs 9.7 0.7 4.2 3.4 1.7

page30image63976 page30image64136 page30image64560

Hotels & restaurants 4.5 12.9 -0.7 18.0 4.6

page30image65768 page30image65928 page30image66352

Transport & communications 14.3 17.5 14.1 11.7 10.4

page30image67560 page30image67720 page30image68144

Road, rail & water transport 12.9 14.1 7.9 2.8 4.5

page30image69432 page30image69592 page30image70016

Air transport and support services -3.6 0.9 3.3 12.0 7.8

page30image71304 page30image71464 page30image71888

Posts and telecommunication 19.8 23.7 21.2 18.9 14.8

page30image73096 page30image73256 page30image73680

Financial services 25.4 29.5 19.5 -10.0 4.5

page30image74848 page30image75008 page30image75432

Real estate activities 5.7 5.7 5.7 5.8 5.8

page30image76640 page30image76800 page30image77224

Other business services 12.4 15.0 8.6 3.0 4.3

page30image78432 page30image78592 page30image79016

Public administration & defense 5.5 16.1 11.6 -15.2 3.8

page30image80264 page30image80424 page30image80848

Education 4.3 -1.3 9.9 -4.2 2.3

page30image81976 page30image82136 page30image82560

Health -3.2 0.4 5.7 -0.4 -3.8

page30image83688 page30image83848 page30image84272

Other personal & community services 12.3 11.8 11.4 13.8 8.4

page30image85560 page30image85720 page30image85880 page30image86040 page30image86200 page30image86360 page30image86840 page30image87000 page30image87160 page30image87584 page30image87744 page30image87904 page30image88064 page30image88224 page30image88384 page30image88544 page30image88704 page30image88864 page30image89024 page30image89184

Adjustments

10.2 -2.7 3.0

8.9

7.7

page30image91536 page30image91696 page30image91856 page30image92016 page30image92176 page30image92336 page30image92496 page30image92656 page30image92816 page30image92976 page30image93136 page30image93296 page30image93456 page30image93616

FISIM 27.1 69.1 28.6 -11.4 8.4

page30image94744 page30image94904 page30image95328

Taxes on products 11.8 5.0 7.4 4.7 7.8

Source: Uganda Bureau of Statistics

21

i. Agriculture, Forestry and Fishing

Despite its large employment potential, growth in the agricultural sector continued to be sluggish during FY2012/13, but recovering from the poor performance of the previous two years. With agricultural estimated growth rate of 1.4 percent during fiscal year 2012/13, this was slightly better that the 1.2 percent and 0.8 percent growth rates recorded in 2010/11 and 2011/12, respectively. Cash crops are estimated to grow at 3.9 percent during the year under review compared to 8.2 percent in the previous year, and contributed only 9.7 percent of the total value added in the agricultural sector. Food crops, which include most of the items produced for home consumptions and for regional exports (e.g. maize, beans, simsim or cassava), contributed 52.5 percent to the total value added in the sector but recorded almost no growth during FY2012/13. However, this was better than the negative growth of 1.7 percent in the previous year. Value added in the livestock subsector also remains low, estimated at 9.3 percent of total value added in the sector for the fiscal year 2012/13. Overall, this highlights the largely subsistent nature of Uganda’s agriculture, and hence the urgent need to invest in increased commercial production and productivity enhancement.

Cash crops

The cash crop sub-sector includes coffee, cotton, tea, cocoa, tobacco, sugar cane and exported horticultural products. Coffee output is estimated at 3.2 million 60kg-bags in FY2012/13. The output of the Coffee growing activities is estimated to grow by 9.8 percent in FY 2012/13 compared to the 12.7 percent growth in FY 2011/12. Coffee contributes over 60 percent of the cash crops’ total value added. The outlook on coffee production is positive, and is expected to increase to 3.4 million 60kg-bags in 2013/14 on account of expected improvement in world coffee prices, improved crop husbandry and control in coffee wilt diseases.

Tea is estimated to register an increase in production of 14.0 percent in FY 2012/13, which is slightly lower than the growth rate of 18.5 percent achieved in FY 2011/12. The sugarcane production is also estimated to have grown by 22.4 percent in FY 2012/13 compared to a decline of 16.7 percent in FY 2011/12. Cocoa production increased by 6.8 percent in 2012/13 compared to a high growth of 17.2 percent in 2011/12.

Cotton production activities, on the other hand, are estimated to decline by 38 percent in FY 2012/13 from a strong growth of 76.9 percent in FY 2011/12. Cotton production is estimated to be slightly below 200,000 bales in FY2012/13 compared to improved production of 254,000 bales produced last year. The decline in the Cotton growing activities is attributed to a reduction of approximately 80 percent in acreage, which followed a drop in the farm gate prices. The cotton crop was also affected by adverse weather conditions specifically drought during planting season and the heavy rains that followed. Farm gate prices dropped from an average of Sh.2, 300 per Kg of seed cotton received by farmers in 2010/11 to an average of Sh.1, 100 in 2011/12. This was a significant disincentive to farmers, which resulted in about 50% drop in acreage during 2012/13. At the beginning of marketing in

22

December 2012, farm-gate prices had dropped by 9% compared to the seasonal average of 2011/12 but gradually increased to Sh.1,100 in January 2013. This was attributed to a slight increase in International lint prices and the strengthening of the dollar against the shilling.

The flowers and horticulture crops growing activities are estimated to decline by 2.8 percent during FY 2012/13 compared to a growth of 10.6 percent in FY 2011/12.

Food crops

The food crops subsector is estimated to grow by 0.2 percent in the FY2012/13, an improvement on the contraction of 1.7 percent registered in FY2011/12.

Livestock, forestry and fishing

Fishing subsector is estimated to grow by 1.9 percent in FY2012/13. This growth was the same as the growth registered during FY2011/12.

ii. Industrial Sector

During FY 2012/13, industrial production surpassed the average for the last five years, and almost three times the growth rate in the previous year. The industrial sector is estimated to have recorded a growth rate of 6.8 percent during the year under review, compared to a modest growth rate of 2.5 percent in the previous year. This was largely on account of very strong performance of the construction sector which recorded an estimated growth of 8.2 percent compared to 3.2 Percent in the previous year, and accounted to nearly 61 percent of value addition to the industrial sector. Manufacturing also recovered to a growth rate of 4.2 percent during FY 2012/13 from a decline of 0.3 percent in the previous year, and is estimated to have accounted for 26.3 percent of value added to the industrial sector. Both construction and manufacturing accounted for 87 percent of value added to the sector. The share of industry in overall GDP is estimated at about 25.4%. Electricity growth is also higher this year than the previous year, which is necessary to support increased production and social services such as education and health in the economy.

Mining and quarrying

Mining and quarrying subsector contracted by 1.0 percent in the FY2012/13, compared to a growth of 5.7 percent registered in FY2011/12. The subsector’s contribution to GDP is estimated at 0.3 percent in FY2012/13

Electricity supply

The completion of the Bujagali Hydropower Dam and many mini-hydropower stations in south western Uganda has contributed to power stability and growth during FY 2012/13. This is expected to improve further with the completion of Nyangak which will supply power to the West Nile region. The improvement in electricity generation across the country will improve the manufacturing sector by guaranteeing constant supply and at the same time

23

reducing the cost of power supply. The total electricity supply at peak time stands at about 487 MW outstripping peak hour demand, which is an important manifestation of how power negation capacity has steadily improved. This however, is should not lead to complacence as more energy generation capacity will be required to support a fast growing economy, and as economic diversification continues.

Manufacturing

The improved supply of electricity, the positive regional economic outlook, as well as the strong domestic demand are key factors which provide opportunities for stronger growth in the manufacturing sector. The preliminary GDP estimates for FY 2012/13 indicate that total manufacturing grew by 4.2 percent compared to a decline of 0.3 percent registered during fiscal year 2011/12. The manufacturing activities performance was greatly supported by improved electricity supply during FY 2012/13 compared to power shortages experienced in the first half of FY 2011/12.

The “Formal” manufacturing performance, as indicated by the preliminary figures, registered a growth of 4.7 percent in the fiscal year 2012/13, an improvement from the 2.2 percent decline registered in the fiscal year 2011/12. The main contributors to the recovery in manufacturing sub sector were the strong growth in food processing, drinks and tobacco, paper and printing and metal works.

Construction

The construction activities, which include public and private sector construction activities, are estimated to grow by 8.2 percent in FY 2012/13. This was a very strong growth when compared to the slower growth of 3.2 percent registered in FY 2011/12. The recovery of civil works (public construction) from a minus 23.8 percent in FY 2011/12 to a growth of 29.8 percent resulted in the strong performance of the construction activities. Besides, construction activities contributed 13.7 percent of the total nominal GDP, which is the single largest contributing subsector in the economy. The construction sector has also benefited from lower prices for inputs into civil works and buildings, which declined by 1.2 percent during the year.

iii. Services Sector

The services sector, which contributes over 52 percent to total value added in the economy (GDP), registered modest recovery to a growth rate of 4.8 percent during FY2012/13 compared to 3.6 percent in the previous year. The key drivers of this recovery include transport and communications particularly posts and telecommunications, air transport and related support services. Financial services and public administration are also key drivers, following their recovery from negative 10 percent and negative 15.2 percent respectively in FY2011/12 to estimated positive growth rates of 4.5 percent and 3.8 percent, respectively, during FY2012/13. The improved performance of financial services during the year is attributed to a recovery in loans uptake, owing to a reduction in lending rates and stable levels of bank deposits in real

24

terms. Despite slow growth of the wholesale and retail trade subsector of only 1.7 percent during the year under review, the subsector, at 24 percent, remained the largest contributor to value added in the services sector. Transport and communications (19 percent) and real estate (14 percent) were the other significant contributors. The real estate sub-sector remained stable reflecting steady demand due to the high population growth.

Wholesale and retail trade

The wholesale and retail trade activities are estimated to grow by 1.7 percent in FY2012/13 down from 3.4 percent in FY2011/12. The slowdown was partly attributed to the decline in import trade and low growth of the agriculture. It is also worth noting that this subsector contributed 12.4 percent of the total GDP in FY2012/13 compared to 13.7 percent in FY2011/12.

Transport and communications

The preliminary GDP estimates indicate that transport and communications activities grew by 10.4 percent in FY2012/13, which is a lower growth than the 11.7 percent growth registered in FY2011/12. This sector’s contribution to the total GDP at current prices in 2012/1 was 5.1 percent.

The road, rail and water transport subsector is estimated to have grown by 4.5 percent in FY2012/13, up from a growth of 2.8 percent in FY2011/12. The improvement in performance of these activities is attributed to increase passenger services. On the contrary air transport handling activities experienced a slowdown from 12.0 percent growth registered in FY2011/12 to 7.8 percent in FY2012/13 due to slower growth in passenger landings at Entebbe International Airport during FY2012/13. In addition, the posts and telecommunications subsector is estimated to grow by 14.8 percent in FY2012/13. This was a lower growth compared to the 18.9 percent growth registered in FY2011/12. Growth in the communications subsector is mainly attributed to strong performance in the overall cellular subscriptions and talk time during the year. The contribution of posts and communication activities to the total GDP is 1.9 percent in FY2012/13.

Financial services

This sector is comprised of commercial banking, the central bank, insurance, foreign exchange bureaus and other activities auxiliary to financial intermediation. Commercial banking remains the biggest contributor to the sector. The financial services sector output has recovered from the FY2011/12 decline of 10.0 percent to register a growth of 4.5 percent in FY2012/13. The improved performance of financial services during the year is attributed to a recovery in loans uptake, owing to a reduction in lending rates and stable levels of bank deposits in real terms. The financial services’ contribution GDP in FY2012/13 remains unchanged from the 3.8 percent realised in FY2011/12.

25

Real estate activities

Real estate activities, which include outputs of rental and owner occupied buildings, are estimated to grow by 5.8 percent in FY2012/13, the same growth rate as that attained in FY2011/12. The contribution of the subsector to GDP is 5.6 percent in FY2012/13 compared to 5.2 percent in FY2011/12.

Other services

Other business services activities are comprised of the following: all other business activities such as renting of transport equipment, machinery and other equipment; household and other personal goods; and data processing and computer related consultancy, research and experimental development, legal activities, accounting, book keeping and auditing activities, tax consultancy, business and management consultancy activities. The others are architectural and engineering activities including consultancy, investigation and security activities, photographic activities and other business services.

The other business services sector output is estimated to grow by 4.3 percent in FY2012/13, which is higher than the 3.0 percent growth registered in FY2011/12. In terms of contribution to total nominal GDP, the sector’s share was 1.6 percent in FY2012/13 compared to 1.5 percent in FY2011/12.

Community Services

These services include public administration, education and health. In this subsector, public administration output is estimated to grow by 3.8 percent in FY2012/13, which was much better than the 15.2 percent decline recorded in FY2011/12. Public administration and defence contributed 2.9 percent of the total GDP at current prices in FY2012/13.

Education services activity is estimated to grow by 2.3 percent in FY2012/13 following a decline of 4.2 in FY2011/12. The subsector contributed 4.2 percent of the total real GDP in FY2012/13. Similarly, health services subsector registered a further contraction by 3.8 percent in FY2012/13 compared to an earlier decline of 0.4 percent registered in FY2011/12. The contribution of the subsector to total GDP is still very low, at only 0.8 percent in FY2012/13.

iv. GDP by Expenditure

A compilation of value added for all economic activities in the economy by expenditure suggests that fixed capital formation has rebounded strongly from a modest growth of 3.0 percent in FY2011/12 to a growth rate of 9.0 percent in FY2012/13. This was primarily due to improvement in public sector construction which grew at 29.8 percent in FY2012/13, recovering from a negative growth rate of 23.8 percent in the previous year, and growth in private investment in machinery and equipment which accelerated from 5.4 percent in FY2011/12 to 18.5 percent in FY2013/14. This is a manifestation of investor confidence in the aftermath of the shocks that

26

constrained economic activity during FY2011/12. In contrast, public investment in machinery and equipment contracted by 7 percent reflecting Government prioritization of its investments towards infrastructure development.

Although government consumption was only negative 0.6 percent in FY2012/13, it represented a marked improvement on the negative 15.4 percent recorded in FY2011/12. Private consumption, on the other hand, slowed down from a growth rate of 9.6 percent in FY2011/12 to an estimated 4.6 percent in FY2012/13, and was the key driver of the 1.3 percent contraction in overall consumption expenditure during FY2012/13 Tables 5 and 6 provide a summary of the GDP by expenditure.

Exports of goods and services recorded the strongest growth since the start of the global financial crisis, with export of goods recording an impressive estimated growth of 24.5 percent in FY2012/13 compared to the contraction of 9.2 percent per annum on average over the previous four years. This strong performance despite the subdued export markets in Europe and America underscores the growing significance of markets in Uganda’s regional trade partners. While recognising the traditional markets in Europe and USA for Uganda’s exports, prioritizing further export diversification and promoting intra-regional trade will help to cushion the export sector from external shocks.

Table 5: Monetary and Non-Monetary GDP at constant 2002 Prices (% changes, fiscal years)

page36image13960   page36image14504 page36image15376

2008/09

page36image16976

2009/10

page36image17976 page36image18752

2010/11

page36image20352

2011/12

page36image21352 page36image22224

2012/13

Total GDP at market prices

7.3

5.9

6.6

3.4

5.1

Final consumption expenditure

12.2

10

8.2

3.4

-1.3

Household final consumption

13.6

11

8.4

6.1

-1.4

Government final consumption

3.7

3.7

7.4

-15.4

-0.6

Gross capital formation

6.8

9.9

10.3

3

9

Fixed capital formation

6.9

9.9

10.3

3

9

Changes in inventories

-0.8

8.2

0.6

-8.2

2.8

Net exports

66.3

50.2

23.2

2.5

-23.1

Exports

2.3

-23.7

0.5

15.6

18.6

Goods, fob

-4.9

-35.4

-3

6.6

24.5

Services

37.3

15.7

7.1

30.9

10.4

Imports

16.9

0.2

11.5

8.6

-2.5

Goods, fob

16.1

-7.7

8.2

7

-5.7

Services

19.3

23.6

18.7

11.7

3.8

Source: Uganda Bureau of Statistics

27

Table 6: Fixed Capital Formation at constant 2002 Prices (% changes, fiscal years)

page37image3176   page37image3720 page37image4496

2008/09

page37image6096

2009/10

page37image7432 page37image7872

2010/11

page37image9472

2011/12

page37image10976

2012/13

Gross capital formation

6.9

9.9

10.3

3

9

public

14.4

21.3

28.8

-12.3

13.1

private

5.1

7

4.9

8.6

7.8

Construction works

4.2

6.3

9

1.9

9

public

21.9

16.3

37.1

-23.8

29.8

private

1.3

4.3

2.7

9.6

4.6

Machinery and equipment

16.5

21.8

14.2

6

9.1

public

4

29.4

16.9

7.2

-7.1

private

23.9

17.9

12.7

5.4

18.5

Source: Uganda Bureau of Statistics

2.1.2. Monetary Sector

i. Monetary Policy Framework

Prior to July 2011, the Bank of Uganda primarily used two instruments to regulate the supply of money in circulation as a means to control inflation as well as maintain a stable exchange rate. These were the issuance or redemption of treasury bills and bonds, and sale or purchase of foreign exchange. The use of these instruments became less effective as regulation of the amount of money in circulation became more difficult due to the use of the Uganda shilling as a medium of exchange in some neighbouring countries. Heavy reliance on the issuance of treasury bills and bonds also became expensive in terms of interest payments, increasingly taking resources away from the budget which could have been utilised to finance other priority programs and projects.

In July 2011, the Bank of Uganda changed the tools for controlling inflation, to rely primarily on the variations in interest rates or cost of borrowing. Increased interest rates, for instance, reduce the amount of credit extended to the private sector, thus curtailing the desire to borrow for non-essential consumption. This new arrangement for controlling inflation is what is referred to as “Inflation Targeting framework”. Under this monetary policy framework, the Bank of Uganda raises or lowers the reference interest rate (called the Central Bank Rate) at which commercial banks access short term advances or loans from the Central Bank to meet their short term financing needs. If the CBR is raised, commercial banks increase lending interest rates to their borrowers, which increases the cost of borrowing. This prevents lending to the general public from increasing at a rate which can lead to increases in the general prices of goods and services. On the other hand, if there is insufficient credit to the private sector and inflation is low, the Bank of Uganda can lower its reference interest rate which signals to commercial banks to lower their lending interest rates. In so doing, the cost of borrowing is reduced, increasing demand for loans by the private sector.

28

At the beginning of each month, the Bank of Uganda holds a policy committee which considers the state of the financial sector and of the economy as a whole to determine whether or not to increase or lower its key reference interest rate to commercial banks. A decision is announced at the beginning of each month, and this ensures that policy decisions related to the financial sector are transparently and effectively communicated. Key considerations in making a decision in this respect include growth prospects of the private sector, the movements in the general price level of goods and services (inflation), availability of credit for lending to private sector, and any other relevant factors. The primary objective is to maintain stable prices in order to create a conducive environment for investment, and to maintain the welfare of the population. Low inflation is also important for maintaining the value of savings, which encourages the working population to save.

ii. Inflation

Inflation has been in single digit for most of the FY 2012/13, with exception of the Months of July and August 2012. The major driver of low inflation has been the drop in food prices, which have been negative on average for the whole fiscal year. Food price inflation dropped sharply from a peak of 44.2% in May 2011 to 0% in January 2013 to negative 2.1 percent in May 2013. In contrast, non food prices have averaged 10.3 percent per annum for the 12 months to May 2013, but much lower than what it was in the previous fiscal year. The key factors which have resulted in lowering non food inflation included the government’s tight monetary policy and Government expenditure which was consistent with low inflation, easing international commodity prices, and a stable exchange rate.

Core inflation which measures the increase in the general price level excluding food crops, energy, fuel and utilities, dropped from 21.2 percent in May 2012 to 5.6 percent in May 2013. This was above the target of 5% p.a due to increases in education costs, health and beverages and tobacco. Figure 4.1 below gives trends for major inflation categories.

The sharp deceleration of inflation since September 2012 suggests that inflation is under control. The drop in inflation has helped to restore confidence in the country’s economic management, and the speed with which this happened is a strong indication of the soundness of Uganda’s economic foundation for continued growth.

29

Figure 15: Inflation Rate by major Groups (year on year)

50% 40% 30% 20% 10%

0% -10% -20%

page39image3688 page39image5632 page39image5792 page39image6384

page39image6704 page39image6864 page39image7024 page39image7184 page39image7344 page39image7504 page39image7664 page39image7824 page39image7984 page39image8144 page39image8304 page39image8464 page39image8624 page39image8784 page39image8944 page39image9104 page39image9264 page39image9424 page39image9584 page39image9744 page39image9904 page39image10064 page39image10224 page39image10704

2011/12

2012/13

page39image12880 page39image13040 page39image13200 page39image13360 page39image13520 page39image13680 page39image13840 page39image14000 page39image14160 page39image14320 page39image14480 page39image14640 page39image14800 page39image14960 page39image15120 page39image15280 page39image15440 page39image15600 page39image15760 page39image15920 page39image16080 page39image16240 page39image16400 page39image16720

Headline

Food EFU Core

page39image17920 page39image18080 page39image18240 page39image18400

Note: Core inflation constittes about 81.6% of the total CPI basket, food crops account for 13.5% of the basket, and

Electricity, Fuel & Utilities (EFU) account for the remaining 4.9%. Source: Uganda Bureau of Statistics

Figure 16: Inflation Developments by Item

115
110
105
100

95

page39image23168 page39image24264 page39image24424 page39image25856 page39image26016 page39image26176 page39image26336 page39image26496 page39image26656 page39image26816 page39image26976 page39image27136 page39image27296 page39image27456 page39image27616 page39image27776 page39image27936 page39image28096

Jul-12

Food

Aug-12

Sep-12

Oct-12 Nov-12 Dec-12

Beverages and Tobacco

Jan-13

Feb-13 Mar-13 Apr-13

Clothing and Footwear

Transport and Communication

page39image31888 page39image32048 page39image32208

Rent, Fuel and Utilities

Education

Household and Personal Goods

Health, Entert. &Others

page39image34000 page39image34160 page39image34320 page39image34480 page39image34640

Source: Uganda Bureau of Statistics

In the medium term, inflation is likely to remain in single digit; however, the supply of food to the markets continues to be a source of vulnerability. Mitigating this vulnerability will require addressing the food supply constraints through deliberate investments in increased agricultural production and enhancing productivity. This will ensure that there is adequate food for household consumption (food security) and there is significant surplus for export to meet regional food demand.

iii. Interest Rates

The decline in the Bank of Uganda reference interest rate has been translated into lower commercial bank lending rates during FY2012/13. The overall interbank rate declined from 26.2 per cent in January 2012 to 8.6 per cent in March 2013. The domestic currency time deposit rate also eased from 21.2 percent in January 2012 to 11.9 per cent in March 2013. The yields in Government securities have also dropped, with the 364-day Treasury Bill rate

30

Index (jul-12=100)

July Aug Sep Oct Nov Dec Jan Feb Mar Apr May

June July Aug Sep Oct Nov Dec Jan Feb Mar Apr

May June

declining from 24.5 percent in January 2012 to 12.2 in March 2013. Commercial bank lending rates have also reduced, from nearly 30 percent in August 2011 to an average of about 24 percent by end March 2013. The trends in key interest rates are shown in Figure 17 below.

Figure 17: Evolution of Interest Rates

30 25 20 15 10

5 0

page40image6192 page40image7624 page40image7784 page40image8880 page40image9040 page40image9200 page40image9360 page40image9520 page40image9680 page40image9840 page40image10000 page40image10160 page40image10320 page40image10480 page40image10640 page40image10800 page40image10960 page40image11120 page40image11280 page40image11440 page40image11600 page40image11760 page40image11920 page40image12080 page40image12240 page40image12400 page40image12560 page40image12720 page40image12880 page40image13040 page40image13200 page40image13360 page40image13520 page40image13680 page40image13840 page40image15944

Lending Rate

Overall

Time Deposit Rate

7 Day

91-Day TB Rate

CBR

364-Day TB Rate

page40image20472 page40image20632 page40image20792 page40image20952 page40image21112 page40image21272 page40image21432

Borrowers were adversely affected by the rise in interest rates in the previous year mainly because they were not fully aware of the financing terms for their loans, many of whom borrowing at which are variable or change as financial market conditions change. As a result, the rise in interest rates affected those who had borrowed before as well as new borrowers, making it difficult for most borrowers to adjust their cash flows to meet the increased cost of servicing their loans.

To ensure that consumers of financial services are made aware and understand all the information relating to the terms and conditions under which such services, including loans, are provided, the Bank of Uganda developed consumer protection guidelines which have been issued to banks. In addition, Bank of Uganda, together with other agencies such as the Capital Markets Authority, Uganda Bankers’ Association and Reuters, is undertaking financial literacy and awareness campaigns throughout the country in the local languages media. In addition, Bank of Uganda established in February 2010 a Regulation and Resolution of the Commercial Banking Section. This Section handles: (i) complaints from commercial banks, (ii) investigates illegal deposit taking institutions, and (iii) addresses all other issues raised by clients in relation to consumer protection.

31

in%

iv. Securities

To increase transparency and provide information to investors in Government securities i.e Treasury bills and bonds, the Bank of Uganda now calculates and publishes the daily interest
rate that the securities secondary

market was demanding for lending
to Government, across all periods
when the funds borrowed are due
for repayment (currently up to 10
years). The interest rates investors
demand at each point in time over
the entire period of holding a
Government Treasury Bill or Bond,
and which also reflects the
perceptions about the risk profile of
holding such debt paper are plotted
into what is called the “yield curve”. A longer repayment period leads to a higher perception of risk, which in turn leads to a higher interest rate. Figure 18 shows that investors perceive longer tenor Government securities as more risky than those with shorter tenor.

2.1.3. Financial Sector Performance and Reforms

In FY2012/13, the reduction in the inflationary pressures and gradual improvement in the macroeconomic environment led to easing of the monetary policy stance stimulating lending to the private sector and overall growth of the economy. This section reviews the performance of different types of financial institutions, developments in the capital markets as well as the insurance industry. It also provides a brief overview of regulatory reforms aimed at deepening Uganda’s domestic financial market.

i. Financial Sector Performance

Commercial banking

The banking sector was in a healthy financial condition, recording strong profits in 2012, in part because of high interest margins. Non-performing loans edged up slightly but the banks’ capital position remained very strong, with core capital for the banking system as a whole standing at 18.8 percent of risk weighted assets in December 2012. At the beginning of March 2013, the statutory increase in the minimum paid up capital of banks from Ushs 10 billion to Ushs 25 billion took effect, with all 24 banks in operation now in compliance.

Credit to the private sector grew by 6.0 percent from Shs.7.19 trillion in June 2012 to Ushs.7.62 trillion by end March 2013, reversing the stagnation experienced during the period September 2011 to June 2012 (Figure 19). However, a slight decline in the stock of loans and advances was registered between December 2012 and March 2013 mainly due to the closure of the

Figure 18: Treasury Bond Yield Curve, as at 30th May 2013

15 14 13 12 11 10

9

8
0 2 4 6 8 10

Time to maturity (years)

page41image25128 page41image26728 page41image26888 page41image27048 page41image27208 page41image27368 page41image27528 page41image27688 page41image27848 page41image28008

Source: Bank of Uganda

32

Yield to maturity (in %)

lands registry which impeded the banks’ ability to verify land titles which are used as collateral for commercial bank lending.

Total customer deposits grew by 6.0 percent from Ushs.9.7 trillion at the end of June 2012 to Ushs.10.3 trillion in March 2013 thus more funds were mobilized to boost the level of intermediation. Overall total assets of commercial banks grew by 9.7 percent from Ushs14.4 trillion in June 2012 to Ushs.15.8 trillion in March 2013.

Commercial banks held adequate capital levels and complied with the minimum and the ongoing capital requirements. Core capital which is the primary form of capital grew by 16.0 percent from Ushs.1.87 trillion in June 2012 to Ushs.2.17 trillion at the end of March 2013. In line with the revised capital requirements which became effective March 01, 2011, banks beefed up their paid up capital and were able to comply with the Ushs. 25 billion requirement. The build-up was also augmented by retention of significant profits made during the period under review. Banks’ profits after tax stood at Ushs.370 billion in the nine months to March 2013 relative to Ushs.430 billion in the same period to March 2012.

The gradual reduction in interest rates also eased liquidity pressures in the market as noted by the increase in the liquid assets to deposit ratios of the banking sector from 37.6 percent in the March 2012 to 42.7 percent in March 2013. However, the effects of the unfavourable economic conditions experienced in 2011 led to a slight deterioration in the ratio of non-performing loans to

total advances from 3.4 percent in March 2012, to 3.9 percent in June 2012 and 4.7 percent in March 2013.

Two additional banks commenced operations in 2012 bringing the total number of commercial banks to twenty four (24) after the closure of one bank, Kigezi Commercial Bank.16 The number of commercial banks increased from 458 in December 2011 to 492 in December 2012 and to 497 in March 2013; while the number of ATMs increased from 663 in December 2011 to 738 in December 2012 and to 755 in March 2013.

Credit Institutions

16 The licence of this institution was withdrawn due to serious violations of the provisions of the Financial Institutions Act 2004.

Figure 19: Credit and Deposits in Commercial Banks

114 112 110 108 106 104 102 100

page42image23592

Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13

Total Lending Total Deposits

page42image29696 page42image29856

Source: Bank of Uganda

page42image30584

33

Index (current prices Jul-12=100)

Performance of Credit Institutions was similarly satisfactory, with their total assets increasing by 14 percent from Shs. 197 billion at the end of July 2012 to Shs. 226 billion at the end of February 2013; mainly driven by lending. Total loans increased by 10.4 percent from Shs. 111 billion to Shs. 122 billion over the same period. Likewise, total deposits increased by 15.4 percent from Shs. 119 billion to Shs. 137 billion in the first eight months of the FY2012/13. All the credit institutions maintained unimpaired paid-up capital above the statutory requirements of Shs. 1 billion and complied with the minimum core capital to risk weighted assets ratio requirement of 8 percent. The total capital grew by Shs. 8.0 billion from Shs. 41 billion as at end July 2012. Total profits, however, fell by 86.4 percent from a net profit position of Shs. 3.1 billion reported as at July 2012 to Shs. 0.4 billion at the end of February 2013.

Microfinance Institutions

The overall financial condition of the Tier 3 Microfinance Deposit Taking Institutions (MDIs) was rated satisfactory and the sub-sector continued to grow. Total assets increased by 10.9 percent from Shs. 250.2 billion to Shs. 277.5 billion in the first eight months of FY2012/13. Loans grew by 6.7 percent from Shs. 171.8 billion to Shs. 183.3 billion during the same period. MDIs’ holdings of securities stood at Shs. 0.9 billion at the beginning of the financial year 2012/13, but were all redeemed in December 2012.. Furthermore, total customer deposits in MDIs grew by 15.2 percent from Shs. 96.4 billion to Shs. 111.0 billion; reflecting the public’s continued confidence in the sub-sector. The number of accounts as at December 2012 stood at 719,156, an increase of 23 percent from 580,698 as at June 2012. All the MDIs maintained unimpaired paid-up capital above the statutory requirements of Shs. 500 million and complied with the minimum core capital-to-risk-weighted-assets ratio requirement of 15 percent. MDIs’ paid- up capital increased by 14.2 percent; from Shs. 19.3 billion to Shs. 22.0 billion between July 2012 and February 2013. As with commercial banks and credit institutions, MDIs’ profits were lower at Shs. 2.1 billion in February 2013 relative to Shs. 6.2 billion in June 2012. All MDIs complied with the statutory liquidity requirements and maintained their portfolio at risk; nonperforming advances to total advances remained stable at 2.9 percent.

Savings and Credit Cooperatives

Government promotes greater financial inclusion through the provision of wholesale credit to Saving and Credit Cooperatives (SACCO). The Microfinance Support Centre, which channels these funds to SACCOs on behalf of Government, has provided a cumulative total of 2,501 loans since FY1999/2000, amounting to Shs. 142 billion. The cumulative loans portfolio outstanding as at 28th of February this year was Shs.54 billion (table 7).

34

Table 7: Support to SACCOs

LOAN PRODUCT

CUMMULATIVE DISBURSEMENT

page44image5384 page44image5544 page44image5704 page44image6184

OUTSTANDING BALANCE(Shs.)

page44image7096 page44image7256 page44image7416 page44image7576 page44image7736 page44image7896 page44image8056 page44image8216 page44image8376 page44image8536

VALUE (Shs.)

NO. OF LOANS

page44image9872 page44image10032 page44image10192 page44image10512 page44image10672 page44image10832 page44image10992 page44image11152 page44image11312 page44image11632 page44image11792 page44image11952 page44image12272 page44image12432 page44image12592 page44image12752 page44image13072 page44image13232 page44image13392

Agriculture loans

74,850,699,200

893

page44image15096 page44image15256 page44image15416

38,997,869,146

page44image16184 page44image16344 page44image16664 page44image16824 page44image16984

Commercial loans

SME Loans(non agriculture)

52,003,873,500

7,631,666,500

1,047

137

9,624,561,902

page44image20664 page44image20824 page44image21144 page44image21304 page44image21464

1,495,000,000

19

3,337,988,092

page44image23128 page44image23288

Environmental Loans

page44image24096 page44image24256 page44image24416

851,497,566

page44image25184 page44image25344 page44image25664 page44image25824 page44image25984

Special Interest Group Loans

5,811,000,000

405

1,417,570,690

page44image28480 page44image28640 page44image28800 page44image28960 page44image29280 page44image29440 page44image29600 page44image29760 page44image29920 page44image30080 page44image30240 page44image30400 page44image30560 page44image30720 page44image31040 page44image31200 page44image31360 page44image31520 page44image31680 page44image31840 page44image32000 page44image32160 page44image32320

TOTAL

141,792,239,200

2,501

54,229,487,396

page44image34912 page44image35232

page44image36192 page44image36352 page44image36512 page44image36672 page44image36832

Source: Ministry of Finance, Planning and Economic Development

Mobile money

In line with Bank of Uganda’s strategic initiative of financial sector deepening, approvals were granted for new electronic banking products and mobile money transfer services. In addition to mobile money services offered by MTN Uganda, Uganda Telecom (UTL), Airtel and Warid Telecom Ltd., two new mobile money transfer providers namely; M-cash and EzeeMoney came into the market. Following the removal of exclusivity clauses from the contracts between commercial banks and money transfer companies in November 2011, commercial banks have exploited this freedom of choice to partner with more than one money transfer service provider. Consequently, a number of banks now offer both MoneyGram and Western Union services under one roof. More banks introduced e-banking solutions such as internet banking to augment their service delivery channels as a cheaper alternative to setting up branches.

The number of registered users of mobile money financial services reached 11.03 million people (approximately 30 percent of Ugandans) in March 2013, while the cumulative value of money moved through the system reached Shs. 15 trillion by end of March, 2013. To strengthen regulatory oversight over mobile money transfer services, BOU and Uganda Communications Commission (UCC) formed a joint working group (JWG) to deal with matters related to mobile financial services. The JWG is in the process of drafting interim guidelines for the mobile money transfer business.

ii. Capital Markets

As shown in Figure 20, all key stock market indicators have been on an upward trend during the financial year 2012/13. The USE All-Share index that tracks share price movements was 1,496.0 at the end of March 2013, up 50.5 percent from a year earlier. Daily average turnover over the first nine month months of the FY (to March 2013) was 137.6 percent higher than in the first nine months of the previous FY. The improved performance at the USE was driven by the prevailing low inflation, a stable domestic currency, the listing of Umeme shares and a drop in yields on treasury securities that saw a shift by investors away from the government debt market towards the equities market.

35

Index

Billins

Umeme Limited offered shares to the public in an Initial Public Offering (IPO) that ran from 15th October-7th November 2012. The company sold 622 million shares at a price of Shs. 275 that targeted raising Shs. 171.15 billion. The offer was over-subscribed by 35 percent and brought on board 6,464 new shareholders. The shares

started trading at the Uganda Securities Exchange (USE) on 30th November 2012.

In addition, three bonus issues were effected during the financial year by Jubilee Holdings Limited (JHL), Stanbic Bank Uganda Limited (SBU) and Bank of Baroda Uganda Limited (BOBU). JHL (which is cross listed from the Nairobi Stock Exchange(NSE)) issued and listed an additional 5.4 million ordinary shares in the ratio of one new ordinary share for every ten ordinary shares held. In a bid to strengthen its share capital, SBU issued an additional 40 billion ordinary shares in the ratio of four new ordinary shares for every one ordinary share held. The bonus issue raised SBU’s paid up share capital from Shs. 10.2 Billion to Shs. 51 Billion. BOBU also issued bonus shares in the ratio of 1.5 shares for every share held. This increased the number of shares to 2.5 billion from 1 billion and enabled the bank to meet the minimum capital requirement of the Bank of Uganda that stands at Shs. 25 Billion (USD9.44 Million).

The African Development Bank (AfDB) issued the first and second tranches of a Shs. 125 billion (USD 49.0 million) 10-year bond. These issues are part of a program which will allow the AfDB to issue bonds in multiple tranches to fund its lending for infrastructure and other projects in Uganda. The first tranche of Shs. 12.5 billion (USD 4.90 million), which was listed at the Uganda Securities Exchange (USE) on 2nd August 2012, was over-subscribed by 50 percent with a total of Shs. 18 billion (USD 7.05 million) being received

iii. Insurance Industry

Insurance plays an important role in enhancing economic growth as it protects insurance policy holders against risks that would avert production and business development. The industry recorded positive growth and remained resilient despite some macroeconomic challenges during the financial year. Insurance premium income written rose by 18.5 percent in 2012 to Shs. 351.2 billion, from Shs. 296.8 billion in 2011. Market penetration, measured by premiums as a percentage of GDP, rose very slightly from 0.65 percent in 2011 to 0.66percent in 2012.

Figure 20: USE All-Share Index and daily average turnover

1,600 1,400 1,200 1,000

800 600 400 200

1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2

page45image27480 page45image27640 page45image27800 page45image27960 page45image28120 page45image28280 page45image28440 page45image28600 page45image28760 page45image28920 page45image29080 page45image29240 page45image29400 page45image29560 page45image29720 page45image29880 page45image30040 page45image30200 page45image30360 page45image30520 page45image30680 page45image30840 page45image31000 page45image31160 page45image31320 page45image31480

0 page45image33184 page45image33384 page45image33584 page45image33784 page45image33984 page45image34184 page45image34384 page45image34584 page45image34784 page45image34984 page45image35184 page45image35384 page45image35584 page45image357840.0

page45image35976 page45image36568 page45image36992 page45image37416 page45image37576 page45image38000 page45image38592

Daily average turnver (Shs., RHS)

USE All-Share Index (LHS)

page45image39832 page45image39992

Source: Uganda Stock Exchange

36

The composition is still dominated by the non-life insurance that accounts for 89.1percent of the total premiums, the rest being for life insurance.

During the year, the Insurance Regulatory Authority of Uganda (IRAU) issued licences for the Year 2013 to 22 Insurance Companies (including a new re- insurance company, “Uganda Re”), 27 Insurance Brokers, 14 Loss Assessors/Adjusters, and 833 Insurance Agents.

iv. Financial Sector and Pension Reform Initiatives

Financial Inclusion

To promote financial deepening and inclusion, the BoU has recently embarked on the implementation of the National Strategy for Financial Inclusion. The Strategy includes four pillars, namely (i) improving financial literacy, (ii) consumer protection, (iii) financial innovation (including through mobile money and agency banking), and (iv) financial services data and measurement. Through implementation of this strategy, demand and supply of financial services is expected to increase. As the financial sector becomes increasingly sophisticated and complex, the bank of Uganda will continuously update its regulatory and supervisory tools to ensure effective oversight, to support financial deepening and promote innovation into new financial products to meet the needs of stakeholders. The BoU will also pursue close cooperation with other governmental agencies, such as the communications regulator, to support financial innovation.

Government will effect amendments to the financial institutions Act 2004 to allow Agency Banking Model, Bancassurance, Islamic Banking Finance and regulation of mobile money services. Experience within EAC Partner States, particularly Kenya and Rwanda, suggests that the Agency Banking Model has been effective in extending financial services more directly to the unbanked population in rural areas.

In addition, Ministry of Finance, Planning and Economic Development has finalized and submitted to cabinet the Principles for Regulation of Tier IV Microfinance Institutions. This will improve the safety of savings and encourage fair competition among microfinance institutions. The Policy and structural issues on the enactment of a Regulatory Framework for Micro Finance Institutions (MFIs) include the following:

  1. All Tier 4 Microfinance institutions including SACCOs, irrespective of the type and nature of activities will be under one regulator – the Microfinance Regulatory Authority (MRA);and

  2. Bringing regulatory framework and supervisory practices for Tier 4 Microfinance institutions in consonance and harmony with other financial sector laws namely; The Financial Institutions Act (2004) and the Microfinance Deposit taking Institutions Act (2003).

37

Capital Markets Authority Act (CMA)

Government has prepared principles for the amendment of the Capital Markets Authority (CMA) Act. The main objectives of these amendments are to:

  1. address corporate governance and administrative shortcomings in the regulatory regime;

  2. improve operational procedures to enable the CMA to execute its functions;

  3. prohibit trading actions not covered in the current Act, provide for offences and penalties, and to provide for disputes resolutions;

  4. comply with the International Organization of Securities Commission’s (IOSCO) Multilateral Memorandum of Understanding (MMOU) to preserve and strengthen Uganda’s capital markets and its international reputation; and

  5. comply with the provisions of the East African Common Market Protocol.

Furthermore, Asset Backed Securities (ABS) Regulations, which provide a legal framework for the issuance of ABS, were published. ABS will be important in providing an alternative source of funding for organizations in Uganda with cash-flow needs.

Finally, the CMA Board of Directors approved Regulations for the issuance of regional fixed income securities in the East African Community (EAC) agreed upon during the 33rd East African Securities Regulatory Authorities (EASRA) meeting. The issuance of regional fixed income securities is expected to deepen and integrate capital markets in the EAC which is in line with advancing the provisions of the East African Common Market Protocol that provide for free movement of capital in the region.

Insurance Amendment Act

The Insurance Amendment Act (2011) brought the operations of all Health Membership Organizations under the purview of the insurance regulator and allowed the setting up of Uganda Re re-insurance firm. Subsequently during FY2012/13, Insurance Regulatory Authority of Uganda (IRAU) licensed 8 Health Medical Organisations (HMO), which provide health insurance services. IRAU also has issued a licence to Uganda Re, which will help reduce the amount of premium ceded to re-insurance companies in other jurisdictions. The Authority has engaged composite companies on the proposed guidelines to separate Life and Non-Life Insurance business to ensure full compliance with the provisions of the Insurance Amendment Act. The road map towards compliance has been developed by the IRAU and shared with the industry players.

Following awareness programmes by the IRAU and market players, the industry is getting increasing recognition and becoming more attractive to the general public, including via new products that are being introduced on the market such as micro-insurance products. Insurance products are also

38

expected to be sold by commercial banks in future once the proposed amendments to the Financial Institutions Act to allow bancassurance become effective. IRAU also introduced a 0.5 percent Insurance Training levy to the Insurance Institute of Uganda. The levy is intended to help training and certification of programmes that will enhance insurance professionalism in Uganda. This will not only benefit consumers who will receive increased professional guidance in order to make good insurance choices, but also help the local industry to compete in a globalised market.

Retirement Benefits Sector (pensions) Reforms

The overriding objective of the on-going reforms in the retirement benefits/pension sector is to create a robust and efficient pension system that will ensure all Ugandans are protected from old age poverty and those who face various risks in their life especially vulnerable children and women as well as the elderly, have a social safety net. Along these reforms are issues such as governance and accountability that need to be addressed in order to build trust and confidence in the social protection system. This is a broad reform which will be expanded to cover not only those in the formal sector who constitute only about 9-10 percent of the working population of 12 million, but also to those in the informal sector who are the majority workers in Uganda.

Specifically, these reforms aim at (i) improving governance of the retirement benefits sector; (ii) increasing coverage to include all those employed in the formal sector, those who are self-employed and to also cover those in the informal sector who are the majority in Uganda’s working population; (iii) ensuring that these retirement benefits schemes are fiscally sustainable and are able to meet the future pension obligations of savers; and (iv) over the long term, ensuring that those who save for their retirement have adequate income. The reforms the Government is undertaking are therefore broad in nature and scope.

To protect retirement or employee savings and ensure that those who save in retirement schemes get their benefits, Government has but in place an independent regulator, the Uganda Retirement Benefits Regulatory Authority (URBRA), to oversee the establishment, operation and management of retirement benefits schemes in the country. The law that established the regulator, the URBRA Act 2011, has strong provisions for transparency, reporting and accountability to ensure that savers are kept aware of what is happening to their savings, including where such funds are invested and the return on those investments.

There will be institutional reforms particularly as regards the Public Service Pension Scheme, which will separated from the Ministry of Public Service and managed professionally as a separate entity. This will ensure that civil servants and other public servants get their pensions when they retire from service and without delays. The reforms and other institutional as well as regulatory requirements including rigorous reporting requirements and oversight by the URBRA will prevent the current hemorrhage of pension funds

39

through poor governance. The reforms will also introduce competitive pressure as a sustainable means of improving Governance, and provide choice so that savers can choose where to keep their savings where they feel is safe. These are some of the objectives of the Retirement Benefits Liberalization Bill currently before Parliament, and to which the Ministry of Finance, Planning and Economic Development will soon introduce amendments arising from broader consultations with stakeholders.

Increasing coverage will entail removing the current threshold where companies or other employers in the private sector employing five (5) people and above contribute to the NSSF. The proposed reforms will require all those employed in the formal sector to contribute to the NSSF or other schemes which shall be licensed to receive mandatory contributions. This immediately increases coverage from the date when the new proposed legislation becomes effective. Another category that social protection will be extended to is those who are self-employed and those in the informal sector by providing incentives and educating them on the benefits of saving for old age.

Ensuring fiscal sustainability will require introducing a contributory system to the Public Service Pension Scheme so that the scheme becomes partially funded. Right now the scheme is unfunded and in many cases in arrears. It is proposed that the new scheme will have a component of the existing Define Benefits system and the Defined Contributions which will be combined to have a hybrid scheme for civil servants and other public servants. This will include those in the traditional civil service, teachers, local government employees, those serving in the military and related employees. There will also be some changes to the parameters that define the current public service pension system, to make it affordable and sustainable. Another important goal is ensuring adequacy of social protection, which will be achieved in the long term as the economy continues to grow towards a middle income status.

Significant progress has been made. The Minister responsible for finance appointed the Board on 31st August 2012. This paved the way for the institutional setting up of the regulator, the URBRA, which started its operations in December 2012. Since then the regulator has issued regulations which have enable the licensing of retirement benefits scheme, Trustees, Administrators, Fund Managers and Custodians. This is in accordance with Section 96 of the URBRA Act.

Since the Authority became operational in December 2012, about 160 applications have been received. These applications are in various categories including retirement benefits schemes themselves, administrators, fund managers, trustees and custodians. More than three-quarters of these applicants have been licensed. Progress is being made towards establishment of administrative structures, putting in place regulatory and oversight systems and to boost capacity at URBRA, including recruitment of a Chief Executive Officer.

40

URBRA is developing a communication and awareness strategy to educate and inform the general public about the reforms, their benefits, receive feedback on the elements of the reforms and to address any concerns that stakeholders may have. Another important aspect of effective regulation and oversight is coordination. In this respect, URBRA will work with the Bank of Uganda, Capital Markets Authority, the Insurance Regulatory Authority of Uganda, Registrar of Companies and Uganda Revenue Authority to come up with a coordination framework to enable sharing of information and for coordinated actions.

2.1.4. The External Sector

Uganda’s overall balance of payments improved further during FY2012/13, recording a surplus of US$ 530 million in the 12 months to March 2013, compared to US$ 365 million a year earlier and a large deficit of US$ 504 million in the 12 months to March 2011. This is on account of strong export performance, a significant increase in foreign direct investment, coupled with a slowdown in the growth of imports. The trade balance improved to a deficit of US$ 2,087 million in the 12 months to March 2013, compared to a deficit of US$ 2,509 million in the 12 months a year earlier. The current account deficit as a percentage of GDP is estimated at 9.3 percent for FY 2012/13, narrower than the 11 percent of GDP recorded in 2011/12. A summary of the key indicators in the external sector are shown in Table 8.

Table 8: Balance of Payments Indicators in % of GDP

These developments were accompanied by a nominal exchange rate appreciation which amounted to 6.1 percent against the U.S. Dollar between June 2012 and March 2013. The exchange rate was fairly flat over the first quarter (July-September), before depreciating over the second quarter, in part due to the uncertainty created by the suspension of donor aid that was announced during this period. The Shilling then recovered somewhat over the third quarter, supported by inflows from offshore investors, exports proceeds and remittances, amidst subdued import demand (figure 21).

Whilst Government continues to be committed to the floating exchange rate regime, BoU occasionally intervened in the international foreign exchange markets during FY2012/13 to dampen excessive volatility. The net impact of direct exchange rate market interventions during the period July 2012 to March 2013 amounted to net sales of USD 308.9 million. At the same time BOU continued its strategy of rebuilding its stock of international reserves which was equivalent of USD 789 million.

page50image25160 page50image25320 page50image25480 page50image25640 page50image25800 page50image25960 page50image26280 page50image26440 page50image26920 page50image27240 page50image27400 page50image27560 page50image27720 page50image27880

Exports

page50image28808 page50image28968 page50image29128 page50image29288 page50image29448 page50image29608 page50image29768 page50image29928 page50image30088 page50image30248 page50image30408 page50image30568 page50image30728 page50image30888

Imports

page50image31816 page50image31976 page50image32136 page50image32296 page50image32456 page50image32616 page50image32776 page50image32936 page50image33096 page50image33256 page50image33416 page50image33576 page50image33736 page50image33896

Current Account Balance

page50image34904 page50image35064 page50image35224 page50image35384 page50image35544 page50image35704 page50image35864 page50image36024 page50image36184 page50image36344 page50image36504 page50image36664 page50image36824 page50image36984

Current Acc. Balance (Excl. Grants)

page50image38072 page50image38232 page50image38392 page50image38552 page50image38712 page50image38872 page50image39032 page50image39192 page50image39352 page50image39512 page50image39672 page50image39832 page50image39992 page50image40152

BOP Overall Balance

24.3

14.2

26.0

-8.1

-10.6

-0.3

2009/1 0

27.0

1.4

2010/1 1

27.8

-10.7

-15.7

-3.5

2011/1 2

27.3

2012/1 3

2007/8

2008/9

14.4

15.2

13.7

13.9

13.4

page50image53608 page50image53768 page50image53928 page50image54088 page50image54248

23.9

page50image55176 page50image55336 page50image55496 page50image55656 page50image55816

-6.3

-10.2

-11.0

-9.3

page50image58088 page50image58248 page50image58408 page50image58568 page50image58728

-9.2

-13.0

-13.9

-10.7

page50image61000 page50image61160 page50image61320 page50image61480 page50image61640

3.9

3.9

1.9

page50image63304 page50image63624 page50image63784 page50image64104 page50image64264 page50image64584 page50image64744 page50image65064 page50image65224 page50image65544 page50image65704 page50image66024 page50image66184 page50image66504

Source: Bank of Uganda

page50image73896 page50image74056 page50image74216 page50image74376 page50image74536 page50image74960 page50image75120 page50image75280 page50image75440 page50image75600 page50image75760 page50image75920 page50image76080 page50image76240 page50image76400 page50image76560 page50image76720 page50image76880 page50image77040 page50image77200 page50image77360 page50image77520 page50image77944 page50image78104 page50image78264 page50image78424 page50image78584 page50image78744 page50image78904 page50image79064 page50image79224 page50image79384 page50image79544 page50image79704 page50image79864 page50image80024 page50image80184 page50image80344 page50image80504 page50image80928 page50image81088 page50image81248 page50image81408 page50image81568 page50image81728 page50image81888 page50image82048 page50image82208 page50image82368 page50image82528 page50image82688 page50image82848 page50image83008 page50image83168 page50image83328 page50image83488 page50image83912 page50image84072 page50image84232 page50image84392 page50image84552 page50image84712 page50image84872 page50image85032 page50image85192 page50image85352 page50image85512 page50image85672 page50image85832 page50image85992 page50image86152 page50image86312 page50image86472 page50image86896 page50image87056 page50image87216 page50image87376 page50image87536 page50image87696 page50image87856 page50image88016 page50image89296 page50image89456

41

BOU’s net action in the foreign exchange market during this period was therefore USD 480 million, which raised the level of foreign exchange reserves from 4.1 worth of imports at the end of June 2012 to 4.3 at the end of March.

Figure 21: Shilling/US Dollar Exchange Rate Figure 22: Effective Exchange Rate Developments

110 105 100

95 90 85 80

page51image5824

Nominal Effective Ex. Rate

Real Effective Ex. Rate

page51image11824 page51image11984

page51image12264

2,900 2,800 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000

Source: Bank of Uganda

Table 9: Balance of Payments Summary (in million of USD)

page51image23104

FY2011/12

FY2012/13

Q3 Q4

Q1 Q2 Q3

page51image31904

A. Current Account Balance (A1+A2+A3+A4)

page51image33064 page51image33936

-437.23

page51image35112 page51image35272

-649.28

page51image36272 page51image37144

-645.11

page51image38152 page51image38312

-365.05

page51image39488 page51image39648

-183.65

page51image40984

A1. Goods Account (Trade Balance)

-669.27 -635.71

-562.22 -509.06 -380.58

a) Total Exports (fob)

681.14 711.71

719.35 698.28 764.81

b) Total Imports (fob)

-1,350.41 -1,347.42

-1,281.57 -1,207.34 -1,145.38

A2. Services Account (services net)

-88.67 -119.77

-178.29 -51.09 -43.63

a) Inflows(credit)

522.46 489.56

457.14 522.16 551.87

b) Outflows(debit)

-611.14 -609.33

-635.43 -573.25 -595.51

A3. Income Account (Income net)

-125.34 -134.33

-206.41 -121.59 -99.39

a) Inflows(credit)

7.33 7.61

7.84 5.64 7.07

b) Outflows(debit)

-132.67 -141.94

-214.25 -127.23 -106.46

A4. Current Transfers (net)

446.05 240.53

301.80 316.68 339.95

a) Inflows (Credit)

493.69 264.83

333.03 328.75 359.81

b) Outflows (Debits)

-47.63 -24.30

-31.23 -12.07 -19.86

page51image82496

B. Capital & Financial Account Balance (B1+B2)

page51image83736 page51image84608

483.81

page51image85784 page51image85944

790.70

page51image86944 page51image87816

527.58

page51image88824 page51image88984

485.99

page51image90160 page51image90320

724.41

page51image91656

B1. Capital Account

3.23 2.32

16.75 8.93 29.60

B2. Financial Account; excl. financing items

480.58 788.38

510.84 477.07 694.82

a) Direct Investment

428.63 635.63

360.68 296.23 465.58

b) Portfolio Investment

58.11 29.80

-66.39 -19.08 43.18

c) Financial derivatives, net

3.49 1.39

0.56 -1.65 1.75

d) Other Investment

-9.66 121.56

215.99 201.58 184.31

page51image113112

C. Errors and Omissions

page51image114232 page51image114672

46.61

page51image115680 page51image115840

41.27

page51image116840 page51image117280

314.59

page51image118288 page51image118448

-71.66

page51image119456 page51image119616

-440.34

page51image120784
page51image122976 page51image123736 page51image124496 page51image125256 page51image126016 page51image126776

D. Overall balance (A+B+C) 93.19 182.70 197.07 49.28 100.43 E. Reserves and related items page51image129672 page51image130072-93.19 page51image130504 page51image130704-182.70 page51image131136 page51image131536-197.07 page51image131968 page51image132168-49.28 page51image132600 page51image132800-100.43

page51image133192 page51image141648 page51image141808

a) Reserve assets

-90.34 -182.83

-194.18 -48.02 -103.37

b) Use of Fund credit and loans

-0.93 0.00

-0.93 0.00 -0.92

c) Exceptional Financing

-1.92 0.13

-1.96 -1.27 3.86

Source: Bank of Uganda

42

Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12

Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13

Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12

Jul-12 Sep-12 Nov-12 Jan-13 Mar-13

Index (July 2011=100)

UGX

i. Current Account

Goods Account (Trade Balance)

The trade deficit improved by 16.8 percent (US$422 million) to USD 2,088.7 million in the twelve months ending March 2013, from USD 2,509.2 million a year earlier. This improvement was largely driven by strong exports performance and sluggish imports.

Total export earnings for the period April 2012 to March 2013 are estimated at USD 2,894.2 million. This is an improvement of 11.6 percent (US$ 307 million) compared to the corresponding period to March 2012. The improvement was largely driven by performance of formal non-coffee and informal exports, which more than compensated for the shortfall in coffee exports. Non-coffee export earnings are estimated at USD 1,997 million, which is a 14.4 percent increase compared to USD1,748 million realized in the previous twelve months. The increase was primarily driven by good performance of maize, sugar, rice, cellular phone re-exports, simsim, cement, bottled water, tea, tobacco, cocoa beans, base metal, plastics and oil-re- exports. In the meantime, coffee export receipts declined by 16.7 percent to USD 395.4 million compared to USD 474.8 million in the period to March 2013. This decline was driven by a decline in both export volumes and world market prices. A total of about 3 million (60 kilogram) bags were exported at an average price of USD 2.2 per kilogram compared to a total of 3.2 million (60 kilogram) bags at an average unit price of USD 2.5 that prevailed in the previous twelve months. Receipts from informal cross-border trade also increased to USD 499.7 million compared to USD 364.1 the previous twelve months to March 2012. The robust performance of informal exports was mainly driven by growth in maize and sugar exports on account of partial recovery of informal trade with South Sudan and increased informal trade with Tanzania.

The export demand from the COMESA and the Middle East countries continues to be strong and has offset the decline in export demand in Europe and American markets. This underscores the importance of strengthening regional integration in order to further boost intra-regional trade. Exports to the COMESA region increased by 15.8 percent and now constitute about 54 percent of total export earnings compared to 50 percent in the twelve months to March 2013. Exports to the Middle East also increased by 17.5 percent. Exports to Europe, the second biggest market for Uganda’s exports, declined by 8.1 percent with their share also declining from 25.9 percent to 22.1 percent in the period April 2012 to March 2013. Exports to Asia posted a decline of 7.5 percent with the share also decelerating by 1 percentage point to 5.6 percent of the total exports.

The total value of imports declined by 2.2 percent to USD 4,982.8 million during the twelve months ended March 2013 from USD 5,095.8 million in the previous period, on account of a reduction in Government non-project imports and private sector non-oil formal imports. Government imports declined by 23.3 percent to USD 354.1 million, in part due to the suspension of donor aid to budget support. Total formal private sector imports on the other hand

43

remained stable at about USD 4,578 million, largely on account of the oil import bill, which increased by 5.7 percent to USD 1,038 million in the twelve months to March 2013. The non-oil formal private sector imports declined by 3.8 percent to USD 3,539.3 million, largely on account of a contraction in consumption imports. Production imports however increased by 5.1 percent, an indication that the economy is steadily recovering from the low growth registered in the previous year. The reduction in consumption imports may be attributed to low aggregate demand in the economy owing to the effect of past tight monetary policies. The performance of imports is summarised in Table 11.

Table 10: Export of Goods (in million of USD)

page53image8200

FY2011/12

FY2012/13

Q3 Q4

Q1 Q2 Q3

page53image15184

Total Exports

page53image16384 page53image16832

681.14

page53image18000 page53image18160

711.71

page53image19336 page53image19768

719.35

page53image20776 page53image20936

698.28

page53image21944 page53image22104

762.35

page53image23280

1. Coffee (Value)

100.05 94.25

95.57 82.63 122.95

Volume (‘000 60-Kg bags)

0.66 0.67

0.72 0.64 1.00

Av. unit value

2.53 2.35

2.22 2.14 2.05

2. Non-Coffee formal exports

487.68 513.97

510.82 471.78 500.00

Electricity

3.80 4.69

3.68 3.44 4.17

Gold

2.73 3.24

1.62 0.23 1.74

Cotton

37.03 31.11

4.38 3.48 14.83

Tea

14.64 18.47

19.39 21.41 18.52

Tobacco

18.92 13.73

15.31 13.63 21.76

Fish & its prod. (excl. regional)

36.75 32.96

25.79 25.80 25.39

Hides & skins

9.98 12.82

10.35 8.26 2.67

Simsim

5.28 4.05

0.56 1.67 11.85

Maize

14.96 14.70

15.89 13.62 14.39

Beans

1.57 1.69

4.37 5.05 3.48

Flowers

13.99 15.41

13.52 9.76 14.18

Oil re-exports

35.21 33.67

36.65 34.45 31.96

Cobalt

2.63 2.11

4.74 4.75 3.69

Others

290.18 325.33

354.59 326.23 331.37

Source: Bank of Uganda
Table 11: Imports of Merchandise (fob, in millions of USD)

page53image84752

FY2011/12

FY2012/13

Q3 Q4

Q1 Q2 Q3

page53image91064

Total Imports

page53image92440

1,350.4

page53image93864

1,347.4

page53image95040

1,281.6 1,207.3

page53image97008

1,145.4

page53image98184

Government Imports

148.4 105.6

71.7 96.2 80.7

Project

85.6 91.0

60.9 76.8 67.3

Non-Project

62.9 14.6

10.8 19.4 13.3

Formal Private Sector Imports

1,186.3 1,229.0

1,199.0 1,097.8 1,050.5

Oil imports

273.4 255.7

256.7 254.3 271.3

Non-oil imports

912.9 973.2

942.2 843.5 779.2

Estimated Private Sector Imports

15.7 12.9

10.9 13.4 14.3

Total Private Sector Imports

1,202.0 1,241.9

1,209.9 1,111.2 1,064.7

Source: Bank of Uganda

44

Services Account

The services account deficit declined from USD 559 million to USD 393 during the year ending March 2013. This improvement was largely driven by increased inflows from tourism related activities and other business services coupled with reduced payments for transportation and construction services. Travel inflows amounted to USD 1,114 million compared to USD 996.3 million recorded in the previous year. Inflows from other business services also increased from USD 135.21 million to USD 229.68 million during the same period of time. Payments for transportation and construction services abroad declined by 2.4 percent and 14.3 percent to USD 1,202.3 and USD 169.1 million, respectively during the same period.

Income Account

The deficit on the income account expanded to USD 562 million from USD 435 million recorded over the previous twelve months, mainly due to increase in compensation of non-resident employees and payment of dividends to non- resident direct investors. Interest payment on public debt and to portfolio investors also rose to USD 51 million and USD 40 million, respectively.

Current Transfers

Net current transfers are estimated at a surplus of US$1,140 million over the year ended March 2013, a decrease of 33 percent over the US$1,701 million realised in the previous period. This decline is largely explained by reduced disbursements to government driven by adjustment from the oil capital gains tax amounting to US$499 million received in the year ended March 2012, and a decline in project aid and budget support inflows. Budget support grants declined from US$ 142.6 million for the year ending March 2012, to US$ 74.5 million estimated for the year ending March 2013. Similarly, project support grants also declined from US$ 177.5 million to US$ 100 million in the same period. Moreover, remittances to NGOs declined by 5.8 percent to US$ 1,785 million in the same period, in part due the tight economic conditions in advanced economies. Workers’ remittances at US$ 768 million were also slightly lower in the 12 months to March 2013, compared to US$ 816 million a year before. This reflects the continued economic hardships still facing the sources of remittance income.

ii. Capital and Financial Account

The capital and financial account recorded a surplus of US$2,529 million in the year ended March 2013 compared to the surplus of US$1,834 million recorded in the previous year, representing an increase of US$ 695 million in one year. This surplus was mainly driven by foreign direct investment and other investment inflows, which increased to US$ 1.76 billion and US$723.4 million, respectively; from US$ 1.1 billion and US$417 million, respectively, in the previous 12 months to March 2012. Foreign direct investment was largely driven by increased investments in the oil and telecommunications sectors. Official capital inflows (disbursements) to government increased to

45

US$ 499 million in the 12 months to March 2013 compared to US$ 364 million a year before. This strong performance was on account of increased donor disbursements in the form of project support which increased by US$ 175 million to total US$ 494 million compared to US$ 319 million in the 12 months to March 2012. This performance is consistent with the donors’ dramatic withdraw from general budget support in favour of project support over concerns of public finance governance. As a consequence, budget support loan disbursements shrank to a merge US$ 5.1 million in the 12 months to March 2013, from an equally low figure of US$ 45m in the same period a year before. The was a surge in external capital inflows in the form of loans to non-Governmental sectors, including the private sector which increased to US$ 221 million in the 12 months to March 2013 compared to US$ 139 million in the same period a year before.

2.2. Macroeconomic Outlook

The macroeconomic objectives of Government in FY2013/14 and over the medium term are to:

i. Ensure low inflation close to the policy target of 5 percent per annum, ii. Achieve and maintain rates of economic growth of at-least 7% per

annum,
iii. Maintain an adequate level of foreign exchange reserves equivalent to

at least 4 months of imports of goods and services; and
iv. Maintain a stable exchange rate that is supportive of export growth.

As the global economy starts to recover from one of the worst crises in recent economic history, Uganda’s growth rate is also expected to pick up momentum and return gradually to its medium term growth path of 7 percent. Foreign direct investment has remained very resilient to global developments elsewhere, and the advent of oil will continue to attract investment flows into the country. Domestic investment also appears to be increasing and there are promising signs that agriculture is receiving renewed attention by investors. However there are also downside risks to this outlook. A slower than expected recovery in the Euro area, for example, would negatively affect Uganda’s exports. Moreover, continued public investment in key infrastructure projects is essential to unbind Uganda’s growth potential. In this context it will be particularly important to ensure that reductions in official aid do not derail these investment efforts.

2.2.1. The Macroeconomic Forecast for FY2013/14 to FY2017/18

The economy is expected to accelerate its recovery to an estimated growth rate of 6.0 percent per annum in FY 13/14, and thereafter expected to achieve an average growth rate of 7% p.a over the medium term. This growth recovery is premised on maintaining macroeconomic stability, addressing PFM issues to improve resource mobilization and utilization, investment in priority sectors including the commencement of major projects such as the Karuma Hydropower dam, and restoration of donor assistance flows.

46

Inflation has fallen below the medium term target of 5% in May 2013 and is projected to average about 6% p.a in FY2013/14 and around 5% over the medium term. The exchange rate, which is a key determinant of economic competitiveness and has a major effect on the resource envelope, is expected to remain stable owing to the improvement in the trade balance. For FY 2013/14, the exchange is expected to remain in the range of Ushs 2600-2700 to the US Dollar. This figure is only good for planning the budget; otherwise predicting the exchange rate often comes with significant inaccuracy because of the many external factors beyond the control of Government.

This set of projections underpins fiscal projections for FY2013/14 which are described in chapter three.

Table 12: Macroeconomic Projections to FY2017/18

page56image9768 page56image11664

Outturn

page56image13648

Estimate

page56image15928

Projection

page56image17912

Projection

page56image19848

Projection

page56image22192

Projection

page56image24520

Projection

page56image26520 page56image26680 page56image26840

2011/12

page56image28080 page56image28240

2012/13

page56image29144 page56image29304

2013/14

page56image30808 page56image30968

2014/15

page56image31864

2015/16

page56image32944 page56image33104 page56image33264

2016/17

page56image34512 page56image34672 page56image34832

2017/18

page56image35912 page56image36072 page56image36232

Real GDP growth

3.4%

5.1%

6.0%

6.9%

7.0%

7.0%

7.0%

Nominal GDP (Shs. bn, market prices)

49,849

54,688

63,122

70,425

78,706

88,301

98,887

Nominal GDP (US$ mn, market prices)

19,494

21,072

23,504

25,460

27,624

30,089

32,715

Headline Inflation (period average)

23.5%

6.0%

6.2%

5.0%

5.1%

5.1%

4.9%

Core Inflation (period average)

24.9%

6.8%

6.3%

5.1%

4.9%

5.0%

5.0%

Current account balance (as % of GDP)

11.1%

9.3%

10.9%

13.2%

13.7%

14.2%

13.8%

Exports of Goods & Services ($m, current prices)

4,541

4,914

5,043

5,483

6,024

6,688

7,420

Imports of Goods & Services ($m, current prices)

7,607

7,494

8,458

9,407

10,255

11,309

12,633

Growth in exports ($m, current prices)

20.4%

8.2%

2.6%

8.7%

9.9%

11.0%

11.0%

Growth in imports ($m, current prices)

11.4%

-1.5%

12.9%

11.2%

9.0%

10.3%

11.7%

Change in fuel import volumes

28.6%

6.7%

5.7%

8.2%

8.4%

8.9%

8.3%

Change in non-fuel import $ values

11.0%

0.2%

17.7%

7.2%

14.4%

14.7%

13.9%

Reserves in imports valued in months

4.2

4.2

4.1

4.1

4.1

4.0

4.0

i. Short- and Medium-Term real GDP Growth Prospects

GDP growth is projected to rise to 6 percent during 2013/14 and further to an average of 7 percent per annum over the medium term, as implementation of key infrastructure projects intensifies. In particular a number of hydro electricity projects have been planned (Karuma and Isimba being the biggest with capacities of 600MW and 200MW respectively). The improvement in electricity generation will particularly benefit the manufacturing sector as well as support other activities in the service sector. The total electricity supply at peak time stands at about 487 MW outstripping peak hour demand implying that the current generation capacity has improved. However, due to maintenance efforts in the electricity grid some interruptions continue to constrain the supply of electricity, these interruptions in the supply of electricity due to grid maintenance are expected to decline as the overall power generation capacity in the country increases.

ii. Sectoral Prospects

In FY2012/13 growth was mainly driven by construction, transport and communication, manufacturing and real estate activities. These sectors will continue to feature strongly in Uganda’s growth performance.

47

In the manufacturing sector, for instance, domestic steel production is expected to improve further as the government has banned iron ore exports. Moreover, steel manufacturing will benefit from increased demand following the planned construction of several railway lines using local raw materials. Some local steel rolling mills have been operating below capacity due to shortage of raw materials despite the high demand from the booming construction sector. Iron ore exports have been destined for China over the last few years.

Construction sector growth is expected to increase even faster in FY2013/14 than in FY2012/13, driven by private sector construction. Information obtained from the largest producers of roofing materials indicates that growth in the sector will be in the range of 7-10 percent in 2013/14 and this will be sustained over the medium term.

The key challenges to the growth in the roofing materials will be the fluctuations in the exchange rate, high power tariffs and fluctuations and high fuel costs. Planned government construction projects will further impact on growth positively.

The beverages sector growth is expected to improve on account of expansions in the capacity of the Coca Cola franchise in response to increasing demand both domestically and regionally. The alcohol subsector is equally buoyant with expansions already taking place at the existing Nile breweries facility Jinja and investment of about US$80m in the new facility at Mbarara.

Growth in agriculture is expected to improve as a number of cash crops recover from their weak performance in FY2012/13. Cash crops growth is therefore expected to exceed 6 percent up from the 3.9 percent in 2012/13, following higher international prices for cash crops which will likely encourage farmers to engage in production of the crop for next year. In particular, coffee output is likely to improve the medium term with an expected procurement of coffee bags of more than 3.4million in 2013/14 on account of expected improvement in world coffee prices, improved crop husbandry and control in coffee wilt diseases.

Service sector growth is expected to post growth in excess of 6 percent with driving forces being wholesale and retail trade as the rest of the sectors expected to post relatively similar growth to the current year. Growth in the trade sector is expected to result from better manufacturing, monetary agriculture growth and a better non-oil imports outlook.

Telecommunications sector will continue to benefit from the competition among the leading telecom companies, particularly between MTN and Airtel, which has recently acquired Warid Telecom. The Airtel takeover of Warid is likely to increase its subscriber base to levels near those of MTN, leading to a potential war on market leadership.

48

iii. Inflation Prospects

Given the relatively stable inflation, BoU remains committed to stimulating aggregate demand in order to boost real economic activity. Nonetheless, this will be done without jeopardizing the medium term inflation objective.

Going forward, inflation is expected to remain stable as the base effects that were responsible for a faster disinflation have waned. Core inflation is therefore expected to stabilise around Bank of Uganda’s medium term target of 5.0 percent on account of stable food production and global commodity prices, subdued domestic and global demand and relative exchange rate stability. The risks around the outlook for inflation reflect the usual mix of factors pertaining to aggregate demand, commodity prices, global economic factors and the exchange rate. The decline in inflation over the last few months has mainly been driven by a decline in food crops inflation which is largely determined by domestic and regional weather conditions. Therefore any change in these conditions could lead to rapid upward pressures on inflation in general and food crops inflation in particular. In addition, as growth recovers, a subsequent rise in food product demand may also pose an upward risk to inflation, especially if demand outstrips supply. The outlook for global commodity prices is dependent on global economic recovery, and stronger recovery in the global economy could fuel increase in commodity prices and trigger high import costs and hence domestic inflation. However the lagged effects of recent subdued growth in private sector credit (see below), elevated lending rates, and the negative output gap which is likely to persist over the next two years, will act to moderate inflationary pressures in the near term. Annual average headline and core inflation are therefore projected at 6 percent and 8 percent respectively in FY2013/14. Overall annual inflation for FY2013/14 is expected to remain broadly at this Financial Year’s levels of about 6 percent.

iv. Balance of Payments Prospects

The current account of the balance of payments is expected to weaken further, on account of increased imports, slow growth in exports and reduced remittances. In addition, net donor inflows are expected to decline. The gap on the current account will be partially offset by increased flows on the capital and financial account.

2.2.2. The Investment Outlook

The Government has continued to promote the private sector as the engine of economic growth. Attracting increased foreign and domestic investment is therefore a key priority in the Government’s strategy to accelerate employment creation and socio-economic transformation of the country as envisaged in the Vision 2040.

In FY2012/13 the Government conducted an Investor Survey to monitor the effect of different government policies and interventions aimed at improving the business environment (Box 1). The study showed that macroeconomic stability continues to be a key concern of businesses. High inflation and

49

exchange rate volatility have a strong negative impact on business operations in almost two thirds of interviewed enterprises. In addition, many enterprises are operating below installed capacity. Further efforts to accelerate infrastructure development as well as skills provision of Uganda’s workforce are therefore warranted to attract increased investment and unleash Uganda’s growth potential.

Box 1: The Investor Survey 2012

The survey targeted all domestic and foreign projects licensed by Uganda Investment Authority (UIA) from 1991 to 2010 whose status was not established by previous surveys. The survey’s overall objective was to establish the value of investment and employment generated by the projects surveyed. The Survey report highlighted the following:

  1. Of the projects surveyed, 53.5% were owned by foreign investors, 42.2% by local investors while 4.3% were jointly owned by local and foreign investors. Over the survey period, foreign-owned projects attracted actual investment of US$ 1,493.1 million, domestic-owned projects US$ 1,283.7 million and joint venture projects US$ 66.6 million.

  2. Analysis of employment creation revealed that despite higher pecuniary investment in foreign-owned projects, domestic-owned projects employed more people, suggesting that the former used more capital intensive technologies than the latter. Domestic investors employed 38,491 people at an average of 103 employees per project compared to 33,373 at an average of 70 employees and 1,917 people at an average of 50 employees for foreign-owned projects and joint ventures, respectively.

  3. The choice of Uganda as an investment destination was influenced by a number of factors including macroeconomic and political stability (73.8% of respondents), domestic and regional markets (65.1%) and affordable labour (55.9%).

  4. The majority of projects surveyed were located in the Central region (77.9%), while 13.6% were located in the Eastern region, 6.0% in the West and 2.5% in the North. In terms of sectoral distribution, the manufacturing sector had the highest number of projects, followed by wholesale and retail trade, and accommodation and food service.

  5. 90% of the entities surveyed perceived the court system to be fair and impartial, and 77.5% felt that the court system was well facilitated by government.

  6. Business entities were also interviewed on factors limiting the success of their businesses. Prominent among these were: tax regulations and administration (70.6%), high cost of credit (83.3%), limited access to credit (77.0%) and poor infrastructure (78.9%), particularly energy and transport.

i. Foreign Investment in Uganda

In tandem with increasing investment flows to Sub-Saharan Africa as a whole, foreign investment in Uganda has grown substantially in recent years. Foreign direct investment (FDI) was almost 2.5 times higher in quarter 3 of FY2012/13 than in the same quarter three years earlier. In FY2012/13 FDI fell strongly in the first few months has risen more recently to almost USD 500 million in quarter 3 of FY2012/13. On the other hand, portfolio investment inflows have been more volatile due to their short-term nature. The recent decline observed in figure 23 starting in quarter 3 2011/12 coincided with the decline in interest rates, as BoU started to gradually adjust the CBR downwards. This led to smaller returns on Government securities, which had attracted large inflows when interest rates were high in response to the inflation surge of 2011.

50

million USD (current prices)

The strong increases in FDI reflect international investors’ confidence in Uganda’s long term growth prospects. Moreover, the continued foreign investment inflows in the oil sector will continue to underscore the country’s economic development prospects. However, figure 23 above also shows that foreign investment can be very volatile with large swings from one quarter to the next. For instance,

between quarter 4 2011/12 and quarter 1 FY2012/13, FDI fell by more than 50 percent. In these circumstances it will be essential to build up necessary buffer stocks to prevent excessive volatility from undermining growth and further economic development. BoU will therefore continue to build up its stock foreign exchange reserves.

ii. Domestic Investment

Continued domestic public and private investment will be essential to unleashing Uganda’s growth potential. The Investor Survey Report 2012 revealed that 68 percent of enterprises operate below installed production capacity. While 74 percent of businesses report being constrained by insufficient demand and underdeveloped markets, insufficient energy and transport infrastructure continues to be the single most cited barrier to business expansion at the local level. Government will thus continue focusing on expanding Uganda’s infrastructure stock, in order to transform the economy, address key binding constraints to production and attain middle income status in the near future as stipulated in the National Development Plan and the Vision 2040.

Better infrastructure will crowd-in further economic activity form the private sector. Increased private investment will be fundamental in providing more and better jobs to Uganda’s rapidly growing population. The Investor Survey Report 2012 also showed that domestic private investment is particularly labour intensive as opposed to foreign investment which appears to rely more on capital intensive technologies. The dividends of increased local private investments could therefore be large with positive spillover effects for the economy as a whole.

However, more private investment will also require a larger share of credit channelled to production in the economy. Since the end of FY2006/07 credit to the private sector has expanded by more than 130 percent in constant terms, but this spectacular increase has not translated into similarly high growth. This weak link between private-sector-credit and growth implies that

Figure 23: Foreign Investment in Uganda

700 600 500 400 300 200 100

0 -100 -200

2009/10

2010/11

FDI Inflows

2011/12 2012/13

Portfolio Investment

page60image25816 page60image27888 page60image28048 page60image28208 page60image28368 page60image28528 page60image28688 page60image28848 page60image29008 page60image29168

page60image29896 page60image30320 page60image30744

Q1 Q2 Q3 Q4

page60image32312 page60image32736 page60image33160

Q1 Q2 Q3 Q4

page60image34720 page60image35144 page60image35568

Q1 Q2 Q3 Q4

page60image37128 page60image37552 page60image37976

Q1 Q2 Q3 Q4

page60image40512 page60image40672 page60image40832

Source: Bank of Uganda

51

credit is predominately channelled to consumption rather than production. Currently, only 21.4 percent of all private sector credit is channelled to productive sectors like agriculture and manufacturing. More than a third of all private-sector-credit is used to finance real estate, construction, and household loans (figure 24). Furthermore, the Investor Survey Report 2012 shows that more than 70 percent of firms finance their investments through retained earnings. This implies that access to credit continues to be a challenge to domestic investors in Uganda. More recently, however, there has been an increased focus on agricultural financing. Through the Agricultural Credit Facility the Government is incentivising greater credit intermediation in agriculture.17 While credit to agriculture and manufacturing have grown in line with increases in total private-sector-credit in most years, agricultural credit has grown more quickly in FY2012/13 (figure 25). This would suggest that efforts to extend more credit to agriculture are already having an impact.

Figure 24: Outstanding private sector credit by sector, Figure 25: Private sector credit over time in end of March 2013. manufacturing and agriculture sectors

page61image10160

Mining & Quarrying 0.4%

Building, Mortgage, Construction & Real Estate 23.7%

Trade 21.5%

Electricity & Water 1.6%

Community, Social & Other Services 3.1%

Manufacturing 14.0%

Business Services 4.4%

Other Services 5.0%

Transport & Communication 5.5%

Agriculture 7.3%

Personal & Household Loans 13.4%

260 240 220 200 180 160 140 120 100

page61image22384 page61image24152 page61image24312 page61image24904 page61image25064 page61image25224 page61image25384 page61image25544 page61image25704 page61image25864 page61image26024

Agriculture

Manufacturing

Total PSC

page61image28816 page61image28976 page61image29136

Source: Bank of Uganda Source: Bank of Uganda

2.2.3. Key macroeconomic risks

The preceding economic outlook is subject to external risks which could potentially lead to substantial deviations between projected and actual growth. In the case of Uganda, downside risks stem mainly from international as well as domestic factors. Government will monitor risks closely to ensure that it can react in time through appropriate policy measures that will mitigate the effect of any downside scenario.

17 The Agricultural Credit Facility provides medium and long-term financing in partnership with a number of private banks. The facility is jointly capitalised by Government and the participating financial institutions.

page61image35472

52

2006/07

2007/08

2008/09

2009/10

2010/11

2011/12

2011/13

Index (constant prices, 2006/07=100)

i. Domestic Risks

Aid cuts

The FY2012/13 saw a significant drop in the availability of donor resources, particularly in form of budget support. Several donor countries appear to be moving away from budget support, as aid budgets fall under greater scrutiny in donors’ home constituencies. However, it is yet to be seen whether the current cuts to aid are temporary or permanent and a reflection of a long term trend. In-house analysis conducted by Ministry of Finance Planning Economic Development, suggests that the effects of growth of budget support cuts in FY2012/13 were not large, amounting to a reduction of around 0.1-0.4 percentage points of GDP. This appears to be in line with actual growth figures which have seen a 0.3 percentage points smaller growth in FY2012/13 than projected one year ago.18 More permanent reduction in aid inflows, however, may have more severe implication for the macroeconomic outlook with a potential reduction of GDP growth amounting to 0.5-0.6 percentage points. In order to protect spending on basic services, Government will therefore continue efforts to mobilize more domestic resources to mitigate the risks from continued shortfalls in aid inflows in the medium term.

Drought and spike in food prices

The inflation surge observed in 2011 was to a large extent driven by spikes in food prices, which were the consequence of drought and insufficient rain across many parts of the country. While world commodity prices are expected to moderate during the next financial year, lower than projected rainfall could again lead to price spikes, which could undermine growth during the next financial year. In addition, a recent study by Government on the impact on food prices revealed that prices for identical commodities do not always move together across the country. This suggests inadequate integration of agricultural markets across the country can go a long way in preventing sudden price hikes due to bad weather conditions. Government will therefore continue to monitor prices of food commodities in domestic markets and promote further market integration along agricultural value chains.

Investment delays in critical infrastructure projects

Long delays in the implementation of critical public investment projects, particularly in energy and transport, will have negative implications for GDP growth in the medium term, as they impede optimal private sector development. The macro assumptions pre-suppose that the critical investments projects will be implemented according to plan. To reduce the risks of unnecessary delays, Government will continue to work towards improving project cycle management capacity and better planning of large investment projects.

18 Last year’s BTTB projected a growth rate of 5.4 percent in 2012/13. The actual estimate for GDP growth is 5.1 percent.

page62image23320

53

ii. International Risks

Longer than expected downturn of the global economy

As reflected in chapter one, global growth is expected to accelerate gradually. Should the current slowdown in advanced economies be more protracted, particularly in the Euro area, this could have negative implications for Uganda’s macroeconomic outlook. Uganda’s main trading partner continues to be the European Union (EU). With lower than expected growth in the EU this would most likely affect Uganda’s export industry. In addition, while FDI in Uganda has been resilient to the slowdown in advanced economies, a deeper fallback into recession in advanced economies may lead to FDI outflows, with negative implications for the balance of payments.

A surge in inflation in advanced economies

Interest rates in advanced economies have been exceptionally low in response to low inflation and very low growth. In addition, many central banks have been stimulating the economy through unconventional monetary policies, termed monetary easing. As advanced economies recover, central banks will have to reabsorb large amounts of liquidity. In addition, if estimated potential output turns out to be lower, the combined effect may lead to quickly accelerating inflation in advanced economies forcing central banks to aggressively raise interest rates. For Uganda, this is of particular concern, as more than 40 percent of credit to the private sector is denominated in foreign currency.

54

Chapter 3: Public Finance
3.1. Fiscal Objectives and Fiscal Strategy

3.1.1. Government’s Fiscal Objectives

The Government fiscal objectives are to:

  1. Accelerate private-sector led economic growth;

  2. maintain macroeconomic stability, including low inflation close to the

    medium term target of 5 percent per annum, and a stable exchange rate

  3. Improve domestic revenue mobilisation and optimize a mix of financing sources including PPPs, equity financing, less concessional external loans and other debt market financing instruments such as bonds, to

    implement critical priority infrastructure investments;

  4. Improve expenditure efficiency through public finance management

    reforms to ensure effectiveness of scarce resources;

  5. Support increased production and productivity as well as skills training

    to create jobs; and

  6. Maintain medium and long term debt sustainability.

To accelerate economic growth, increase per capita income to middle income country status, and therefore reduce poverty faster, priority will be given to improving domestic revenue mobilization, expenditure efficiency and diversifying sources of financing, including exploring new financing options now available on the international capital and credit markets. To effectively utilise these resources, addressing implementation capacity constraints will be an integral part of the fiscal strategy.

The Uganda economy remains competitive mainly because of its open economic policies and sustainable debt levels. In scaling up its public investment, the Government will be cautious in its borrowing policies and practices to maintain sustainable debt levels consistent with sustainable economic growth. However, due to the constraints in raising domestic revenue in the short term, increased public spending will be financed through borrowing, resulting in a slight increase in national public debt. For public debt to be sustainable over the medium to long term, borrowed funds must be invested in areas that increase production, productivity and mainly export oriented.

3.1.2. Fiscal Strategy for FY2012/13

The fiscal strategy for the FY 2012/13 was initially aimed at providing fiscal stimulus to support economic recovery following dismal performance in the previous year when the economy grew by 3.4percent, while at the same time continuing to support the objective of reducing inflation to single digit. This strategy entailed unlocking donor disbursements to speed up implementation by allocating adequate resources for counterpart funding of donor supported

55

programs and projects, prioritizing infrastructure investments such as Karuma, increasing external borrowing as a means to supplement domestic revenue mobilization and creating room for expenditure through expenditure efficiency measures. These fiscal policy actions were necessary to compensate for the very low private sector demand in the economy resulting from the tight monetary policies aimed at curbing inflation.

However, as a result of the suspension of budget support by Development Partners, Government substantially revised its fiscal strategy in 2012/13. This fiscal strategy entailed cutting the budget allocations to non-priority sectors, improving further public expenditure efficiency, an increase in domestic borrowing, and improvements in cash management by optimizing all resources available to government. This was necessary in order to mitigate the full impact of the donor suspension on the economy, by continuing to fund critical infrastructure investments and supporting agricultural production and productivity.

Budget execution in the FY2012/13 faced three major challenges. On the resource side, two major shocks were encountered. Firstly, external grants are expected to be Shs. 280.7 billion lower than had been programmed in the Budget for FY2012/13, due to the suspension of disbursements by Development Partners. Secondly, shortfalls in tax revenue collections are expected, mainly as a result of a reduction in import volumes of fuel and non- tariff barriers imposed by the Kenyan Port Authorities. The total shortfall in revenues (domestic and external) for FY2012/13 compared to the approved Budget is therefore expected to amount to Shs. 379.2 billion. The third major challenge occurred on the expenditure side, as procurement delays continued to undermine critical supply side policy interventions. In particular, the implementation of the 600MW Karuma power project has been delayed for the second year in a row. This delay acts to reduce domestic development expenditures in FY2012/13 by Shs. 1,150 billion compared to Budget plans.

3.1.3. Improvements in Public Financial Management

There has been tremendous progress in the improvements of public financial management systems in Uganda in recent years. All Central Government Votes are now covered by an Integrated Financial Management System, which has increased transparency, improved accountability and permits better traceability of transactions at all levels of Government. In addition, an Integrated Personnel and Payroll System is in place, which handles payments of salaries. However, there have also been a number of setbacks in the Government’s efforts to improve on public financial management. Corruption cases that broke out during FY2012/13 have underscored the importance for further strengthening of existing systems, which will increase controls on the use of public funds and protect priority allocations in the budget.

i. Public Finance Bill 2012

Government has presented to Parliament a new Public Finance Bill, which will consolidate the existing 2003 Public Finance and Accountability Act

56

(PFAA) and the Budget Act 2001. Most importantly this new Bill will shift the budget cycle forward to ensure that the budget is passed before the start of the financial year, provide for a contingency fund to help manage in-year expenditure pressures, and establish a legal framework for the management of oil revenues. More recently, the Government has presented a series of amendments to the Public Finance Bill 2012. These include among others the establishment of Treasury Single Account, a requirement that annual Treasury securities issuance must be specified in the annual budget and cannot exceed that amount without Parliamentary approval, and a requirement that proceeds from Treasury securities issuance for monetary policy purposes are held in a special fund.

ii. Improvements to Project Cycle Management

Better Public Financial Management also warrants improvements in the implementation capacity of large infrastructure projects. Some large infrastructure undertakings by Government have seen several delays, which are pernicious to Uganda’s medium term growth outlook. The Government is therefore working to streamline and improve project identification, selection and execution. More specifically, this will ensure that only those projects for which cost-benefit analysis and feasibility studies have been conducted, are included in the Public Investment Plan (PIP). Government will therefore ensure that necessary project appraisal capacities are adequately developed in respective sectors.

iii. Management of Oil Revenues

The Public Finance Bill 2012 foresees the establishment of a Petroleum Fund into which all oil revenues will be deposited. The utilization of these funds will be guided by the Oil and Gas Revenue management policy, with annual appropriation from the Petroleum Fund to the budget and with a set number of fiscal rules which are to be detailed in the Charter of Fiscal Responsibility provided for in the Public Finance Bill 2012.

iv. Cross-Cutting Reform Efforts

The National Identity Card Project has suffered from a series of unfortunate delays. The successful completion of this project will greatly contribute to financial sector development. The Government therefore plans speed up the issuance of identity cards in FY2013/14, with a target of at least 1 million additional cards issued by end of the financial year.

3.1.4. Debt Sustainability Analysis (DSA)

The most recent Debt Sustainability and Risk Analysis, carried out in October 2012 assessed how Uganda’s current level of debt and prospective new borrowing would affect its ability to service its debt in the future. Public and publicly-guaranteed (PPG) external debt was assessed to be sustainable over the projection period with all five debt-burden indicators (three solvency indicators and two liquidity indicators) staying well below their sustainability thresholds throughout the period, as illustrated in Table 13 below.

57

Table 13: External Debt Sustainability Analysis – 2012 DSA

Solvency Ratios

page67image3464 page67image3784

Threshold

page67image6024 page67image6344 page67image6824 page67image7144

page67image10344 page67image10504 page67image10664 page67image10824 page67image10984 page67image11144

2011 2012 2013 2014 2015 2016 2017

page67image12472 page67image12792 page67image12952 page67image13272 page67image13432 page67image13752 page67image13912 page67image14232 page67image14392 page67image14712 page67image14872 page67image15192 page67image15352 page67image15672

Nominal Debt to GDP

page67image17616

50

page67image18784

10.7

11.8

12.6

13.2

13.5

13.7

13.7

PV of Debt to GDP

page67image26720

150

page67image27888

51.7

53.5

55.9

58.9

61.4

59.8

58.6

PV of Debt to Revenue

Liquidity Ratios

page67image34688 page67image35008

300

page67image36480 page67image36800 page67image37280 page67image37600

85.6 85.2 87.1 88.7 79.1 77.3 76.5

page67image40912 page67image41232 page67image41392 page67image41712 page67image41872 page67image42192 page67image42352 page67image42672 page67image42832 page67image43152 page67image43312 page67image43632 page67image43792 page67image44112

Debt Service (Excl. Redemp) to Revenue

page67image46240

25

page67image47408

1.4

1.6

1.8

2.2

2

2.1

2.3

Debt Service (Incl. Redemp) to Revenue

page67image55752

35

page67image56920

2.4

2.6

2.8

3.3

2.6

2.8

3.0

page67image62176 page67image71216

Source: Ministry of Finance, Planning and Economic Development

The 2012 DSA and risk analysis baseline scenario also showed that total public debt (i.e. the aggregate of both external and domestic debt) is sustainable and under no risk of debt distress over the projection period. As illustrated in Table 14 below, over the projection period the solvency thresholds of present value of total public debt-to-GDP19 and PV of total public debt-to-revenue increase at first, mainly driven by infrastructure-related external borrowing, but then gradually decline over the long run, due to lower accumulation of both external and domestic debt, as government begins to use domestic oil revenues to finance investments.

Table 14: Summary of Public Debt Sustainability Analysis – 2012 DSA

 

2010

page67image90608

2011

page67image92848

2012

page67image94112 page67image95016

2013

page67image95944 page67image96584

2014

page67image98184 page67image98824

2015

page67image99752 page67image100392

2016

page67image102296

2017

page67image103552

2018

page67image105296

page67image106544

Solvency Ratios

page67image108088   page67image108816 page67image109136   page67image109848  

Nominal Debt to GDP

23.8

28.9

28

29.1

29.9

32.3

33.4

34.6

33.7

PV of Debt to GDP

   

22.2

22.7

23.1

25.3

26.4

27.5

26.8

PV of Debt to Revenue

page67image127728 page67image129008

178.3

page67image129936 page67image130840

164.6

page67image131600 page67image132240

159.6

page67image133336 page67image133976

169.6

page67image134736 page67image135376

155.2

page67image136776

155.6

page67image137704 page67image138344

149.3

page67image139280 page67image140080

page67image140688

Liquidity Ratios

page67image141896   page67image142624 page67image142944   page67image143656    

Debt Service (Excl. Redemp) to Revenue

10.1

8.4

9.3

12.2

9.1

9.2

8.6

9.2

9.9

Debt Service (Incl. Redemp) to Revenue

64.7

58.7

50.4

62.2

51

45

42.1

41.5

41.4

Source: Ministry of Finance, Planning and Economic Development

In summary, the 2012 Debt Sustainability and Risk Analysis showed that Uganda’s debt is sustainable. This reflects debt relief received under the HIPC and MDRI, compliance with the 2007 Debt Strategy, and prudent macroeconomic management. It also shows that cautious borrowing and reliance on primarily concessional financing is still critical to ensuring a sustainable debt path. However, given the soundness of Uganda’s debt levels, the DSA results also imply that there is room for gradual increase in non- concessional financing options to meet its significant infrastructure

19 The PV of public to debt-to-GDP ratio is a key indicator in assessing a country’s debt sustainability. It measures the country’s discounted debt stock in relation to its gross domestic product (GDP). It thus serves as an estimate of country’s ability to repay its debt in the future, by comparing what a country owes to what it produces.

page67image171448

58

development financing needs that may not be fully met by concessional external borrowing. Alternative financing options could include domestic debt issuance, public private partnerships (PPPs) and eurobond issuances to finance infrastructure development. However, it is vital that the costs and risks associated with such options are fully understood before these new avenues of financing are pursued further.

3.1.5. The Debt Strategy 2013 and a new Debt Management Framework

Government is finalising a new Public Debt Strategy 2013 (DS2013), which will replace Debt Strategy 2007. DS2013 will set out the objectives, principles, guidelines and quantitative benchmarks that will guide debt policy over the five-year period from FY2013/14 to FY2017/18. The focus of DS2013 will remain on ensuring that Uganda maintains a high degree of debt sustainability.

Government is introducing the annual publication of its 5-year Medium-Term Debt Management Strategy (MTDS). The MTDS will set out the plan government intends to implement over the medium term to achieve its desired composition of the public debt portfolio, consistent with the cost-risk and other provisions set out in DS2013, and based on the latest economic, fiscal and financial market projections. The MTDS for FY2013/14-2017/18 will be published alongside DS2013.

Government has adopted a new policy framework for domestic debt issuance, encompassing aspects of fiscal policy, monetary policy, cash management and debt management. Whereas prior to FY2012/13 government securities (Treasury Bills and Treasury Bonds) were used only as a monetary policy tool, as of FY2012/13 net securities issuance is now conducted primarily for fiscal policy purposes. As part of this, Government is committed to fully-funding its domestic borrowing requirement through securities issuance. The focus of monetary policy is now on the CBR and repo operations. If any primary issuance is deemed necessary for monetary policy purposes, this will be clearly separated from, and closely coordinated with, issuance of securities for fiscal policy, while also clearly announced to the market.

In addition, a number of measures will be introduced to improve domestic debt management. As part of this, Government will extend the average time to maturity of its domestic debt portfolio, including by issuing longer-term Bonds to extend the yield curve and assist in financing government investment. Government will also publish a debt issuance calendar, to further support market development.

59

3.2. Performance of the Resource Envelope and Fiscal Outturns FY2012/13

3.2.1. Performance of the Resource Envelope in FY2012/13

The Government’s resource envelope is comprised, on the one hand, of domestically mobilized
resources through tax and non-
tax measures and, on the other

hand, of external resources
provided in form of ODA grants
to the Government of Uganda.20
However, recent years have
seen both an absolute and
relative decline in the ODA
received by government in form
of grants. This decline has been
particularly fast in FY2012/13
due to the suspension of budget
support payments by
development partners in November 2012. As illustrated in figure 26, the share of ODA grants as percentage of the overall resource envelope has fallen from 40 percent in FY2004/05 to 12 percent in FY2012/13. This underscores the importance of strengthening domestic resource mobilisation efforts, as stipulated in the NDP, which targets an annual increase in 0.5 percentage points of the tax-to-GDP ratio.

i. Domestic Revenue Performance FY2012/13

Domestic revenues from tax and
non-tax sources are estimated at
13.5 percent of GDP, 0.2 percentage
points more than what was recorded
in which is above the 13.3 percent
(including oil revenues) recorded in
FY2011/12 and significantly above
the 12.5 percent recorded in
FY2011/12 when the oil revenues in
that year are excluded. However,
this was slightly lower than the 13.7
percent of GDP projected at the time
of the Budget in June 2012. Tax
revenue excluding oil receipts
increased to 13.1 percent of GDP in FY 2012/13 compared to 12.3 percent of GDP in the previous year. Revenue collections by Uganda Revenue Authority, which is also an indicator of the administrative effort by the Authority, amounted to 12.9 percent of GDP in FY 2012/13 compared to 12.3 percent achieved in the previous year. This reflects an increase in tax effort of 0.6 percentage points—a remarkable performance for the year.

20 ODA loans are considered under external financing in section 6.2.3. 60

Figure 26: Composition of the Resource Envelope

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 ODA Grants Domestic Revenue (excluding Oil)

page69image23488 page69image25592 page69image25752 page69image25912 page69image26072 page69image26232 page69image26392 page69image26552 page69image26712 page69image26872 page69image27032 page69image27192 page69image27352 page69image27512 page69image27672 page69image27832 page69image27992 page69image28152 page69image28312 page69image28472 page69image28632 page69image28792 page69image30560 page69image30720

Source: Ministry of Finance, Planning and Economic Development

Figure 27: Revenue Performance

16,000 14,000 12,000 10,000

8,000 6,000 4,000 2,000

Consumption Taxes Non-Tax Revenue

13.2% 13.0% 12.8% 12.6% 12.4% 12.2% 12.0% 11.8% 11.6% 11.4%

page69image36600 page69image39880 page69image40040 page69image40800 page69image40960 page69image41120 page69image41280 page69image42376 page69image42536

0
2007/08

2009/10

2010/11
Income Taxes

2012/13

page69image44528

2008/09 Tax Revenue

2011/12

page69image46944 page69image47104

International Trade Taxes

Tax-to-GDP

page69image48048 page69image48208 page69image48368 page69image48528

Source: Ministry of Finance, Planning and Economic

Development

page69image49632

in billion Ugs. (current prices)

In absolute terms, the URA revenue outturn for FY2012/13 is estimated at Ushs.7,154.6 billion, against the target of Shs.7,284.7 billion, which represents a shortfall of Shs.130.1 billion for the year. However, compared to the revenue collection for FY2011/12, there was growth of 16.6 percent in nominal terms. The shortfall in actual revenue collections compared to what was planned was due to two factors: (i) a reduction in import volumes of fuel, and non-tariff barriers imposed by the Kenyan Port Authorities, such as the Cash Bond imposed on transit goods through Kenya.

Taxes in Domestic Economic Activity

Income taxes are projected to be Shs. 2.44 trillion against a target of Shs. 2.39 trillion, which represents a surplus of Shs. 55.5 billion. This is explained by high performance of withholding taxes on bank interest and supply of goods and services.

Corporation tax collections amounted to Shs. 648 billion, slightly above the programmed level on account of the recovery in economic activity during the year. Domestic consumption VAT and Excise taxes are estimated to have surpassed their targets, signalling increasing household and private sector demand compared to the previous year. Consumption VAT and excise duty tax collections were above their targets by Shs. 84.3 billion and Shs. 5.9 billion during the year, respectively.

The easing of monetary conditions as a result of low inflation increased aggregate demand for key taxable products like beer, cement and sugar. This partly explains the surplus of 5.7 percent above target for consumption taxes. The telecom sub-sector completed much of the development works which has reduced input VAT tax claims, thus leading to an increase in VAT payable to URA. A number of administrative measures implemented by URA also boosted domestic revenue performance. These measures included: debt collections amounting to Shs. 237.7 billion as of end March 2013; audits yielding Shs. 64.7 billion; auctioned items of Shs. 0.5 billion; and customs enforcement which fetched Ushs.13.2 billion. In addition, URA registered 6,253 new businesses during the same period.

International trade taxes

International trade taxes, which now account for 43 percent of total domestic revenue collections, were below target by Shs. 273.7 billion against the target of Shs. 3,364.4 billion. This is mainly due to the projected shortfalls from excise duty on petroleum and VAT on imports of Shs. 88.8 billion and Shs. 171.9 billion, respectively. The productivity of these two tax heads has been affected by reduced import volumes, logistical constraints causing delays in clearance of goods at Mombasa port, and other non-tariff barriers, specifically the Kenya Revenue Authority’s Cash Bond requirements for goods in transit through Kenya. Table 15 summarises the revenue performance during FY2012/13 compared to the previous fiscal years.

61

Performance of Non-Tax Revenue

Non-Tax Revenue (NTR) is projected to perform at a rate of 76.0 percent against the target of Shs 171.0 billion in FY2012/13. This implies a projected shortfall of Shs 41.0 billion on account of Ministries Departments and Agencies (MDA) delay to implement the revised NTR rates that were expected to generate about Shs. 31.8 billion in FY2012/13. Government has put in place strategies to further improve and strengthen NTR mobilization. These measures include: (i) implementation of e-payment to improve transparency and accountability, (ii) ensuring that all the NTR items are provided on web portals for clients to be able to register their payments online, (iii) Publication of NTR estimates book, including NTR rates and charges starting with the Budget Speech for FY 2013/14, to NTR analysis and data management, (iv) Stepping up mobilization by MoFPED in conjunction with URA.

Table 15: Revenue Performance by different Tax Items (in billion of Shs.)

page71image11560

Collections (Shs.bn)

page71image12208

Outturn 2008/09

page71image15352

Outturn 2009/10

page71image17832

Outturn 2010/11

page71image21080

Outturn 2011/12

page71image23560

Budget 2012/13

page71image26712

Projected Outturn 2012/13

page71image29200 page71image29360 page71image29520 page71image29680 page71image29840

page71image31408

Absolute

page71image32176

page71image33432 page71image34176

Percent

page71image34944

Net URA collections (Excl. Govt taxes and tax refunds)

Income Taxes

page71image37384 page71image37544 page71image37704 page71image37864 page71image38344 page71image38504 page71image38664

3662.3 1028.9

page71image39928 page71image40088 page71image40248 page71image40728 page71image40888 page71image41048

4205.7 1303.1

page71image41960 page71image42120 page71image42280 page71image42440 page71image42600 page71image42760

5114.2 1665.1

page71image44024 page71image44184 page71image44344 page71image44824 page71image44984 page71image45144

6135.9 1991.4

page71image46056 page71image46216 page71image46376 page71image46536 page71image46696 page71image46856

7284.7 2388.7

page71image48120 page71image48280 page71image48440 page71image48920 page71image49080 page71image49240

7154.6 2444.2

page71image50152 page71image50312 page71image50472 page71image50632 page71image50792 page71image50952

-130.1 55.5

page71image52216 page71image52376 page71image52536 page71image53016 page71image53176 page71image53336

0.982 1.023

page71image54432 page71image54592 page71image54752 page71image55232 page71image55392 page71image55552

_PAYE

555.7

657.9

825.6

996.9

1198.8

1194.3

-4.5

0.996

_Corporate Tax

230

315.4

419.6

553.9

642.9

648

5.1

1.008

_Witholding tax

158.7

212.8

274.8

328.9

411.4

432.1

20.7

1.05

_Others

84.5

117

145.2

111.6

135.5

169.9

34.3

1.253

Consumption Taxes (Domestic)

page71image86472 page71image86632 page71image86792

768.6

page71image89304 page71image89464 page71image89624

945.5

page71image91304 page71image91464 page71image91624

1039.8

page71image93976 page71image94136 page71image94296

1296.5

page71image95976 page71image96136 page71image96296

1583.3

page71image98648 page71image98808 page71image98968

1673.5

page71image100648 page71image100808 page71image100968

90.2

page71image103320 page71image103480 page71image103640

1.057

page71image105656 page71image105816 page71image105976

_Excise Duty

242.6

274.1

315.6

362.2

429.9

435.9

5.9

1.014

_VAT

526

671.4

724.2

934.3

1153.4

1237.7

84.3

1.073

Taxes on Intnl trade

page71image121600 page71image121760 page71image121920

1891.7

page71image124432 page71image124592 page71image124752

1960.7

page71image126432 page71image126592 page71image126752

2441.7

page71image129104 page71image129264 page71image129424

2905.3

page71image131104 page71image131264 page71image131424

3364.4

page71image133776 page71image133936 page71image134096

3090.6

page71image135776 page71image135936 page71image136096

-273.7

page71image138448 page71image138608 page71image138768

0.919

page71image140784 page71image140944 page71image141104

_Petroleum Duty

566.2

638.2

821.2

903

895.5

806.6

-88.8

0.901

_Import duty

360.1

352.2

447.4

502.4

576.6

586.7

10.2

1.018

_Excise Duty

112.5

112.8

93.3

180.7

245.6

234.3

-11.3

0.954

_VAT on imports

763.6

763.4

986.5

1155.6

1422.7

1250.8

171.9

0.879

_Others

90.3

94.1

185.6

163.6

224.1

212.2

-11.9

0.947

Tax Refunds

-101.9

-105.3

-143.6

-168.5

-180.7

-180

0.7

0.996

Fees and liscences

78.3

102.7

111.3

111.2

129

126.2

-2.7

0.979

Govt Taxes

80.9

57.5

55.3

71.1

87.3

44.3

-43.1

0.507

Non tax revenue

124.3

113.8

94.1

104

171

130

-41

0.76

page71image207728

Source: Ministry of Finance Planning and Economic Development

62

ii. Impact of Domestic Revenue Measures for FY2012/13

The objectives of the revenue measures for the FY2012/13 were: revenue generation; reform of the tax laws; enhancing taxpayer compliance; and to support tax administration. Table 16 shows the impact of some of these measures on revenue performance.

Table 16: Impact of tax measures for FY2012/13 as of December 2012

page72image8800 page72image8960 page72image9120 page72image9280

TAX HEAD

TAX MEASURE

page72image10416 page72image10576 page72image10736 page72image10896 page72image11056 page72image11216 page72image11536 page72image11696 page72image11856 page72image12176 page72image12336 page72image12496 page72image12656 page72image12976 page72image13136 page72image13296 page72image13456 page72image13616 page72image13776 page72image13936 page72image14096 page72image14520 page72image14680 page72image14840

Increase the PAYE threshold

OBJECTIVE

Reduce the tax burden on low

IMPACT

The increase in the PAYE threshold resulted in the loss of tax payers from whom monthly PAYE tax revenue of

page72image19592 page72image19752 page72image19912 page72image20072 page72image20232 page72image20392

Shs. 0.65bn was expected. In addition keeping the other tax bands constant has resulted in a monthly average loss of Shs. 4.06bn The total loss over the period is Shs. 32.05bn

page72image22880 page72image23040 page72image23200 page72image23360

Income Tax

from Shs. 130,000 to Shs. 235,000 per month,

income earners and increase their disposable income

page72image25632 page72image25792 page72image25952 page72image26112 page72image26272 page72image26432

This policy change has resulted

in an estimated average

page72image27736 page72image28056 page72image28216

monthly gain in revenue of Shs. 3.7bn from the approximately 7,107 eligible tax payers. Overall, it is estimated that Shs. 30.78bn has been realized over the period under review.

An additional 10% imposed on

individuals with chargeable income of Shs. 120 Million and above, per year.

page72image32400 page72image32560

Compensate for the above loss

page72image33328 page72image33488 page72image33648 page72image33808 page72image33968 page72image34288 page72image34712 page72image35136 page72image35560 page72image36144 page72image36304 page72image36464 page72image36624 page72image36784 page72image37208 page72image37368 page72image37528 page72image37688 page72image38008 page72image38168

Reinstate VAT on supply of Water at 18%

Generate Shs. 21.7bn.

However Supply of water for domestic use was exempted from VAT

page72image40552 page72image40712

Reinstating VAT on only Water

for commercial use has so far yielded Shs. 10.4bn in revenue.

page72image42240 page72image42400 page72image42560 page72image42720 page72image42880

Value-Added-Tax

page72image43488 page72image43648 page72image43808 page72image44128 page72image44288 page72image44448 page72image44608 page72image45088 page72image45248 page72image45408 page72image45568 page72image45728 page72image45888 page72image46048 page72image46472

Excise duty on spirits made

from locally made raw materials from 45% to 60%.

page72image48080 page72image48240 page72image48400 page72image48560

Generate Shs. 10.4 billion

Shs. 4.53bn collected

page72image49976 page72image50136 page72image50296 page72image50456 page72image50616 page72image50776

Excise Duties

page72image51584 page72image51744 page72image51904 page72image52064 page72image52224

Impose excise duty at a rate of

10% on cosmetics and perfumes

page72image53592 page72image53752 page72image53912 page72image54232 page72image54552 page72image54712 page72image54872 page72image55192 page72image55352 page72image55512 page72image55672 page72image56152 page72image56312 page72image56472 page72image56632 page72image56792 page72image56952 page72image57112 page72image57272 page72image57696 page72image57856 page72image58176

Gaming and Pool

Betting

Increase the Gaming and Pool

Betting Tax from 15% to 20%.

Generate Shs. 4.1bn

Shs. 5.2bn has been collected

page72image61320 page72image61480 page72image61640

The 5% increase in the GPBT tax has led to an increase in revenue collected by 21.2% to

page72image63296 page72image63456 page72image63616 page72image63776 page72image63936

Generate Revenue

page72image64584 page72image64744 page72image64904 page72image65064

Shs. 5.4bn.

page72image65872 page72image66352 page72image66512 page72image66672 page72image66832 page72image67152 page72image67312 page72image67632 page72image67792 page72image67952 page72image68112 page72image68272 page72image68432 page72image68592 page72image68752 page72image69336

Import duty on set top boxes for analogue digital and

page72image70408 page72image70568 page72image70728

To facilitate smooth transition

page72image71456 page72image71616 page72image71776 page72image71936 page72image72096

Import duties

terrestrial transmission was

reduced from 25 % to 0 % for a

period of one Year

page72image74384 page72image74544

from analogue to digital Terrestrial transmission

Loss of Shs. 0.63bn

page72image78584 page72image79064 page72image79224 page72image79384 page72image79544 page72image80024 page72image80184 page72image80344 page72image80504 page72image80984 page72image81464 page72image81624 page72image81784 page72image81944 page72image82264 page72image82424 page72image82584 page72image82904 page72image83064 page72image83224 page72image83544 page72image83704 page72image83864 page72image84184 page72image84504 page72image84664 page72image84824 page72image84984 page72image85464 page72image85624 page72image85784 page72image86104 page72image86264 page72image86424 page72image86744

63

Import duty food supplements

and mineral premix used in fortification on was Reduced from 25 % to 0 %

Make imported food

supplements affordable thus helping to improve the health of
Ugandans

page73image6320 page73image6480 page73image6640 page73image6800 page73image6960 page73image7120 page73image7280

Loss of Shs. 0.29bn

page73image8168 page73image8328 page73image8648 page73image8808 page73image8968 page73image9288 page73image9448

Import duty vacuum packing bags on was reduced from 25 % to 10 %

page73image10784 page73image10944 page73image11104 page73image11264 page73image11744 page73image11904 page73image12064 page73image12384 page73image12544

0% for one year

To ease packaging by the Manufacturers

page73image14184 page73image14344

Loss of Shs. 0.07bn.

page73image15072 page73image15232 page73image15392

Stay application of EAC CET for Road Tractors for semi- trailers and apply a duty rate of

Reduce the cost of transportation of goods to support the industrial and

page73image17944 page73image18104

Loss of Shs. 2.74bn

page73image18832 page73image18992

agricultural sector

page73image19640 page73image19800 page73image20120 page73image20280 page73image20440

This facility was extended by another year and estimated revenue foregone stood at Shs. 21.3bn.

page73image22080 page73image22240 page73image22400 page73image22560 page73image22720

Stay application of EAC CET on wheat and apply a duty rate of 0% for one year

Encourage wheat importation

since what the region produces

is not enough

page73image25936 page73image26096 page73image26256 page73image26416 page73image26576 page73image26736 page73image26896 page73image27056

Extension of importation

Make the manufacturing sector

During the period under

page73image29040 page73image29200 page73image29360 page73image29520 page73image29840 page73image30000

facility for selected raw

materials exempt from all duties (“Ugandan list”)

more competitive by reducing

the cost of acquiring raw materials

review, raw materials valued at

page73image33608 page73image33768 page73image33928 page73image34248 page73image34408 page73image34568

This facility was set up to support the manufacturing sector by releasing would-be tied up capital for the tax payers.

Shs. 925bn were imported under this facility.

page73image37144 page73image37464

However, provided the VAT deferred and not discharged is considered an exemption. As per the period under review, VAT deferred stood at Shs. 102bn

page73image39672 page73image39832 page73image39992

VAT deferment on Plant and Machinery

page73image40904 page73image41064 page73image41224 page73image41384 page73image41544 page73image41864 page73image42024 page73image42184

Declaration of the source of

funds for purchases of land whose value exceeds Shs. 50 million

page73image44240 page73image44400 page73image44720 page73image45040 page73image45200 page73image45360 page73image45520 page73image45680

page73image46960 page73image47120 page73image47280 page73image47600 page73image47760 page73image47920 page73image48080 page73image48240 page73image48400 page73image48560 page73image48720 page73image49040 page73image49200 page73image49360 page73image49520 page73image49680 page73image49840 page73image50000 page73image50160 page73image50320 page73image50480 page73image50640 page73image50800 page73image50960 page73image51440 page73image51600 page73image51760 page73image51920 page73image52400 page73image52560 page73image52720 page73image52880 page73image53200

iii. Performance of ODA Grants

Total receipts of ODA grants have fallen by almost 25 percent in FY2012/13 compared to a year earlier. This reflects in part a general reduction in ODA receipts, particularly in form of grants, and the suspension of budget support payments during the first half of the financial year. In FY2012/13 actual disbursements fell 22 percent short of planned disbursements in the approved budget (see table 17 below), implying a 9 percentage points higher disbursement rate than in FY2011/12. However, while in FY2011/12 the shortfall in donor resources was driven mainly by low disbursements of project aid, the lower than budgeted resources in FY2012/13 occurred due to much lower budget support disbursements, which amount to only 39 percent of planned budget support payments at the time of budget approval.

Table 17: External Resources (grants only)

page73image62320   page73image63200      
page73image66752

2010/11

page73image67752 page73image68024

2011/12

page73image69024 page73image69296

2012/13

page73image70296
  page73image71176

App. Budget

page73image72360 page73image72952 page73image73112

Outturn

page73image73880

Disb. Rate (%)

page73image75240 page73image75672

App. Budget

page73image76856 page73image77448 page73image77608

Outturn

page73image78376

Disb. Rate (%)

page73image79560 page73image80008

App. Budget

page73image81352 page73image81944 page73image82104

Outturn

page73image82872

Disb. Rate (%)

page73image84232
page73image84672   page73image85384
page73image85984

Total Grants

page73image87192

524 432 82% 287 230 80% 237 202 85%

707 491 69% 260 235 90% 447 256 57%

476 184 292

371 78% 72 39% 300 103%

page73image97008

Budget Support

page73image98160
page73image98760

Projects

page73image99928

64

3.2.2. Expenditure Outturns and the Fiscal Deficit in FY2012/13

Total expenditure and net lending in FY2012/13 (including external development and domestic arrears repayment) is projected at 19.2 percent of GDP, compared to 18.6 percent of GDP in FY2011/12. This is lower than the 20.1 percent of GDP programmed in the approved Budget, due to lower external support disbursement combined with delays in the implementation of some key Government projects.

Tables 21 and 23 below provide forecasts (in two different formats) of detailed nominal fiscal outturns up to FY2012/13. Furthermore, table 19 depicts a summary of key fiscal indicators up to FY2012/13. Overall fiscal operations are expected to remain within programmed levels. The overall deficit including grants in FY2012/13 is expected to be 3.9 percent of GDP. This is higher than the 3.0 percent recorded in FY2011/12, but lower than the 4.1 percent programmed in the approved Budget FY2012/13, largely due to the underperformance on the expenditure side which more than offset for the shortfalls in revenues. The overall deficit excluding grants in FY2012/13 is expected to be 5.7 percent of GDP, lower than the 6.4 percent programmed in the Budget, and slightly higher than the 5.3 percent recorded in FY2011/12.

Transfers to other levels of Government

Transfers to local government are projected at Shs. 1,890.4bn, representing 18.8 percent of the resource envelope. This is line with government policy of decentralization to improve service delivery.

Subsidies to the Energy Sector

Government kept the level of subsidies to the power sector at a low level, following the revision of power tariffs in the second half of FY2011/12 and the commissioning of the 250 MW Bujagali Power Station. Power subsidies are estimated to amount to Shs68.8 billion in FY2012/13, much less than Ushs.186.8 billion paid in the previous year

Interest Costs

Interest cost on public debt is estimated to have increased by 47.6 percent in the FY2012/13 to Shs. 890.5 billion compared to Shs. 603.3billion incurred in the previous year. Interest payment on domestic debt is projected to have the largest growth of 52.8 percent, on account of two factors: (i) due to an increase in domestic debt stock by about Shs 1.035 trillion in FY2012/13 over the stock at end of the previous fiscal year; and (ii) due to the relatively high interest rates of debt issued in FY 2011/12.

The cost from external debt service for the financial year 2012/13 is estimated at USD 67.4 million, as at 30th April 2013. This shows higher than planned payment of 9.9 percent, equivalent to USD 6.1 million. Interest payments amounted to USD 28.1 million and principal repayment was USD 39.3 million. The higher than planned external debt service was mainly attributed to commitment fees and interest payments made on loans acquired during

65

the financial year from African Development Bank (ADB) and China. Out of the total external debt service paid during the financial year, 79.1% or USD 53.3 million was paid to multilateral creditors while 20.9% equivalent to US$ 14.1million was repaid to bilateral creditors, including a small portion to East African Development Bank. The highest debt service payment was made to World Bank’s International Development Agency (IDA) which accounted for 35.7% or US$ 24.1million followed by European investment Bank (EIB), African Development Bank (ADB) and China with 15.5%, 12.6% and 10.6% respectively and equivalent to US$ 10.6 million, US$ 8.5 million and US$ 7.1 million respectively.

Social Security benefits

Pension payment during the FY2012/13 is projected at Shs. 260.5billion which matches the programmed amount.

Investment in Non-Financial Assets

In line with the fiscal strategy, capital formation was expected to grow significantly in FY2012/13. During the fiscal year under review, Shs 2.8 trillion is estimated to have been spent on investment in non-financial assets compared to Shs 1.8 billion in FY2011/12 – an increase of nearly 50 percent. Notwithstanding this increase in capital formation, a few large projects have not commenced on account of procurement delays and compensation challenges.

3.2.3. Financing Outturns in FY2012/13

It is estimated that the financing of the Shs. 2,160 billion fiscal deficit (including grants) in FY2012/13 will be met by Shs. 1,316 billion of net external financing and Shs. 844 billion of net domestic financing.

i. External Financing Outturns

Total official grants were estimated at Ushs 962 billion during FY 2012/13 compared to Ushs 1129 billion in the previous year. This was below planned level by Ushs 281 billion. Budget support grants registered a large shortfall of Ushs 294 billion due to the donor suspension of budget support in September 2012. In contrast, project support grants had strong performance, increasing to Ushs 776 billion in FY2012/13 compared to Ushs 553 billion in the previous year. The strong performance of project support is a reflection of the shift by donors away from budget support, which started a few years back but was accelerated during the year under review. Project support was also slightly more than planned in nominal shilling terms.

Total external loan disbursements amounted to Ushs 1,521.5 billion during the fiscal year under review compared to Ushs 1356 billion in the previous year. Of this, budget support loans amounted to Ushs 287 billion (assuming the World Bank will disburse US$ 100 million by 30th June 2013) and project support loans amounting to Ushs 1,234 billion, as planned in June 2012.

66

Further information on external financing in FY2012/13 will be provided in the Report on Loans, Grants and Guarantees for Financial Year 2012/13.

ii. Domestic Financing Outturns

Domestic financing of the FY2012/13 budget consisted of net Treasury securities issuance of Ushs.1.035 billion, of which Ushs.625 billion was for fiscal purposes, and Ushs.410.0 billion was for the recapitalization of Bank of Uganda. Recapitalization was necessary to enable Bank of Uganda effectively carry out its monetary policy management. This recapitalization, which is provided for in the Bank of Uganda Act, was necessitated by the fiscal impairment of the Bank as a result of very low interest earnings on investment of its reserves. Low interest rates in international financial markets have been a key feature of the global financial crisis. These markets are beginning to recover, with expected increase in revenue to Bank of Uganda.

3.2.4. Public Debt in FY2012/13

i. External Debt

It is estimated that at the end of FY2012/13 the total stock of public debt (domestic plus external) will be Shs. 15,939.1 billion, or 29.1 percent of GDP. Of this, Shs. 6,045.8 billion (11.1 percent of GDP) will be domestic debt, and Shs. 9,893.3 billion (USD3.761 billion, or 18.1 percent of GDP) will be external debt. Figure 28 presents the estimated

Figure 29: Total, domestic and external debt stock (% of GDP)

80% 70% 60% 50% 40% 30% 20% 10%

0%

page76image16352 page76image18120 page76image18280 page76image18704 page76image18864 page76image19024 page76image19184 page76image19344 page76image19504 page76image19664 page76image19824 page76image19984

Domestic debt stock

External debt stock

Total debt debt stock

page76image24024 page76image24184 page76image24344

Note: Figures for FY2012/13 are estimates. Source: Ministry of Finance, Planning and Economic Development

debt figures as at end-FY2012/13 in historical context, by illustrating the change in the stock of total, domestic and external debt as a proportion of GDP since FY1999/00. The
figure shows that since the

completion of several debt relief initiatives in FY2006/07, which reduced total debt to 20.0 percent of GDP, Uganda has maintained a significantly lower level of debt as a share of GDP. Total debt to GDP increased only slightly in the three years following the debt relief completion point to 23.3 percent at the end of FY2009/10. Debt to GDP has

Figure 28: Total external debt exposure (in USD billions)

7 6 5 4 3 2 1 0

page76image34264

FY 08/09

FY 09/10
Disbursed Undisbursed Total external debt exposure

*FY 12/13

FY 10/11

FY 11/12

page76image41216 page76image41376 page76image41536

Note: Figures for FY12/13 are as at March 31st. Source: Ministry of Finance Planning and Economic Development

67

in USD (current prices)

1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

% GDP

since risen to the estimated 29.1 percent at the end of FY2012/13, reflecting in part the fiscal support government has provided to the economy in response to an uncertain economic environment, including continued investment in infrastructure.

In addition, Uganda’s total external debt exposure also includes loan commitments which have not been disbursed to date. This is illustrated in figure 29 (as at 31st March). The stock of external debt committed but yet undisbursed is USD 2.277 billion, giving a total external debt exposure of USD 5.804 billion. Most external debt (86.6 percent) is owed to multilateral creditors. The largest amount of external debt outstanding is owed to International Development Agency (IDA), USS 2.037 billion (57.8 percent), followed by African Development Bank with USD 0.702 billion (19.9 percent). Further information on the external debt stock in FY2012/13 is provided in the Report on Loans, Grants and Guarantees for Financial Year 2012/13, in line with the statutory requirement.

Table 18: Uganda’s external debt outstanding and disbursed (DOD) and undisbursed, as at end-March 2013 (in ‘000s USD)

CREDITOR NAME

OUTSTANDING EXCL. ARREARS

STOCK OF ARREARS OF PRINCIPAL

STOCK OF ARREARS OF INTEREST

OUTSTANDING INCL. ARREARS TOTAL

UNDISBURSED

page77image24320

GRAND TOTAL

page77image25360 page77image26232

3,445,846

page77image27568 page77image28008

47,282

page77image29008 page77image29880

34,300

page77image31216 page77image31656

3,527,412

page77image32656 page77image33528

2,277,153

page77image34864
page77image35480

BILATERAL TOTAL

page77image36680 page77image37560

392,669

page77image39064 page77image39664

47,282

page77image40664 page77image41544

34,300

page77image43048 page77image43648

474,234

page77image44648 page77image45528

646,536

page77image47032

AUSTRIA

12,663

0

0

12,663

0

CHINA

283,256

0

0

283,256

298,849

FRANCE (AFD)

3,835

0

0

3,835

92,030

INDIA

6,408

0

0

6,408

0

IRAQ

0

1

1

2

0

JAPAN BANK FOR INTERNATIONAL COOPERATION

33,859

0

0

33,859

193,763

KUWAIT FUND

23,932

0

0

23,932

12,237

NIGERIA

0

9,000

7,755

16,755

0

SAUDI ARABIA-SAUDI FUND

8,429

0

0

8,429

22,998

SOUTH KOREA-EXIM BANK

4,586

0

0

4,586

26,640

SPAIN-ICO

15,701

0

0

15,684

0

SWEDEN-SVENSKA HANDELSBANKEN

0

0

0

0

18

TANZANIA

0

35,157

23,095

58,252

0

U.A.E (ABU DHABI FUND)

0

3,124

3,450

6,574

0

page77image119608

MULTILATERAL TOTAL

page77image120808 page77image121688

3,053,178

page77image123192 page77image123792

0

page77image124792 page77image125672

0

page77image127176 page77image127776

3,053,178

page77image128776 page77image129656

1,630,617

page77image131160

AFRICAN DEVELOPMENT BANK (ADB)

1,184

0

0

1,184

14,962

AFRICAN DEVELOPMENT FUND (ADF)

702,481

0

0

702,481

500,013

BADEA

19,976

0

0

19,976

21,030

EAST AFRICAN DEVELOPMENT BANK (EADB)

90

0

0

90

0

EUROPEAN INVESTMENT BANK (EIB)

29,363

0

0

29,363

95,865

INTERNATIONAL DEVT ASSOCIATION (IDA)

2,037,191

0

0

2,037,191

782,746

INTERNATIONAL MONETORY FUND (IMF)

4,489

0

0

4,489

0

ISLAMIC DEVT BANK (IDB)

9,920

0

0

9,920

78,480

NORDIC DEVELOPMENT FUND (NDF)

68,287

0

0

68,287

2,209

OPEC FUND

15,203

0

0

15,203

32,532

THE INTERN. FUND FOR AGRIC. DEVT.(IFAD)

164,995

0

0

164,995

102,781

68

page78image304

ii. Domestic debt

The total stock of domestic debt is estimated at Shs.6.05 trillion, equivalent to 11.1% of GDP. Much of this debt arose from the issuance of Government securities for the purpose of economic stabilization. The cost of servicing domestic debt has increased substantially estimated at Shs 786 billion in FY2012/13. To reduce the cost of stabilizing the economy on the budget, the Bank of Uganda has adopted monetary policy management tools which rely on regulating demand for private sector credit via interest rates.

Table 19: Selected indicators of Central Government Fiscal Operations
Outturn Outturn App.

Proj

2012/13

15.2% 13.5% 13.5% 13.1% 13.1% 19.1% 19.2%

1.9% -1.8% -2.3% -5.7% -3.9% -1.5% -1.2% -0.3% 24.7%

4.5% -2.4% -2.8% 70.4% 48.7% 29.1% 11.1% 18.1% 27.5% 72.1% 29.7%

54,688

Description

Revenue & Grants / GDP
Domestic Revenue incl Oil / GDP
Domestic Revenue / GDP
Tax revenue incl Oil / GDP
Tax revenue / GDP
Total Expenditure and net Lending (excl domestic arrears repayments) / GDP Total Expenditure and net Lending (incl domestic arrears repayments) / GDP Gross Operating Balance / GDP
Domestic Balance / GDP
Primary Balance / GDP
Budget Deficit (excl Grants) / GDP
Budget Deficit (incl Grants) / GDP
Domestic Financing (net) / GDP (-borrowing/+ saving)

o/w Bank Financing (-borrowing/+ saving)

o/w Non-Bank Financing (-borrowing/+ saving)
Foreign Disbursements (grants and loans) / Total Budget (incl domestic arrears) Foreign Disbursements (grants and loans) / GDP
External Borrowing (net) (disbursements less armotization) / GDP
External Borrowing Disbursements / GDP
Ratio of external borrowing disbursements to budget deficit (incl grants and Oil) Ratio of external borrowing disbursements to budget deficit (excl grants and Oil) Total public debt / GDP

o/w Domestic debt / GDP

o/w External debt / GDP Capital Formation / Total Budget Expenses / Total Budget Consumption / Total Budget Memorandum Items

GDP at Current Market Prices (Shs. Billion)

Budget 2010/11 2011/12 2012/13

Note: 1/ Total Budget is equal to total expenditures (including domestic arrears) minus net lending. 2/ Domestic debt is reported as the stock of outstanding Treasury Bills and Bonds at cost value. It excludes the stock of zero-coupon Treasury Bills that Government issues to Bank of Uganda for use in repo operations. 3/ Consumption expenditure for Budgetary Central Government defined to include compensation of employees, purchase of goods and services, and other expenses.

Source: Ministry of Finance, Planning and Economic Development

69

18.7% 15.6% 16.0% 16.4% 13.3% 13.7% 13.3% 12.5% 13.7% 16.1% 13.1% 13.4% 13.1% 12.3% 13.4% 22.5% 18.0% 20.0% 23.0% 18.6% 20.1% -0.3% 1.2% 2.6% -3.7% -1.7% -2.5% -3.2% -1.8% -2.5% -6.6% -5.3% -6.4% -4.3% -3.0% -4.1% -2.8% 0.0% -1.8% -1.1% 2.5% -1.4% -1.7% -2.5% -0.4% 19.6% 26.7% 25.1%

4.5% 5.0% 5.0% -1.9% -2.3% -2.3% -2.2% -2.7% -2.8% 52.3% 89.8% 67.3% 23.3% 44.7% 43.2% 28.7% 26.2% 27.8%

9.2% 10.1% 9.6% 19.5% 16.1% 18.2% 15.6% 19.8% 33.0% 82.3% 77.1% 66.7% 43.9% 36.5% 27.0%

39,086 49,849 54,471

page79image344

Table 20: Central Government Fiscal Operations (1986 GFS format, Shs. billion)

Outturn 2010/11 7292.5

6402.0 5114.2 95.1 1192.7 890.5 515.5 375.0 8972.5 5958.0 1659.5 423.5 348.1 75.4 3875.0 2850.9 1808.9 1042.0 -30.2 193.8 -1453.1 -1256.5 -2570.5 -1680.0 Financing: 1680.0 External Financing (Net) 724.1 Deposits 0.0 Disbursements 878.2 Budget Support Loans 233.4 Project Loans 644.8 Armotization -154.0

Outturn 2011/12 7763.4

6634.1 6135.9 105.9 392.3 1129.3 576.0 553.3 9273.4 5420.9 1831.8 603.3 514.7 88.6 2985.9 3602.9 1901.5 1701.4 -39.4 289.0 -849.2 -906.7 -2639.2 -1510.0 1510.0 1153.9 0.0 1356.4 125.7 1230.8 -202.5 24.6 -1237.7 1262.3 331.4

Budget 2012/13 8698.5

7455.8 7284.7 171.1 0.0 1242.8 480.7 762.1 10926.5 5606.9 2140.8 840.3 713.9 126.4 2625.8 5296.3 3303.6 1992.8 -11.8 35.0 -1351.5 -1387.6 -3470.7 -2227.9 2227.9 1249.1 0.0 1499.5 268.8 1230.7 -250.4 978.8 753.8 225.0 0.0

Proj.

2012/13

8319.3 7357.2 7154.2

203.0 0.0 962.1 186.4 775.7 10479.2 5867.4 2174.8 890.5 786.4 104.1 2802.1 4163.9 2154.1 2009.8 409.4 38.5 -1008.1 -1269.3 -3122.0 -2159.8 2159.8 1315.6 0.0 1521.5 287.5 1234.0 -205.9 844.2 664.8 179.4 0.0

security sector.

Deviation

-379.2 -98.6 -130.5 31.9 0.0 -280.6 -294.3 13.7 -447.3 260.5 34.0 50.2 72.5 -22.3 176.3 -1132.4 -1149.4 17.0 421.2 3.5 343.4 118.3 348.7 68.1 -68.1 66.6 0.0 22.1 18.7 3.3 44.5 -134.6 -89.0 -45.6 0.0

Perf.

95.6% 98.7% 98.2%

118.6% n.a. 77.4% 38.8% 101.8% 95.9% 104.6% 101.6% 106.0% 110.2% 82.4% 106.7% 78.6% 65.2% 100.9% -3469.1% 109.9% 74.6% 91.5% 90.0% 96.9% 96.9% 105.3% n.a. 101.5% 107.0% 100.3% 82.2% 86.2% 88.2% 79.7% n.a.

Y/Y growth

7.2% 10.9% 16.6% 91.8%

-100.0% -14.8% -67.6%

40.2% 13.0%

8.2% 18.7% 47.6% 52.8% 17.5% -6.2% 15.6% 13.3% 18.1%

-1138.9% -86.7% 18.7% 40.0% 18.3% 43.0% 43.0% 14.0% n.a. 12.2% 128.8% 0.3% 1.7% 3329.9% -153.7% -85.8% -100.0%

Description

Revenues and Grants Revenues

URA Non-URA
Oil Revenues

Grants

Budget Support

Project Support

Wages and Salaries Interest Payments

Domestic

Development Expenditures

Domestic Development/2

External Development

Net Lending/Repayments

Expenditure and net Lending Current Expenditures

External
Other Recurr. Expenditures/1

Domestic Arrears Repaym. Domestic Balance

Primary Balance
Overall Fiscal Bal. (excl. Grants) Overall Fiscal Bal. (incl. Grants)

Domestic Financing (Net)

Bank Financing (Net)

Non-bank Financing (Net)

Errors and Omissions

1104.3 421.4 682.9

-148.4

Note: 1 Includes exceptional spending reclassified from the development budget of the

2: Excludes exceptional spending reclassified as current spending.

3.The wages and salaries, other recurrent, and domestic development include transfers to local governments and extra-budgetary institutions.

Source: Ministry of Finance, planning and economic development

70

page80image376

Table 21: Central Government Fiscal Operations (2001 GFS format, Shs. billion)

Outturn Description 2010/11

Revenue 7,292.5

Taxes 5,114.2 Grants 890.5

Outturn 2011/12

7,763.4

6,135.9 1,129.3 576.0 553.3 392.3 105.9 7,176.9 1,199.0 776.9 329.6 92.5 2,001.2 603.3 514.7 88.6 186.8 2,783.0 1,588.9 919.3 293.7 375.9 35.3 90.0 105.7 68.8 894.3 201.1 202.6 586.4 1,846.9 894.7 952.2 9,023.8 -1,260.4 289.0 -39.4 -1,510.0 -2,639.2 -1,510.0 -24.6 1,237.7 -1,262.3 -1,153.9 0.0 1,153.9 1,356.4 1,230.8 125.7 -192.9 0.0 -9.6 -331.4

Budget 2012/13

8,698.5

7,284.7 1,242.8 480.7 762.1 0.0 171.1 7,291.4 1,367.5 881.1 399.1 87.3 1,531.4 840.4 713.9 126.4 68.8 3,171.0 1,856.4 1,071.4 387.8 397.3 17.5 67.8 156.8 58.3 1,014.1 260.5 51.8 1,407.1 3,611.9 2,373.1 1,238.8 10,903.2 -2,204.7 35.0 -11.8 -2,227.9 -3,470.7 -2,227.9 -978.8 -753.8 -225.0 -1,249.1 0.0 1,249.1 1,499.5 1,230.7 268.8 -217.2 -23.8 -9.4 0.0

Proj.

2012/13 8,319.3

7,154.2 962.1 186.4 775.7 0.0 203.0 7,263.0 1,367.5 881.1 399.1 87.3 1,571.1 890.5 786.4 104.1 68.8 3,052.7 1,890.4 1,105.4 387.8 397.3 17.5 67.8 156.8 58.3 861.8 260.5 51.8 1,056.3 2,768.3 1,529.5 1,238.8 10,031.3 -1,712.0 38.5 409.4 -2,159.8 -3,122.0 -2,159.8 -844.2 -664.8 -179.4 -1,315.6 0.0 1,315.6 1,521.5 1,234.0 287.5 -195.7 0.0 -10.2 0.0

Perf.

95.6%

98.2% 77.4% 38.8%

101.8% n.a. 118.6% 99.6% 100.0% 100.0% 100.0% 100.0% 102.6% 106.0% 110.1% 82.4% 100.0% 96.3% 101.8% 103.2% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 85.0% 100.0% 100.0% 75.1% 76.6% 64.5% 100.0% 92.0% 77.6% 110.1% -3483.5% 96.9% 90.0% 96.9% 86.2% 88.2% 79.7% 105.3% n.a. 105.3% 101.5% 100.3% 107.0% 90.1% 0.0% 108.0% n.a.

Y/Y growth

7.2%

16.6% -14.8% -67.6%

40.2% -100.0% 91.8% 1.2% 14.1% 13.4% 21.1% -5.6% -21.5% 47.6% 52.8% 17.5% -63.2% 9.7% 19.0% 20.2% 32.0% 5.7% -50.4% -24.6% 48.4% -15.3% -3.6% 29.5% -74.4% 80.1% 49.9% 71.0% 30.1% 11.2% 35.8% -86.7% -1138.9% 43.0% 18.3% 43.0% 3329.9% -153.7% -85.8% 14.0% n.a. 14.0% 12.2% 0.3% 128.8% 1.4% n.a. 6.2% -100.0%

Budget Composition

Budget Support

Domestic

External Subisidies Grants

Outturn 2011/12

86.0%

68.0% 12.5% 6.4% 6.1% 4.3% 1.2% 79.5% 13.3% 8.6% 3.7% 1.0% 22.2% 6.7% 5.7% 1.0% 2.1% 30.8% 17.6% 10.2% 3.3% 4.2% 0.4% 1.0% 1.2% 0.8% 9.9% 2.2% 2.2% 6.5% 20.5% 9.9% 10.6% 100.0% -14.0% 3.2% -0.4% -16.7% -29.2% -16.7% -0.3% 13.7% -14.0% -12.8% 0.0% 12.8% 15.0% 13.6% 1.4% -2.1% 0.0% -0.1% -3.7%

Budget 2012/13

79.8%

66.8% 11.4% 4.4% 7.0% 0.0% 1.6% 66.9% 12.5% 8.1% 3.7% 0.8% 14.0% 7.7% 6.5% 1.2% 0.6% 29.1% 17.0% 9.8% 3.6% 3.6% 0.2% 0.6% 1.4% 0.5% 9.3% 2.4% 0.5% 12.9% 33.1% 21.8% 11.4% 100.0% -20.2% 0.3% -0.1% -20.4% -31.8% -20.4% -9.0% -6.9% -2.1% -11.5% 0.0% 11.5% 13.8% 11.3% 2.5% -2.0% -0.2% -0.1% 0.0%

Outturn 2012/13

82.9%

71.3% 9.6% 1.9% 7.7% 0.0% 2.0% 72.4% 13.6% 8.8% 4.0% 0.9% 15.7% 8.9% 7.8% 1.0% 0.7% 30.4% 18.8% 11.0% 3.9% 4.0% 0.2% 0.7% 1.6% 0.6% 8.6% 2.6% 0.5% 10.5% 27.6% 15.2% 12.3% 100.0% -17.1% 0.4% 4.1% -21.5% -31.1% -21.5% -8.4% -6.6% -1.8% -13.1% 0.0% 13.1% 15.2% 12.3% 2.9% -2.0% 0.0% -0.1% 0.0%

515.5

375.0 1,192.7 95.1 Expenses 7,408.5 Compensation of employees 985.0 Wages and salaries/1 671.4 Allowances/1 237.2

Project Support Oil Revenues Other revenue

76.5 2,715.9 423.5 348.1 75.4 184.0 2,644.7 1,505.0 913.6 236.6 354.7 16.2 64.4 115.5 53.7 890.0 203.2 252.1 -116.0 1,400.5 913.2 487.2 8,809.0 -1,516.5 193.8 -30.2 -1,680.0 -2,570.5 -1,680.0 -1,104.3 -421.4 -682.9 External -724.1 Net change in financial assets 0.0 Net change in Liabilities 724.1 Disbursement 878.2

Other employee costs/1 Use of goods and services/1 Interest payments

Local governments Wage bill Reccurent Development

Transfers to International organizations Transfers to Missions abroad
Transfers to Tertiary Institutions Transfers to District Refferal hospitals Transfers to other agencies (incl URA)

Social benefits (pensions)

Other expenses/1

Domestic development budget

Donor projects

Domestic

Bank Financing
Non Bank Financing

Project loans

Import support loans Amortization (-)
Payment of foreign debt arrears exceptional fin.

Errors and ommissions

Gross operating balance Investment in Non-Financial Assets

Total Outlays
Net borrowing
less Payables (domestic arrears repayments) less Net lending for policy purposes
Overall deficit including grants
Overall deficit excluding grants
Net Change in Financial Worth (Financing)

Published to Facililitate International Comparison
1/ Excludes transfers to local governments and extrabudgetary institutions. 2/ All transfers include salaries, non-wage and development related spending. Source: Ministry of Finance, Planning and Economic Development

644.8

233.4 -146.1 0.0 -8.0 148.4

71

page81image432

Table 22: Central Government Fiscal Operations, Memorandum Items (2001 GFS format, Shs. billion)

Description

Wage bill

Outturn 2010/11

1,685.0

Outturn Budget Proj. 2011/12 2012/13 2012/13

1,859.8 2,189.3 2,223.4

1,831.8 2,140.8 2,174.8 807.4 939.7 939.7 919.3 1,071.4 1,105.4

28.5 30.2 30.2 64.3 86.6 86.6 12.3 13.0 13.0 28.1 48.5 48.5 19.9 29.4 29.4

8.2 19.2 19.2 3,589.2 3,466.1 3,692.6 2,346.2 1,796.8 1,973.1

293.7 387.8 387.8 24.1 11.5 11.5 24.0 39.3 39.3 47.2 47.3 47.3

201.1 260.5 260.5 49.6 82.6 82.6 603.3 840.4 890.5 2,985.9 2,625.7 2,802.0 1,916.9 3,301.6 2,152.2 1,390.5 2,719.5 1,681.1 375.9 397.3 397.3 16.2 16.7 16.7 17.4 30.9 30.9 30.5 7.5 7.5 71.0 114.3 3.3 0.0 0.0 0.0 1,701.4 1,992.8 2,009.8 8.2 19.2 19.2 90.3 180.1 180.1 2.5 13.4 13.4 379.5 355.5 372.5 0.0 0.0 0.0 253.6 166.7 166.7 15.0 19.2 19.2 952.2 1,238.8 1,238.8 0.0 0.0 0.0 293.8 315.2 315.2 17.1 25.0 25.0 420.0 511.3 511.3 0.0 0.0 0.0 93.2 223.5 223.5 15.1 22.3 22.3 35.6 50.1 50.1 4.2 1.3 1.3 73.1 90.0 90.0

Perf.

101.6%

101.6% 100.0% 103.2% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 106.5% 109.8% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 106.0% 106.7%

65.2%

61.8% 100.0% 100.0% 100.0% 100.0%

2.9%

100.9% 100.0% 100.0% 100.0% 104.8%

100.0% 100.0% 100.0%

100.0% 100.0% 100.0%

100.0% 100.0% 100.0% 100.0% 100.0%

Y/Y Budget Composition growth

Outturn Budget Outturn 2011/12 2012/13 2012/13

1,659.5 645.9 913.6 26.8 62.2 11.1 25.5 15.3 10.2 4,314.0 3,244.4 236.6 9.9 33.2 47.6 203.2 115.6 423.5 3,890.5 1,808.9 1,345.6 354.7 17.0 20.2 5.7 50.2 0.0 1,042.3 10.2 Allowances 7.7

Recurrent wage budget Budgetary central Local Governments District refferal Tertiary

20.3% 19.6% 8.9% 8.6% 10.2% 9.8% 0.3% 0.3% 0.7% 0.8% 0.1% 0.1% 0.3% 0.4% 0.2% 0.3% 0.1% 0.2% 39.8% 31.8% 26.0% 16.5% 3.3% 3.6% 0.3% 0.1% 0.3% 0.4% 0.5% 0.4% 2.2% 2.4% 0.5% 0.8% 6.7% 7.7% 33.1% 24.1% 21.2% 30.3% 15.4% 24.9% 4.2% 3.6% 0.2% 0.2% 0.2% 0.3% 0.3% 0.1% 0.8% 1.0% 0.0% 0.0% 0.0%

Missions abroad Development Budget

Domestic

Donor projects Recurrent -Non-wage budget

Budgetary central Local Governments District refferal Tertiary

Missions abroad Pensions
URA
Interest Costs

excl interest costs & URA Development Budget

Budgetary central Local Governments District refferal Tertiary

Missions abroad
Transfers to other agencies Presidential Jet

Donor Projects
Wages & Salaries

Other employee costs
Use of goods and services
Transfers to International organizations Transfers to other agencies (URA ,e.t.c) Other expenses
Investment in Non-Financial Assets

o/w Land
o/w Non residential Buildings o/w Residential Buildings o/w Roads and Bridges
o/w Aircraft
o/w Other Structures
o/w Transport Equipment o/w Machinery Equipment o/w Furniture and Fixtures o/w Other

0.2 273.7 0.0 220.8 42.4 487.2 0.0 118.1 0.0 278.9 0.0 45.0 13.9 21.2 2.4 7.7

18.1% 11.8% 133.1% 0.1% 99.5% 0.1% 426.1% 0.0% -1.9% 3.1%

18.9% 18.3% 0.1% 0.2% 1.0% 1.7% 0.0% 0.1% 4.2% 3.3%

Published to Facililitate International Comparison
1/ Excludes transfers to local governments and extrabudgetary institutions. 2/ All transfers include salaries, non-wage and development related spending. Source: Ministry of Finance, Planning and Economic Development

72

19.5% 19.1%

18.7% 18.8% 16.4% 7.3% 20.2% 10.4%

5.8% 0.3% 34.7% 0.7% 5.4% 0.1% 72.9% 0.3% 47.9% 0.2% 133.1% 0.1% 2.9% 49.0% -15.9% 36.8% 32.0% 2.7% -52.4% 0.1% 63.6% 0.4% 0.3% 0.5% 29.5% 2.3% 66.6% 1.3% 47.6% 4.8% -6.2% 44.2% 12.3% 20.5% 20.9% 15.3% 5.7% 4.0% 2.9% 0.2% 77.8% 0.2% -75.4% 0.1% -95.4% 0.6%

20.6% 20.1%

-34.3% 2.5% 27.5% 0.5% 30.1% 5.5%

2.8% 1.5%

7.3% 1.3% 46.3% 0.0% 21.7% 3.2%

3.3% 2.9% 0.2% 0.2% 4.7% 4.7%

139.7% 0.5% 47.8% 0.2% 40.7% 0.2%

-68.8% 0.0% 23.1% 0.1%

1.0% 2.0% 0.2% 0.2% 0.4% 0.5% 0.0% 0.0% 0.8% 0.8%

0.0% 0.0% 0.0%

0.2% 0.2% 10.6% 11.4% 0.0% 0.0% 0.0%

0.0% 0.0% 0.0%

3.3. Fiscal Projections for FY2013/14 and the Medium Term

3.3.1. The Fiscal Strategy for FY2013/14 and the Medium Term Budget Framework

The fiscal strategy for FY2013/14 will seek to mitigate the risks on domestic and external revenue mobilization while ensuring optimal allocation of resources to key strategic priorities. Improvements in domestic revenue mobilization need to be sustained given the increasing limitations on the other sources of funds for the budget resource envelope such as foreign aid.

Government is undertaking public finance reforms some of which are expected to trigger a gradual lifting of the suspension on foreign development assistance. This will provide resources to supplement other sources of financing of Government programs.

Interest rates have become a major component of the budget, primarily because of the large stock of Government securities which have been used as a tool for both monetary management and fiscal purposes. Although the reduction in the BoU’s reference rate—the CBR—has led to slight reductions in commercial lending rates, interest rates including on government securities remain high, raising the cost of financing the Government budget through issuance of Government securities. While this financing is critical for smoothening expenditure during budget implementation and is a potential source of financing key investments such as power dams and roads. However, continued use of this source of financing will require adequate preparations to improve efficiency in execution and therefore reduce the indirect cost to the economy.

Mitigating this risk will require diversification of financing sources, to include less concessional external borrowing which over the medium term will remain cheaper than borrowing domestically. Other financing options which will be promoted include PPPs, Equity financing and infrastructure bonds. At the same time, domestic borrowing will continue as a means of refinancing the existing debt and for objectives related to development of the domestic capital market. All financing sources will be critically evaluated to assess their cost benefit.

73

Table 23: Medium Term Resource Envelope (in Shs. Billion)

  page83image6088

Approved Budget

page83image7232 page83image8008

Proj.

page83image9008 page83image9880

Proj.

page83image10880 page83image11656

Proj.

page83image12656 page83image13432

Proj.

page83image14432 page83image15304

Proj.

page83image16640
page83image16912   page83image17456
page83image18128 page83image18448

A. DOMESTIC REVENUES

page83image19456 page83image19776

2012/13 7,467.5

page83image21032 page83image21352 page83image21672 page83image21992

2013/14 8,761.0

page83image23416 page83image23736 page83image24056 page83image24376

2014/15 9,981.6

page83image25976 page83image26296 page83image26776 page83image27096

2015/16 11,747.2

page83image28520 page83image28840 page83image29160 page83image29480

2016/17 13,730.0

page83image30904 page83image31224 page83image31544 page83image31864

2017/18 16,094.8

page83image33464 page83image33784 page83image34264 page83image34584

URA Revenue

7,284.7

8,486.1

9,699.1

11,454.7

13,425.4

15,775.2

Non URA Revenue

171.1

274.9

282.6

292.6

304.6

319.6

Loan Repayments

11.8

0.0

0.0

0.0

0.0

0.0

page83image57024

B. BUDGET SUPPORT

page83image58104 page83image58880

749.4

page83image59880 page83image60656

212.9

page83image61656 page83image62528

237.1

page83image63528 page83image64304

206.3

page83image65304 page83image66080

211.8

page83image67080 page83image67952

217.5

page83image69288

Loans

268.8

0.0

0.0

0.0

0.0

0.0

Grants

314.4

52.1

43.0

24.0

24.8

25.5

Debt Relief

166.2

160.8

194.0

182.2

187.0

192.0

page83image91608

C. PROJECT SUPPORT

page83image92688 page83image93464

1,992.8

page83image94464 page83image95240

2,453.4

page83image96240 page83image97112

1,751.7

page83image98112 page83image98888

1,277.2

page83image99888 page83image100664

310.4

page83image101664 page83image102536

319.7

page83image103872

Loans

1,230.7

1,752.5

1,225.1

883.8

104.1

107.2

Grants

762.1

700.9

526.5

393.4

206.3

212.5

page83image120048

D. DOMESTIC FINANCING

page83image121128 page83image121904

978.9

page83image122904 page83image123680

1694.2

page83image124680 page83image125552

1316.4

page83image126552 page83image127328

608.7

page83image128328 page83image129104

185.8

page83image130104 page83image130976

1084.0

page83image132312
page83image132752

E. TOTAL RESOURCE INFLOWS

page83image133872 page83image134312

11,188.7

page83image135312 page83image135752

13,121.5

page83image136752 page83image137192

13,286.7

page83image138192 page83image138632

13,839.3

page83image139632 page83image140072

14,438.1

page83image141072 page83image141512

17,716.0

page83image142680
page83image143120

F. EXTERNAL DEBT REPAYMENTS

page83image144240 page83image144680

-250.4

page83image145680 page83image146120

-248.4

page83image147120 page83image147560

-289.9

page83image148560 page83image149000

-284.9

page83image150000 page83image150440

-314.2

page83image151440 page83image151880

-358.6

page83image153048
page83image153488

H. RESOURCE ENVELOPE

page83image154568 page83image155008

10,938.3

page83image156008 page83image156448

12,873.1

page83image157448 page83image157888

12,996.8

page83image158888 page83image159328

13,554.5

page83image160328 page83image160768

14,123.8

page83image161768 page83image162208

17,357.4

page83image163376

Arrears Repayments

35.0

0.0

50.0

50.0

50.0

0.0

page83image174832

I. TOTAL AVAILABLE FOR MTEF

page83image175992 page83image176768

8,910.5

page83image177768 page83image178544

10,419.7

page83image179544 page83image180416

11,195.1

page83image181416 page83image182192

12,227.3

page83image183192 page83image183968

13,763.4

page83image184968 page83image185840

17,037.7

page83image187176

(net of arrears payments)

           

o/w Interest Payments

839.3

975.3

1,005.5

1,011.1

1,142.1

1,226.7

o/w domestic

712.8

837.6

893.3

889.9

1015.9

1107.7

o/w external

126.4

137.8

112.2

121.2

126.2

118.9

o/w Domestic Debt Repayments

9.7

22.6

9.7

9.7

-9.7

-9.7

page83image217136

Source Ministry of Finance, Planning and Economic Development

i. Domestic Revenues

Domestic revenues are projected to increase by 18.6 percent in nominal terms to Ushs 8,761 billion during FY2013/14. This is equivalent to 13.4% of GDP. Thereafter, revenues are projected to increase and will average 15.2% of GDP per annum over the medium term. The growth in domestic revenue over the medium term is expected to result from improvements in revenue administrations and reforms in non tax revenues, as no major changes are expected in tax policy.

ii. Grants

Budget support grants (excluding debt relief) during FY2013/14 are projected to decline by 84 percent to USD 19.4 million as compared to the budget projection for FY2012/13. The decline is expected to continue over the medium term and will amount to USD 8 million by the end of the projection period. The sharp decline partly reflects the un-willingness of most development partners to commit to budget support in the wake of the governance challenges in a number of Government departments. Project support grants are expected to decline from USD 292 million projected during

74

FY2012/13 to USD 261 million in FY2013/14. Thereafter, project grant disbursements are projected to decline and average about US$ 130 million per annum over the medium term. Overall donor support is projected to decline to USD 993 million during FY2013/14 from USD 1,051 million in the approved budget for FY2012/13.

Table 24: Medium term budget support projections by source (in milllion USD

  page84image8696 page84image8856 page84image9176

FY2013/14

page84image11688 page84image11848

FY2014/15

page84image15056

FY2015/16

page84image15928

page84image18008

FY2016/17

page84image19208

Austria

JLOS

2.6

2.6

   

Belgium

Education

5.2

4.5

4.5

4.5

Belgium

Health

6.5

3.9

3.9

3.9

Ireland

JLOS – SWAp

5.2

4.5

   
 

Total

19.4

15.6

8.4

8.4

iii. Projected Financing

It is estimated that the financing of the Shs.3,010.7 billion fiscal deficit (including grants) in FY2013/14 will be met by Shs.1,209.4 billion from external sources and Shs.1,801.4 billion from domestic sources.

Table 25: Detailed aggregate financing breakdown

  page84image48376

Projected Outturn

page84image49776

page84image50760

Budget

page84image52448

 

FY2012/13

page84image55000 page84image55320

FY2013/14

page84image57424 page84image57584

TOTAL FINANCING (NET)

2,159.8

3,198.3

External financing (net)

1,315.6

1,504.1

Concessional loans (net)

1,325.8

1,528.8

o/w Disbursements

1,521.5

1,752.5

o/w Amortisation

-195.7

-223.7

Commercial borrowing

0.0

0.0

Exceptional financing

-10.2

-11.1

Arrears repayments

0.0

-13.7

Domestic financing (net)

844.2

1,694.2

Treasury securities issuance (net)

1,035.0

1,040.0

Bank of Uganda

-190.8

654.2

External Financing

External financing, on a net basis, consists of Shs.1,234.1 billion of projected concessional loan disbursements (the total of both budget support and project support loans), offset by Shs. 223.7 billion of concessional loan repayments, Shs.11.1 billion of exceptional loan repayments (which refer to repayments to creditors who are yet to agree to debt relief terms under the HIPC/MDRI framework), and Shs.13.7 billion of arrears repayments (which refer to repayments to creditors, who have agreed to debt relief terms and whose maturities were due from previous financial years).

75

Domestic Financing

The projected net domestic financing in FY2013/14 consists of Shs.1.040.0 raised through the net issuance of Treasury securities to finance infrastructure projects21, and a total of Shs.761.4 billion to be drawn down from Government savings in the Bank of Uganda.

Table 26: Medium Term Fiscal Framework (in Shs billion)

 

Outturn

Approved Budget

Projected Outturn

Projection

Projection

Projection

Projection

Projection

 

2011/12

2012/13

2012/13

2013/14

2014/15

2015/16

2016/17

2017/18

REVENUE & GRANTS

page85image26648 page85image26808 page85image26968

7,763.4

page85image29152 page85image29312 page85image29472

8,698.5

page85image31224 page85image31384 page85image31544

8,319.3

page85image33296 page85image33456 page85image33616

9,674.8

page85image35368 page85image35528 page85image35688

10,745.2

page85image37440 page85image37600 page85image37760

12,346.9

page85image39176 page85image39336 page85image39496

14,148.1

page85image41680 page85image41840 page85image42000

16,524.8

page85image43752 page85image43912 page85image44072

Revenue

6,634.1

7,455.8

7,357.2

8,761.0

9,981.6

11,747.2

13,730.0

16,094.8

URA Revenue

6,135.9

7,284.7

7,154.2

8,486.1

9,699.1

11,454.7

13,425.4

15,775.2

Other Non Tax Revenue

105.9

171.1

203.0

274.9

282.6

292.6

304.6

319.6

Oil Revenue1

392.3

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Grants

1,129.3

1,242.8

962.1

913.8

763.6

599.7

418.1

430.0

Budget Support Grants

576.0

480.7

186.4

212.9

237.1

206.3

211.8

217.5

Project Grants

553.3

762.1

775.7

700.9

526.5

393.4

206.3

212.5

page85image94008

EXPENDITURE

page85image95048

page85image96616

9,273.4

page85image97816

page85image99048

10,926.5

page85image100248

page85image101480

10,479.2

page85image102680

page85image103912

12,873.1

page85image105112

page85image106344

14,103.3

page85image107544

page85image108600

14,836.6

page85image109640

page85image111208

16,031.3

page85image112408

page85image113640

19,019.8

page85image114840

Recurrent Expenditure

5,420.9

5,606.9

5,867.4

6,323.1

7,211.3

7,991.5

9,433.5

10,951.6

Wages & Salaries

1,831.8

2,140.8

2,174.8

2,330.6

2,642.5

2,903.6

3,339.1

4,954.1

Non Wage

2,464.9

1,997.9

2,176.0

2,372.3

2,876.7

3,349.4

4,166.7

3,701.5

Statutory

521.0

627.9

626.1

644.9

686.5

727.4

785.6

1,069.3

Interest Payments

603.3

840.4

890.5

975.3

1,005.5

1,011.1

1,142.1

1,226.7

External

88.6

126.4

104.1

137.8

112.2

121.2

126.2

118.9

Domestic

514.7

713.9

786.4

837.6

893.3

889.9

1,015.9

1,107.7

Development Expenditure

3,602.9

5,296.3

4,163.9

6,550.0

6,842.0

6,795.1

6,547.9

8,068.3

Donor Projects

1,701.4

1,992.8

2,009.8

2,453.4

1,751.7

1,277.2

310.4

319.7

Domestic

1,901.5

3,303.6

2,154.1

4,096.6

5,090.3

5,517.9

6,237.4

7,748.6

Net lending and investment

-39.4

-11.8

409.4

0.0

0.0

0.0

0.0

0.0

Others2

289.0

35.0

38.5

0.0

50.0

50.0

50.0

0.0

OVERALL DEFICIT (Including grants)

page85image204840 page85image205000 page85image205160

-1,510.0

page85image206576 page85image206736 page85image206896

-2,227.9

page85image208144 page85image208304 page85image208464

-2,159.8

page85image209712 page85image209872 page85image210032

-3,198.3

page85image211280 page85image211440 page85image211600

-3,358.0

page85image212848 page85image213008 page85image213168

-2,489.7

page85image214248 page85image214408 page85image214568

-1,883.3

page85image215976 page85image216136

-2,495.1

page85image217376 page85image217536

OVERALL DEFICIT (Excluding grants)

page85image218888 page85image219048 page85image219208

-2,639.2

page85image220288 page85image220448 page85image220608

-3,470.7

page85image221520 page85image221680 page85image221840

-3,122.0

page85image222752 page85image222912 page85image223072

-4,112.1

page85image223984 page85image224144 page85image224304

-4,121.6

page85image225216 page85image225376 page85image225536

-3,089.3

page85image226280 page85image226440 page85image226600

-2,301.4

page85image227672 page85image227832

-2,925.1

page85image228736 page85image228896

FINANCING

page85image230144 page85image230304 page85image230464

1,510.0

page85image231880 page85image232040 page85image232200

2,227.9

page85image233448 page85image233608 page85image233768

2,159.8

page85image235016 page85image235176 page85image235336

3,198.3

page85image236584 page85image236744 page85image236904

3,358.0

page85image238152 page85image238312 page85image238472

2,489.7

page85image239552 page85image239712 page85image239872

1,883.3

page85image241280 page85image241440

2,495.1

page85image242680 page85image242840

External Financing (net)

1,153.9

1,249.1

1,315.6

1,504.2

2,041.7

1,881.0

1,697.4

1,411.1

Disbursement

1,356.4

1,499.5

1,521.5

1,752.5

2,331.6

2,165.9

2,011.6

1,769.7

Budget Support Loans

125.7

268.8

287.5

0.0

0.0

0.0

0.0

0.0

Project Loans

1,230.8

1,230.7

1,234.0

1,752.5

1,225.1

883.8

104.1

107.2

Commercial Loans

     

0.0

1,106.5

1,282.1

1,907.5

1,662.5

Amortisation

-192.9

-217.2

-195.7

-223.7

-283.0

-286.9

-317.6

-365.0

Exceptional Financing

-9.6

-33.2

-10.2

-24.7

-6.9

2.0

3.4

6.4

Domestic financing (net)

1,433.6

978.8

844.2

1,694.2

1,316.4

608.7

185.8

1,084.0

Memo Items:

             

Fiscal Deficit as % of GDP (Incl. grants)

-3.0%

-4.1%

-3.9%

-5.1%

-4.8%

-3.2%

-2.1%

-2.5%

Fiscal Deficit as % of GDP (Excl. grants)

-5.3%

-6.4%

-5.7%

-6.5%

-5.9%

-3.9%

-2.6%

-3.0%

Total public debt stock % of GDP

26.2%

27.8%

29.1%

29.3%

30.1%

30.6%

31.0%

31.7%

Domestic debt stock % of GDP3

10.1%

9.6%

11.1%

11.2%

10.9%

10.8%

10.2%

10.5%

External debt stock % of GDP

16.1%

18.2%

18.1%

18.1%

19.2%

19.8%

20.8%

21.2%

Domestic revenue % of GDP

13.3%

13.7%

13.5%

13.9%

14.2%

14.9%

15.5%

16.3%

URA revenue % of GDP

12.3%

13.4%

13.1%

13.4%

13.8%

14.6%

15.2%

16.0%

Expenditure % of GDP

18.6%

20.1%

19.2%

20.4%

20.0%

18.9%

18.2%

19.2%

Donor grants and loans % of GDP

5.0%

5.0%

4.5%

4.2%

4.4%

3.5%

2.8%

2.2%

page85image388912

21 Note that the Shs1,040 billion projected net issuance does not include any potential net issuance for monetary policy purposes. If BoU deems it necessary to conduct any primary issuance of Treasury securities during FY2013/14 for monetary policy purposes, the proceeds from such issuance will not be available for GoU to spend. Note also that any such primary issuance of Treasury securities for monetary policy purposes will be closely coordinated with and clearly separated from fiscal issuance, and clearly communicated to the market.

76

3.3.2. Strategies to increase domestic revenues in the medium term

Uganda’s tax effort is estimated at 54-65 percent, implying a tax gap of 35-46 percent. Based on this gap, an estimate of Shs. 3,325 billion to Shs. 5,317 billion of tax remains uncollected every year. In addition, Uganda’s tax expenditures are estimated to amount between 2.3 to 3 percent of GDP, which is equivalent to Shs. 1,129 billion to Shs. 1,472.6 billion in forgone revenue every year. Measures to streamline tax expenditure, tax policy, tax administration to close the tax gap are imperative to reverse this trend and raise the tax effort. To that end, Government has dramatically curtailed exemptions to NGOs and the private sector as a measure to improve the tax effort. Last financial year Government paid Shs. 11.6 billion in tax refunds due to exemptions. However by December 31, 2012 Government had only paid Shs. 3.8 billion. Going forward careful consideration will be given to the cost and benefits of exemptions before they are granted.

In addition, URA is pursuing efforts to strengthen its strategies for addressing or minimising revenue shortfalls. These efforts include:

  1. improving internal efficiencies through intensifying capacity building for the existing staff;

  2. engaging local authorities and other third parties to gather information and intelligence about potential revenue sources;

  3. using e-tax information to identify unreported tax under Rental tax, PAYE, Corporation Tax, Individual Income Tax, Local Excise duty, Gaming and Pool Betting Tax;

  4. and conducting monthly reviews of revenue collection controls in customs department among others.

Government is also pursuing efforts to modernize its tax laws since it is a prerequisite for improved tax administration and enhanced tax compliance. During the year, reforms were undertaken on old tax laws and a draft Bills on the Excise, Lotteries and Stamps duty laws prepared. The laws are intended to improve compliance through simpler collection methods, deletion of outdated and outmoded language and procedures and reflect important business practices in production of excise goods and dealing with commercial transactions. A new Tax Procedures Code is also being worked on to bring all procedures, offences, penalties and interest relating to all tax taxes under one umbrella law for ease of compliance.

In addition, and in order to streamline tax exemptions, a number of tax laws are being reviewed to ensure exemptions are rationalized and minimized to stop revenue leakages. As a result proposals to terminate some exemptions are being considered to enhance revenue performance. Some tax reforms will be considered in the Budget of FY2013/14 to expand the tax base and enhance revenue mobilization. The Government is looking at transactions in the telecommunication sector as a possible source of revenue and is also studying the possibility of making slight adjustments in rates of taxes for high yielding products while taking caution not to increase the cost of doing business, dampen demand or undermine competitiveness. URA will also

77

consolidate the systems put in place and various strategies to plug any existing loopholes in order to minimize revenue leakages. In the medium term, ensuring a more conducive environment for the private sector to shrive through stable macroeconomic indicators is vital for achieving Government revenue targets.

In FY2013/14, tax administration will focus on increasing tax compliance, through conducting comprehensive and issue audits, rolling out the ASYCUDA World which is web-based system that allows traders to submit their declarations from anywhere through the internet to all customs business stations, publicizing non-compliant taxpayers, leveraging the use of Integrated Finance Management System (IFMS), e-tax and informer data in enhancing the audit yield and strengthening the Rental project in Kampala, Entebbe, Jinja, Mukono, Mbarara, Mbale, Lira, Fort Portal and Arua. In addition URA will conduct information based tax clinics for the informal sector such as Kikuubo traders, Kampala shopping arcades and markets.

3.3.3. The Outlook for Uganda’s External Resource Envelope

Aid to Uganda’s National Budget has contributed substantially to the Government’s resource envelope during the last two and a half decades. Between 1991/92 and 2003/04 ODA to government remained fairly constant at approximately 50 percent of total expenditure and 10 percent of GDP. More recently, however, the contribution of ODA relative to GDP has experienced a decline from 9.6 percent in 2004/05 to 4.5 percent in 2011/12, as shown in figure 30.22 This decline is largely on account of a reduction in budget support, which has fallen from 5.2 percent in 2004/05 to less than 1 percent of GDP in 2012/13 (see figure 31). By contrast, the decline in project aid disbursements has been much more moderate from 4.4 to 3.7 percent over the same period.

Figure 30: Grants and Loans, Outturns

Figure 31: External Resource Envelope, as % GDP

3 2.5 2 1.5 1 0.5 0

12% 10% 8% 6% 4% 2% 0%

page87image19696 page87image25328 page87image25488 page87image25648 page87image25808 page87image25968 page87image26128 page87image26288 page87image26448 page87image26608 page87image26768 page87image26928 page87image27088 page87image27248 page87image27408

Project Support Loans
Budget Support Loans
Total Loans and Grants (% GDP)

Project Support Grants Budget Support Grants

page87image29320 page87image29480 page87image29640 page87image29800 page87image29960

6% 5% 4% 3% 2% 1% 0%

page87image31816 page87image36440 page87image36600 page87image36760 page87image36920 page87image37080 page87image37240 page87image37400 page87image37560 page87image37720

Budet Support (% GDP)

Project Aid, Loans & Grants (% GDP)

page87image38944 page87image39104

Source: Ministry of Finance, Planning and Economic Development

Source: Ministry of Finance, Planning and Economic Development

page87image40832

22 In absolute terms, there was a substantial increase in ODA during 2011/12 (compare figure 1), this was largely in account of high project aid disbursements.

78

UGX Trillion (Current Prices)

%ofGDP

i. The External Resource Envelope in the Medium Term

Following projections provided by Development Partners (DP), in FY2013/14 Official Development Assistance to Uganda is expected to amount to USD 1.3 billion. This includes both on-budget aid which is captured in the GoU Medium Term Expenditure Framework (MTEF) and assistance which is managed outside government system (NON-MTEF).

In FY2013/14 the total MTEF contribution, which will add to the Government’s domestic resource envelope, is expected to sum to USD 913.5 million. 29 percent of ODA is expected to be received outside the MTEF and will therefore not be included in the budget estimates for FY2013/14 appropriated by Parliament. Government will continue to work together with Development Partners to reduce the overall share of off-budget aid, while it continues to collect yearly data from donors on off-budget projects to facilitate macroeconomic management and inform strategic allocation of resources.23

Table 27: External resource envelope for the Medium Term in million USD

ii. Sectoral Allocations of ODA in the Medium Term

Table 28 depicts how total ODA to the National Budget is expected to be allocated across sectors. IN FY2013/14 the majority of assistance is planned for the Health sector (24 percent), followed by Works and Transport sector (20 percent), and Energy and Minerals (15 percent), and will thus continue to be used for major infrastructure investment programmes.

           
page88image19920

FY

2013/14

page88image21176 page88image21448

FY

2014/15

page88image22704 page88image22976

FY

2015/16

page88image24232 page88image24504

FY

2016/17

page88image25760 page88image26032

FY

2017/18

page88image27296
page88image27728

TYPE

page88image28728

MTEF Project Support

913.5

633.2

448.3

105.8

105.7

Budget Support

19.4

15.6

8.4

8.4

Off-Budget Project Support

387.6

345.5

252.8

252.8

252.8

page88image47848  

Total ODA

page88image49328 page88image50104

1,320.5

page88image51104 page88image52312

994.3

page88image53648 page88image54424

709.5

page88image55760 page88image56536

367.0

page88image57872 page88image58648

358.6

page88image59824 page88image60248

page88image62800 page88image64720

23 It should be noted, however, that several development partners deliver considerable amounts of off-budget support, but do not report details of these funds to Government. Therefore, figures presented in table 6.6 are likely to represent lower bound estimates of off- budget aid to Uganda.

79

Table 28: Sectoral Allocation of MTEF Project Support

page89image3392   page89image4096 page89image4880

2012/13

page89image6648

2013/14

page89image8152 page89image8752

2014/15

page89image10264

2015/16

page89image12032

2016/17

page89image13192 page89image13976

2017/18

Accountability

4.1%

0.9%

1.0%

0.9%

0.0%

0.0%

Agriculture

5.2%

3.7%

4.5%

0.8%

0.7%

1.3%

Education

9.6%

7.8%

10.9%

13.9%

10.3%

20.6%

Energy & Minerals

15.2%

15.6%

12.5%

9.4%

0.1%

0.3%

Health

24.0%

17.2%

9.5%

6.3%

4.6%

9.2%

Justice, Law & Order

0.6%

0.1%

0.0%

0.0%

0.0%

0.0%

Lands, Housing & Urban Development

0.0%

0.1%

4.0%

5.2%

0.0%

0.0%

Public Sector Management

10.2%

10.2%

6.5%

4.0%

3.2%

6.5%

Security

0.0%

9.1%

11.2%

14.9%

31.0%

62.1%

Tourism, Trade & Industry

0.5%

0.0%

0.0%

0.0%

0.0%

0.0%

Water & Environment

10.7%

2.9%

8.0%

16.9%

0.0%

0.0%

Works & Transport

19.9%

32.2%

31.9%

27.6%

50.0%

0.0%

page89image87656

page89image88264

Total

page89image89264 page89image90040

100.0%

page89image91040 page89image91912

100.0%

page89image93248 page89image93688

100.0%

page89image95024 page89image95464

100.0%

page89image96464 page89image97336

100.0%

page89image98336 page89image99112

100.0%

page89image100712

80

Chapter 4: Sector Performance and Investment Priorities

4.1. Infrastructure Development

Government is mindful of the role of infrastructure in accelerating structural transformation and improving the business climate for both local and foreign investors. Government, therefore, will continue to allocate significant resources to infrastructure development, particularly in the areas of roads, railways, energy and ICT. This section provides highlights of the major achievements in this area during FY2012/13 and the planned interventions to further reduce the infrastructure deficit during FY 2013/14.

4.1.1. Roads

There was continued improvement of the national road network. The percentage of paved national roads increased to 20 percent in FY 2012/13 from 15 percent in 2010/11, with the paved network of national roads now totalling 4000kms (excluding urban tarmac roads).

National roads

In FY2012/13, a number of national roads were either completely or partially upgraded from gravel to asphalt standards as shown in the table below.

Table 29: Roads currently in construction

page90image10896

Roads being upgraded

page90image12312 page90image12752

Percentage completed

page90image14136

Kabale-Kisoro-Bunagana/Kyanika road(101 km)

100% (Completed in September, 2012)

Nyakahita-Kazo road(68km)

97%

Fort Portal – Bundibugyo-Lamia road

82.5%

Kazo-Kamwenge road(75km)

51.6%

Vurra-Arua-Oraba road(92km)

30%

Gulu- Atiak road(74km)

13.8%

Ishaka-Kagamba road (35.4km)

12. 2%

Moroto- Nakapiripiriti road (93km)

Work commenced on 2nd May,2013

Kampala-Entebbe Expressway (51km)

5.8%

Mbarara-Kikagati- Murongo Bridge road(74km)

28.8%

Hoima-Kaiso- Tonya road (92km)

12%

Rehabilitation and reconstruction of national roads

Rehabilitation and reconstruction of the national roads will continue to be a priority in the FY2013/14. Works on the following roads is on-going; Mbarara- Ntungamo road (59km) with 27.7 percent of the works completed; Ntungamo- Katuna road(65km), 15.8% of the works completed; 45.5 percent of the works on the second phase of the Busega-Masaka road(51km) completed; 70 percent of the works on the Kawempe-Kafu road(166km) completed; on the Malaba/Busia-Bugiri road 72.7 percent of the works completed;46% of the works on the Jinja- Kamuli road(57km) completed; 21 percent of the works

81

on the Mukono-Jinja road completed; on the Tororo-Mbale road (49km) 42% of the works was completed and 37 percent of the works on the Mbale-Soroti road(103km) completed. In addition to this, the rehabilitation of the Masaka- Mbarara road (154km) was completed in August 2012.

Road projects under the Contractor Facilitated Financing

In a bid to diversify its financing mechanisms for infrastructure projects, Government has decided to implement some road projects under the Contractor Facilitated Financing (CFF) approach. Under this approach, the contractor, rather than Government, finds the source of financing for a given project. Contractors then submit technical and financial bids to Government, indicating the Financing Institution and the terms of financing. Government then evaluates the bids and chooses the best bidder. In the FY2012/13, CFF prequalification of contractors was completed for the following roads; Olwiyo- Gulu- Kigum(167km); Atiak-Adjumani-Moyo-Afoyi(104); Rwenkunye-Apac- Lira-Kigum-Musingo(350km); Kapchorwa-Suam(77km); Mbale-Bubulo- Lwakhakha(41km); Muyembe-Nakapiripiriti/Moroto-Kotido(193km); Soroti- Katawi-Moroto-Loktanyala(208); Mukono-Kyetume-Katosi(74km); Mpigi- Maddu-Ssembabule(135km); Villa Maria Ssembabule(48km); Musiita- Lumino-Busia/Majanji(104km); Hoima-Butiaba-Wanseko(111km); Rukungiri-Kihihi-Kanungu-Ishasha(74km); Kyenjojo-Kabwoya(105km); Kayunga-Bbaale-Galiraya(88km); Buwaya-Kasanje-Mpigi-Kibibi- Mityana(90km); Nabumali-Butaleja-Numutumba(95km); Hamurwa-Kerere- Kanungu/Bulema-Buhoma-Butogota-Hamayanja-Ifasha-Ikumba; Ishasha- Katunguru(149km); Kabala-Buyonyi(88km); Kisoro-Mgahinga gate(8km); Kisoro-Nkuringo/Bwindi(40km).

Roads under the different procurement stages

The procurement process of the following roads is in progress as below; Zirobwe-Wobulenzi road(23km), the evaluation of this contract is ongoing; Kamwenge-FortPortal road(65km) the contract for supervision was signed on 16th January, 2013; the evaluation of proposals for the Kigumba-Bulima road/Bulima-Kabwoya road(137km) is ongoing; the rehabilitation of Kafu- Karuma(88km) is ongoing and the addendum for Kafu-Kiryandongo road was signed and road works have commenced. Furthermore, the procurement of the works contractor on the Kiryandongo-Karuma and Kamdini-Gulu road(110km); is ongoing.

Roads for Design for capacity improvement/dualing

In the FY2013/14, Government will further design more national roads to improve capacity/dualing. The following roads include; Kibuye-Busega-Mpigi road (30km), Kampala-Jinja Expressway(80km), Kampala Southern Bypass(18km), Kampala-Bombo Expressway(35km) and Kampala city fly – overs. In addition, the design to rehabilitate and reconstruct Kyotera- Mutukula road (44km); Tororo-Mbale-Soroti road (156km) and Corner Ayer- Corner Aboke-Bobi road (55km) is ongoing and shall spill over to the next financial year.

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National Bridges

In the FY2012/13, government completed the construction of Bulyamusenyu Bridge while work on the following bridges is on-going; Ayugi and Irei Bridges on Atiak-Moyo-Afoji road, with 50 percent of the work completed; Nalubale bridge, of which 70 percent of the rehabilitation works completed; 76 percent of the works on the Awoja bridge completed; 25 percent of the works on the Dacra, Ure, Eventre and Uzurungo on Arua-Wandi completed. Furthermore, evaluation of bids on the construction of Biraara Bridge, Ntungwe Bridge and Mitaano Bridge are on-going. The evaluation of technical proposal for the construction of the Second Nile Bridge at Jinja was completed and contract for the construction of the Apak Bridge awarded and work will commence in the subsequent months.

4.1.2. Railway Transport

In line with the Vision 2040, Government is committed to reducing the cost of transportation and has embarked on efforts geared towards increasing the volume of cargo traffic transported by railways and marine transport.
In FY2012/13, government undertook the following;

  1. 85 percent of works on the rehabilitation of MV Kaawa was completed.

  2. Designed the Kampala-Malaba standard gauge railway line which is to be completed in October 2013

  3. Signed the contract for constructing Mukono ICD which is expected to be finalized in December 2013.

  4. Drafted the Assessment report for remodelling Port Bell and Jinja Piers and the final report is expected in September 2013.

  5. The development of Tanga-Musoma- Kampala route: Preliminary activities to procure PPP are underway for the construction of the Bukasa port.

In FY2013/14, focus will be on accelerating the implementation of a number of interventions to revitalize railway transport. These will include the following:

  1. Completion of the rehabilitation of MV Kaawa as one of the measures to revitalise the southern route through Port-Bell-Mwanza-Dar-es salaam.

  2. Complete the construction of Mukono railway ICD

  3. Complete the Draft Design and feasibility study and conclude an

    Engineering Procurement and Construction (EPC) contract for

    Kampala-Malaba railway line.

  4. Undertake the detailed Design study for the Kampala-Kasese railway

    line

  5. Conclude PPP arrangements for the design and construction of Tororo-

    Packwach and Gulu Nimule lines

  6. Conclude an EPC contract for Bukasa Port.

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4.1.3. Inland Water Transport

In this sub-sector, Government’s priority has been the improvement of ferry services on Uganda’s major water bodies. The key interventions include the rehabilitation of existing and purchase of new ferries and the construction of landing sites. In the FY2012/13, government commissioned the Lwampanga Ferry which connects Nakasongola to Amolatar district; relocated the Mbulamuti ferry that connects districts of Kayunga and Kamuli to Kasana- Bugobero crossing and trial operations are ongoing; completed the assembling of the new ferry for Laropi which connects Moyo and Adjumani district; completed the repair of the Obongi-Sinyanya ferry and which is now operational; launched the Kalangala Infrastructure Services(KIS) and commenced operations between Bukakata(Masaka) to Luuku (Kalangala). The old ferry on this landing site will be refurbished and deployed at Kiyindi- Buvuma crossing.

4.1.4. Air Transport

International passengers at Entebbe International Airport (EIA) registered a growth of 9.41 percent between the FY2011/12 and FY2012/13. On the other hand, domestic passengers increased by 77 percent from 10,143 in FY2011/12 to 17, 952 in the FY2012/13. Furthermore, imports by air increased from 21, 408 tonnes in FY2011/12 to 21,717 tonnes in FY2012/13 and export traffic grew by 10.65 percent in FY2012/13.

In order to meet the demands of increasing traffic and volumes of imports and exports, government undertook the following:

  1. Upgraded the airspace management system for the new International Civil Aviation Organisation (ICAO) and flight plan 2012.

  2. upgraded the Instrument Landing System (ILS) electronics and the NAVAIDS remote control Monitoring Systems;

  3. Installed the Maintenance Management Centre (MMC) for the NAFISAT (Very Small Aperture Terminal Network covering North East AFI States); making Entebbe International Airport (EIA) a regional backup MMC for NAFISAT;

  4. Completed the master plan and detailed engineering designs for Gulu and Kasese Airports.

In conjunction with the oil companies especially those operating at EIA, an additional Jet A1 storage tank was constructed. The purpose of this elevation was to increase storage capacity at EIA to 7.6 million litres.

In FY2013/14, government plans to undertake the following:

  1. Acquire land for airport expansion and development;

  2. develop the 20-year Civil Aviation Master plan to guide investments in

    the Aviation industry;

  3. expand and modernize Entebbe International Airport;

  4. upgrade and construct Kasese and Gulu airports;

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v. revive the National Airline;
vi. Carry out studies to develop a new airport at Kabaale, Hoima to support

the Oil industry in the Albertine Region.

4.1.5. Energy

At 215 kWh per capita24, Uganda’s electricity consumption is low, even by Sub Saharan African standards. This is mainly attributed to insufficient power generation, energy losses, and low access due to high power tariffs. The high cost of electricity is a key constraint to improved competitiveness, and significantly reduces the number of investors willing to do business in Uganda25. That notwithstanding, Uganda’s electricity generation has significantly increased following the commissioning of the 250mw Bujagali hydropower dam, and a number of other mini hydro dams.

Government priorities in the energy sub sector continue to be: increasing electricity generation capacity and transmission network; increasing access to modern energy services through rural electrification and renewable energy development; and promoting the efficient utilisation of energy. To that end, progress has been made in the following areas:

Increasing electricity generation capacity:

  1. Bujagali hydropower Project (250MW): Construction was completed and the plant commissioned on October 8, 2012.

  2. Karuma Hydropower Project (600MW): The feasibility study and the Environment and Social Impact Assessment for the Project were completed. The project is to be financed by Government co-financing amounting to US$700 million, as part of GoU Equity, and US$500 million concessional funding from the Government of China. Construction is expected to start before the end of 2013 and 70 percent of the affected persons have been compensated as per the Resettlement Action Plan for the project.

  3. Isimba Hydropower Project (180 MW): The feasibility study for the power plant and transmission line were finalised. Construction is expected to start in FY2013/14, after finalising the financing agreement with the Government of India.

  4. Ayago Hydropower Project (600MW): The project is being developed by Government as a Public Project. The pre-feasibility studies were completed in 2011 and detailed feasibility studies shall be completed in 2014, paving way for construction to start in 2015.

24 NBFP FY 2013/14 – 2017/18
25 Global Competitiveness Index Report (2012).

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v. Small energy projects:

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  •  Completed projects: Two (2) small hydropower projects, namely: Buseruka (9MW) and Nyagak I (3.5MW) were completed in FY2012/13. This is in addition to other Mini- Hydropower plants which are now operational, namely: Ishasha (6.5MW); Bugoye (13MW); Mpanga (18MW); Kasese Cobalt Limited (10MW); Mobuku (15MW); Kisizi (0.35MW); Kagando (0.06MW); and Kuluva (0.12MW).

  •  Planned Projects: Studies for several hydropower projects have been completed and construction is due to start in FY2013/14. These include: Nyagak III (4.5MW); Nengo Bridge (6.8MW); Rwimi (9.6MW); Waki (4.8MW); Lubila (5.4MW); Siti (5MW); Nyamwamba (14MW); Kaka (7.2MW); and Kikagati (16MW).

  1. Feasibility studies are also ongoing in a number of sites, for which construction is expected to start in FY2014/15. These include: Muzizi (26MW); Nshungyezi (40MW); Achwa-Agago (88MW); Kanyampara (7.2MW); Muyembe (3.1MW); Kyambura (8.3MW); and Yamabuye (2.2MW).

  2. Other planned projects include: Katwe Geothermal (150MW); Kabale Peat (33MW); Local Oil/Gas/HFO in Kabaale Hoima district (53MW); Hoima Thermal Plant (50MW); Expansion of Kakira Cogeneration (20MW); Kinyara Cogeneration (32MW); and Solar Thermal (50MW).

Grid Expansion – Transmission infrastructure

  1. Completed Transmission lines: The Bujagali Interconnection Project

    was completed and commissioned. The line transmits power from Bujagali hydropower project to the national grid and consists of: a 220kV transmission line from Bujagali to Kawanda (75km); and a 220/132kV substation at Kawanda.

  2. Transmission Lines under implementation: These include: Bujagali- Tororo (Uganda) 220kV transmission (127.7km); Mbarara-Mirama Hill (Uganda) – Birembo (Rwanda) 220 kV transmission line (66km) and Mirama substation; Mbarara-Nkenda 132kV Transmission Line (160km); Tororo-Opuyo-Lira 132kV transmission Line (260km); Kawanda-Masaka 220 kV transmission line (142km); Nkenda-Fort portal-Hoima 220kV lines (234km); Masaka-Mutukula (Uganda)- Mwanza (Tanzania) 220kV transmission line (85km); Mutundwe- Entebbe 132kV transmission line (35km); Mutundwe-Kabulasoke Restringing 132kV (84.5km); Tororo substation transformer 132/33kV, 32/40MVA; Kampala North substation 132/33kV, 2x20MVA.

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iii. On-going feasibility studies: Feasibility studies are ongoing for a number of transmission lines, namely: Isimba Interconnection project 132kV; Opuyo-Moroto transmission line; Mirama Hill-Kabala 132kv; Hoima-Kafu 220kV; Lira-Gulu-Nebbi-Arua 132kV; Namanve-Namanve South 132kV and Namanve South 132/33kV substation; Nkenda- Mpondwe-Beni 220kVline; Ayago Interconection project; Kinyara- Hoima 1322kV; Kikagati-Mirama 132kV; and Mutundwe-Hoima 132kv line.

Rural Electrification

The recently launched Global Monitoring Report (2013) argues that urbanisation is important in the achievement of the MDGs, and of broader economic growth and development.
An important step in transforming rural into urban areas is electrification, which promotes industry, improves productivity and enhances service provision. Government, therefore, has intervened in this area as follows:

  1. Completed undertakings: A number of district headquarters were connected to the main grid. These include: Nakapiripit; Amudat; Kaberamaido; Dokolo; Amolatar; Ntotoko; ALebtong; Moroto; Napak; Kiruhura; Kyegegwa; and Katakwi.

  2. Ongoing undertakings:

    1. In FY2012//13, rural electrification schemes of over 3000km

      of medium voltage lines (33 or 11kV) were under construction. These include: Soroti-Katakwi; Ayer-Kamudin; Ibanda-Kazo Ntenjeru; Ruhiira Millenium Village; Gulu-Acholibur and Tee- off to Paicho-Patiko-Palaro; Opeta-Achokora with Tee-off to Iceme-Otwal; Masindi-Waki-Buliisa-Tee-off to Hoima; Nkonge- Kashozi; Mubende-Kyenjojo; Rakai-Sembabule; Kabale- Kisoro; Gulu-Adjumani-Moyo; Rackoko-Awere-Lalogi; Apala- Adwar-Kiiru with Tee-off to Morulem; Kaddugala- Lwamanyonyi; and Katugo-Ngoma. Also under implementation are electricity power networks in: Kamuli, Namutamba, Hoima, Nakasongola, Kabale, Rukungiri, Kanungu, Mbarara, Mitooma, Bushenyi, Sheema, Lwengo, Kyenjojo, Buhweju, Wakiso, Tororo, Mbale, Manafwa, Sironko, Bulambuli, Lira, and Masindi.

    2. A study is being done to assess the feasibility of connecting Kalangala district to the main grid by submarine cable from Bukakata.

  3. Planned undertakings for FY 2013/14:

i. A number district headquarters shall be connected to the

main grid. These include: Adjumani; Moyo; Amuru; Koboko; Maracha; Zombo; Nsiika (Buhweju); Bukwa; Otuke; Namayingo; and Buliisa.

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4.1.6.

  1. Construction works for eight (8) projects shall be undertaken. These include: Kapchorwa-Bukwo-Suam (Kapchorwa); Mayuge-Bwondha Landing Site (Mayuge); Kasambira- Bugulumbya-Butuuku (Kamuli and Luuka); Mityana-Lusalira (Mityana); Lake Vitoria free Trade Zone (Rakai and Masaka); Apac-Chegere-Alemi (Apac); Hoima-Nalweyo-Nkooko- Kakumiro (Hoima and Kibaale) and Kitgum-Namokora/Padipe (Kitgum).

  2. Extension of grid from Matanyi (Moroto) – Kaabong and Namukora-Kiringa-Kotido, including the tourist lodges.

Oil and Gas

The key planned undertakings by the sector relate to: capacity building and institutional development; exploration and appraisal; and refinery development.

Capacity building and Institutional Development

  1. Regulations for the oil and gas sector will be developed to support the new laws.

  2. New institutions to take forward the sector i.e. the Directorate of Petroleum; Petroleum Authority of Uganda; and National Oil Company will be put in place.

  3. The second phase of the construction of the laboratories, a petroleum data repository and offices for Directorate of Petroleum and Petroleum Authority will be completed.

Exploration and appraisal

The licensed oil companies are expected to complete the remaining appraisal work and submit applications for production licenses and field development plans for the remaining discoveries in the Albertine Graben. In this regard,

  1. Tullow Oil is expected to submit applications for production licenses and field development plans for the six discoveries in the northern part of Exploration Area 2, whose appraisal was completed during 2012/13 for review, before approval for commencement of their development for production.

  2. Total is expected to complete appraisal of the six discoveries in Exploration Area 1 and 1A and submit application for production licenses and field development plans for these discoveries for review before approval for commencement of their development for production.

Refinery Development

i. Government will complete the acquisition of 29 sq km of land for the refinery through implementation of the approved Resettlement Action Plan which involves compensation and/or resettlement of over 7000 persons to be affected by the development.

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4.1.7.

ii.

iii. iv. v.

Conclude the environmental baseline survey for the refinery development which will characterize the initial environmental and social economic conditions in and around the refinery area and provide a benchmark for comparing the state of the environment before development starts, when the operations are being undertaken and at the decommissioning stage.

Select a lead investor to partner with Government in the refinery development and complete structuring of the company to construct and operate.
Undertake Engineering Design (PreFEED) for crude oil and petroleum product pipelines together with storage facilities to support the refinery development.

A multiclient seismic survey will be undertaken in the areas with the potential for petroleum production in the country in preparation for undertaking a competitive licensing round.

Information and Communication Technology

The NDP advocates for developing ICT infrastructure as one of the strategies to unlock the binding constraints to Uganda’s structural transformation and high economic growth. Amongst its core projects is the construction of Information Technology Business Parks. The importance of the sector is also highlighted in the Uganda Vision 2040, which recognises ICT as having “enormous opportunities that Uganda can exploit to transform the economy and peoples’ lives through job creation, accelerated economic growth and significantly increased productivity and profitability.”

Over the last decade, several ICT services and products, including mobile phones and internet usage, have emerged in Uganda. Increased usage of mobile phones has given rise to innovation within the sector, leading to the emergence of mobile money services. These have helped to bridge the financial inclusion gap.

In a bid to harness the potential of ICT, Government has enhanced its intervention in promotion of ICT to both improve service delivery and promote investment. The key interventions have included the establishment of the National Information and Technology Authority (NITA-U) and installation of 1,050 KM of the planned 1,450 KM of fibre optic cable under the national backbone infrastructure. NITA-U has supported the rollout / maintenance of the important e-government services such as Intergrated Financial Management System (IFMS), Voice over Internet Protocol (VoIP), e-Tax, Intergrated Personnel Payroll System (IPPS) and Land Information System (LIS).

As with any emerging sector, it is paramount that a proper legal and institutional framework is set up to guide operations and activities within the sector. To this end, the Uganda Communications Regulatory Authority (UCRA) Bill 2012, later renamed the Uganda Communications Commission Bill 2012, was enacted.

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Further intervention in the sector included the installation of the digital migration distribution network for Kampala metropolitan (Kampala City, Wakiso and Mukono). This is in line with Government’s objective of migrating from analogue to digital transmission.

Whereas the sector is expanding at an unprecedented rate, ICT usage in Uganda continues to be very low by international standards, and this has been identified by the NDP as one of the key factors hindering Uganda’s competitiveness.

The budget for the FY2013/14 will prioritise the establishment of fully serviced industrial and Information Telecommunications (IT) parks in various regions of the country, and the completion of the fibre optic cable under the national backbone infrastructure.

4.2. Human Resource Development

Government’s main interventions pertinent to Human Resource Development thematic area have been directed to: education and skills development, health, water and environment sectors.

4.2.1. Skills development:

In FY2012/13, Government unveiled its National flagship programme for accelerating the pool of skilled labour in the country dubbed ‘Skilling Uganda’. The Skilling Uganda programme aims to accelerate reforms and guide rational use of investments in the Business, Technical, Vocational and Education Training (BTVET) sub-sector by (i) raising the economic relevance of BTVET, (ii) increasing the quality of skills provided, (iii) providing equitable access to skills development, (iv) achieving greater organizational and management effectiveness; (v) and increasing internal efficiency and resources. The implementation modalities for the programme are detailed in the BTVET 2013/13 to 2021/22 strategic plan. In FY2012/13 Government provided a total of Shs. 54.17 billion in direct support of skills development. These funds were applied to the following among others:

  1. Payment of capitation grants for 8,800 students in 53 government institutions

  2. Monitoring and supervision of 20 beneficiary P.7 graduating BTVET institutions

  3. On-going construction of ten (10) vocational institutions across the county26

  4. Training of 160 instructors of BTVET in ICT skills

In FY2013/14, preparations for the establishment of the planned Skills Development Authority will commence.

26UTC Bushenyi, Mbale Municipality CP, Pacer CP, Kaliro TI, Barinyanga TS, Lumino CP, Nalwire TI, UTC Elgon, Abilonino CPIC, UCC Pakwach, Arua TI, Nakawa VTI, Ahmed SeguyaMem TI and Nakaseke Polytechnic.

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4.2.2. Education

Within the primary education sub-sector, sustained reforms and investment under the UPE policy are slowly paying off. Whereas the completion rate27 in 2010 stood at 67 percent, only 3 out of every 10 children who enrolled in primary one managed to make it to primary seven in FY2011/1228. This points to the fact that there is still a significant number of children falling out or delaying in the primary system as a result of either many children enrolling at a late age or because of high repetition rates. The Net Intake Rate and PLE Performance Index for the same period was 63 percent and 64 percent respectively.

As far as performance of intermediate indicators is concerned, the pupil- teacher ratio in government aided primary schools improved by 3 points, from 57:1 in FY2009/10 to 54:1 in FY2010/11 and in terms of literacy, the share of pupils rated proficient at both P.3 and P.6 levels improved by 3 percent and 4.4 percent respectively in FY2010/11. The sub-sector however remains hindered by dismal survival, completion and transition rates. Beyond primary education, government undertook the following interventions in furtherance of its medium term objectives for the education sector:

  1. Financed UCE registration fees for 108,637 students

  2. Identified and trained senior staff from 91 over enrolled secondary

    schools to implement double shift teaching

  3. Commenced the preparation of a benchmarking report on the State of

    Higher Education with the collection of requisite data.

Makerere University operationalised and managed two newly established campuses in Jinja and Fort Portal. Furthermore, funds were remitted to Muni and Kisubi Brothers Universities to cater for both their development and recurrent expenses while a task force for establishment of Soroti University was put in place and facilitated following the launch of the Soroti University project in the first quarter of FY2012/13.

4.2.3. Health

Labour productivity is as much a function of the population’s health as it is of its skills. Ensuring quality healthcare service is therefore a priority of government. To this end, government focused its efforts in FY2012/13 on strengthening health systems; equipping and stocking health facilities with essential medicines and health supplies; expanding disease prevention cover and ensuring safety for pregnant and lactating mothers. In FY2012/13, the proportion of health facilities not reporting stock out of any one of the six

27Total number of candidates who registered for PLE regardless of age, expressed as a percentage share of the

total population aged 12 years. “The primary completion rate is a more accurate indicator of human capital

formation and the quality and efficiency of the school system than are gross and net enrollment ratios. It is also the most direct measure of national progress toward the Millennium Development Goal of universal primary education.” Laurie Cameron (2005)
28 National Budget Framework Paper (NBFP), 2013/14-2017/18, Table S2.1 Sector Outcomes (page 293)

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tracer medicines averaged 40 percent (excluding ACTs); the proportion of deliveries in health facilities was 37 percent; and the proportion of children under one year old protected against life threatening diseases was at 84.2 percent. Some of the specific measures undertaken by the health sector to improve health outcomes are reported in table 30:

Table 30: Policy Measures in the Health Sector

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Policy and Legal Reform

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Policy Measure

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Human Resource:

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The process for reviewing the Public Health Act (PHA) is ongoing

Recruitment of 8,079 health workers of whom 6,839 (67%) were appointed. Of these however, only 3,037 has so far accessed the payroll.

Award of scholarships to 257 health workers to pursue medical courses. Beneficiaries included 91 staff from hard to reach areas and 166 applicants pursuing specialised disciplines where staff in the sector are in short supply.

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Physical Infrastructure:

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Completion of construction and furnishing works in Mbarara hospital and 39

health centres in the districts of Mbarara, Isingiro, Ibanda, Kiruhura,

Ntungamo,Bushenyi, Rukungiri, Kabale, and Kanungu.

Completion of an oxygen plant in Mulago hospital that is expected to reduce on oxygen supply problems at the facility29 and sustain supply of logistics and vaccines for child immunization (pentavalent program) in 111 districts.

Completion of construction and equipping of Kabale and Hoima Regional Referral Hospitals, and of Kisozi HC III facility.

Construction of a six storied Cancer Ward under the Uganda Cancer Institute.

Evaluation of civil works bid for 13 Hospitals scheduled for renovation.

Procurement of construction works for Kawempe, Kiruddu and lower Mulago.

Finalisation of the proposal for expansion and rehabilitation of Kawolo and Itojo hospitals as well as the evaluation of designs for the same.

Supplies & Equipment:

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Emergency Obstetric and Neonatal Care equipment worth US$ 4 million was

purchased for distribution to 230 Government health facilities including 65

hospitals and 165 HC IVs by June 2013.

Procurement of general and specialised medical equipment worth US$ 8 million for distribution to 46 health facilities undergoing renovation.

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Services:

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Conducted house to house immunisation in 37 districts.

Launched and implemented the communication strategy for the Expanded Programme for Immunisation.

Launched the Pneumonia and diarrhoea vaccine which has now been included in the immunisation schedule for all children below one year and is available at all health facilities.

Contained the following diseases outbreaks: Ebola in Kabaale and Luwero; Marburg in Kabaale, Ibanda and Mbarara;

Conducted indoor spraying in 10 districts of Northern Uganda with impressive entomological and epidemiological impact.

Procured and commenced distribution of 21 million mosquito nets with the aim of attaining universal coverage of Long Lasting Insecticide Treated Nets;

Under Heart Services, there was a relatively low performance with 27 out of the annual planned open heart surgeries done (33.75%), 5829 of the annual target of 12,000 outpatients were seen (48.58%), 105 closed heart operations were done out of the 250 targeted for the entire FY (42.00%) and 3 out of 55 outreach visits annually planned were conducted (5.45%).

Procured and distributed drugs and pharmaceutical products in hospitals and lower level health facilities through National Medical Stores (NMS) which has also taken over the storage and distribution of all vaccines. NMS will also continue roll out the distribution of Maama Kits to ensure that quantities delivered correspond to the number of mothers delivering in the respective Government health facilities.

Source: Ministry of Finance, Planning and Economic Development

4.2.4. Water and Environment

Water and sanitation

Water and sanitation are vital for maintaining good health and thus contribute significantly to enhancing productivity and incomes. The Millennium Development Goals targets halving the number of people without

29 The plant has the capacity to fill 6 cylinders per hour

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sustainable access to safe water and basic sanitation by the year 2015. To that end, and in line with the National Development Plan, the Ministry of Water and Environment (MWE) aims to ensure improved access to quality safe water and sanitation facilities for rural and urban areas as well as water for production. In FY2012/13, the sector undertook the following:

  1. Construction of piped water supply systems, which commenced in 16 towns across the country, along with preparatory mobilization and design activities undertaken for 50 town water supply and sanitation schemes countrywide.

  2. The National Water and Sewerage Corporation undertook the upgrading of the mains outlet from Naguru reservoir to Ntinda Trading centre and installation of an online booster system as well as expansion of the water supply mains at Gayaza road/northern by-pass round-about areas. A high level reinforcement main along Jinja Road from Lugogo to Kireka was added to boost supply to areas of Kireka, Namugongo and Bweyogerere. Substantive progress has been registered in cleaning and un-blocking of 11.5km gravity sewers and 10km of siphons on Jinja Rd, Kitante and Dewinton Rd.

  3. Through the pro-poor interventions initiative: 9kms of mains were constructed; 25 prepaid meters installed and 10 public toilets constructed in Kagugube zone; 390 prepaid metres were installed 13 public toilets with shower bathing facilities and 1,200 connections in Ndeeba-Kisenyi areas; and an additional 35 household toilets and 2,500 connections made in other poorer communities/areas in Kampala.

  4. Completed construction of Longorimit dam in Kaabong district, Kobeibei and Arechek dams in Moroto district, Lutunku valley tank & Kisozi valley tank in Sembabule district, completed the extension of a piped water scheme in Sembabule district.

  5. At least 46 valley tanks with an average capacity of 1,200m3 were constructed in Lyantonde District; 4 valley tanks (of capacity 10,000m3) were constructed in Moroto District and 3 valley tanks (of capacity 10,000m3) in Napak District. In addition, 28 valley tanks of average capacity 2,000m3 were constructed in Kiruhura district. Other achievements include: Re-established, trained and created awareness at 28 facilities for Nshenyi valley tank in Ntungamo District, Betelehem in Rakai District, Olamia valley tank in Apac District, Loptuk, Nawanatau, Rupa, Lopey and Lokopo dams in Moroto District, Nabilatuk, Mamalu, Amudat, Nakobekobe windmill, Kalengengopoch windmills in Nakapiripiriti and Lokali and Lodoi windmill committees in Mororo District, Kopopwa and Angaro windmills in Napak District.

Environment and Natural resources management

Another key outcome for the sector is improved weather, climate and climate change management; and protection and restoration of environment and natural resources. In an effort to address climate change effects, the water and environment sector finalised, for submission to Cabinet, the Climate Change Policy and its implementation strategy. The sector also developed

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guidelines for mainstreaming Climate Change in national development plans by the sectors and local governments. In addition, the Uganda National Meteorological Authority Bill was approved by Parliament and assented to by H.E the President. The Ministry has embarked on modalities for implementing the Authority. Moreover, there are approximately 2,000,000 hectares gazetted forest reserves that are managed by National Forestry Authority, Uganda Wildlife Authority, and Local Governments, about 30 percent of which are degraded. To address this degradation the following interventions have been undertaken:

  1. At least 5,534,560 seedlings were produced at the National Tree Seed Centre and the regional nurseries for NFA.

  2. Community tree planting initiatives have been adopted including the provision of free tree seedlings and establishment of commercial tree nurseries across the country by the National Forestry Authority producing over 10,000,000 tree seedlings annually.

  3. Government has adopted a Public-Private Partnership approach to accelerating afforestation programmes. To-date private investors growing trees in gazetted forest reserves have planted approximately 50,000 hectares since 2002, in addition to 15,000 hectares planted by NFA.

  4. NFA also established a total of 354 hectares of new plantations in Mafuga Plantation (150 hectares), Mbarara (163 hectares) and Kyoga range (41hectares).

  5. The Government successfully removed people from forest reserves especially Kibale, Mabira, Mt. Elgon, Semliki and others.

  6. Efforts have been made to restore forests and protect water catchment areas especially river banks and hilly landscapes through mobilizing forest encroachers to vacate forest reserves for example; Bugoma in Hoima, Kisombwa in Mubende, Mubuku in Kasese and other Central Forest Reserves. Relatedly, 281 hectares of degraded/formerly encroached forests were restored in Mityana and Lake Shore range.

  7. Lastly during FY2012/13 NFA licensed 8 ecotourism projects in several forest reserves including Mabira in Mukono, Kitubulu in Entebbe, Lutoboka in Kalangala and Busingiro in Masindi Districts among others.

The foregoing achievements notwithstanding, the water and environment sector faces a number of constraints, which include:

  1. Inadequate framework for comprehensive operationalisation of the Environment policies and regulation.

  2. Inadequate measures for adaptation to climate change.

  3. Increased unit costs for service delivery at the district level.

  4. Low functionality of water facilities mainly boreholes, springs, RWTs

    and Gravity Flow Schemes (GFS)

  5. Low functionality of urban water and sanitation/sewerage facilities as

    a result of old age, energy problems and management issues. 94

vi. Lack of a coherent regulation and monitoring framework for water and sewerage services especially implementation of the pro-poor strategy in urban areas.

In FY2013/14, the sector plans to address these challenges and improve performance through the following measures:

  1. Develop an integrated Environment Management Policy.

  2. Strengthen the collaboration with relevant institutions and recruit staff

    to beef up capacity at national and Local Government levels.

  3. Contract management at Local Government level through continued

    supervision by Technical Support Units (TSUs)

  4. Reduce fiduciary risks through expediting implementation of large scale

    area based programmes for water stressed areas and conducting value for money tracking studies as a tool for improved financial management and follow up on value for money study recommendations.

  5. Rural Growth Centres Schemes shall continue to be registered under the established umbrella organizations to enable pooling of resources to facilitate collective operation and maintenance.

  6. Continue with revitalization of Community Based Management Structures as well as implementing the national borehole rehabilitation programme.

  7. Develop a strategy for rehabilitation and replacement of pumping and other electromechanical equipment in water supplies with aging facilities in addition to strengthening the capacity building and support functions of the Ministry to Town Water Authorities.

  8. Strengthen the Water Regulation Unit of the MWE to carry out its functions, pilot pro-poor implementation starting with Kobobo Town Council and in new piped water supplies, ensure that all Water Supply Authorities sign new Performance Contracts with MWE and phase out of the old contracts, conduct semi-annual Performance Review of small towns Water Authorities and assess compliance levels.

4.3. Private Sector Development, Employment Generation and Poverty Reduction

The creation of employment opportunities is one of the main transmission channels to poverty reduction, economic transformation, and social cohesion. Uganda’s official unemployment rate is 4.2 percent. However many more people are either underemployed or do not find a formal sector job. Between 2005/6 and 2009/10 the labour force increased at an average annual rate of 4.8 percent.30 This has not been matched by the creation of new jobs, leading to the growing importance of the informal sector which has absorbed an estimated 80 percent of new entrants into the labour market. Accelerating job creation is therefore cornerstone in the Government’s development strategy

30 If this rate of growth continues, the size of the labour force will double within 15 years. The youth labour force (aged 15-24) increased at an even higher rate of 5.9% (sufficient to double in 12 years).

page104image23424

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as stipulated in the National Development Plan and the Vision 2040. This will particularly require renewed attention on private sector development and agriculture, as the majority of Ugandan households continue to make a living from agriculture.

4.3.1. The Business Environment for Private Sector Development

The Doing Business Report 2013 shows that Uganda’s rank in the ease of doing business declined slightly from 119th position in 2012 to 120th in 2013, out of the 185 countries surveyed. In the EAC region, Uganda’s rank improved to 2nd, which places it ahead of Kenya, Tanzania and Burundi, but still significantly behind Rwanda. In Sub-Saharan Africa, Uganda was ranked 9th out of the 46 economies surveyed. The countries ahead of Uganda, in descending order of performance, were: Mauritius, South Africa, Rwanda, Botswana, Ghana, Seychelles, Namibia and Zambia.

The report commends Uganda’s efforts in digitalising records at the title registry and strengthening the insolvency process by clarifying rules on the creation of mortgages, establishing the duties of mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. However, it criticises the introduction of a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority. Table 31 below shows Uganda’s performance with regard to the different ease of doing business performance criteria.

Table 31: Uganda’s Performance in the Ease of Doing Business Rankings

Source: WB, Doing Business Report 2013

As shown in Table 31 above, Uganda has continued to perform well with respect to Getting Credit (40th position) and paying taxes (93rd position). However, challenges still exist especially in enforcing contracts, paying taxes, registering property, dealing with construction permits and getting electricity. The Investor Survey Report 2012 also revealed that tax regulations and administration, followed by bureaucracy and business regulations were among the major regulatory impediments to business expansion considered by investors. Government is thus implementing a series of key reforms such as the recently enacted Company and Insolvency laws, which will improve Uganda’s performance with regard to resolving insolvency and protecting investors. In addition, on-going efforts to reduce the backlog at the

page105image20408

No.

page105image21744 page105image21904

Indicator

page105image23080 page105image23240

2013 Ranking

page105image24456 page105image24616

2012 Ranking

page105image25832 page105image25992

Change

page105image27176

Overall performance 120 119 -1

1 Starting a Business 144 143 -1

2 Dealing with Construction permits 118 115 -3

3 Getting Electricity 127 124 -3

4 Registering Property 124 121 -3

5 Getting Credit 40 52 +12

6 Protecting Investors 139 136 -3

7 Paying Taxes 93 84 -11

8 Trading Across Borders 159 157 -2

9 Enforcing Contracts 117 116 -1

10 Resolving Insolvency 69 64 -5

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Commercial Courts through initiatives such as rolling out the Small Claims Procedures (SCP) will improve the enforcing of contracts indicator rankings.

In addition and with a view to fostering a favourable environment for private sector growth, Government continues to dialogue with the private sector through a number of channels including national budget consultations, the Presidential Investors Round Table (PIRT), private sector foundation platforms; and the annual National Competitiveness Forum. These dialogues have improved communication between Government and the private sector and have proved valuable in the enactment of a wide range of commercial bills into law. Table 32 summarizes the status of the various Bills in support of private sector competitiveness which have been either enacted or are in preparation.

Table 32: Status of Bills related to private sector competitiveness

page106image8960

BILL

page106image10296 page106image10896

LEAD MINISTRY

page106image12112 page106image12712

STATUS

page106image13888
page106image14496

Bills Enacted and Operational

page106image16464

Audit Act 2008

Office of the Auditor General

The Act commenced and is now operational

Copy rights and Neighbouring Rights Act 2006

Ministry of Justice and Constitutional Affairs

The Act commenced and is now operational

Trade Secrets Protection Act No. 2 of 2009

Ministry of Trade, Industry and Cooperatives

The Act commenced and is now operational

Contracts Act, No. 7 of 2010

Ministry of Justice and Constitutional Affairs

The Act came into force by SI 45/2011 on 15th

September, 2011

Mortgage Act 2009

Ministry of Lands, Housing and Urban

Development (MLHUD)

The Act commenced and regulations were signed

is now operational

Hire Purchase Act, No. 3 of 2009

Ministry of Trade, Industry and Cooperatives

The Act commenced on 12th June 2009.

Regulations were signed and published on 17th Feb 2012 when the Act came into force.

Trademarks Act, No. 17 of 2010

Ministry of Justice and Constitutional Affairs

The regulations were published in the Gazette and came into force on 4th September, 2012 as SI No. 58 of 2012

The Computer Misuse Act, No. 2

of 2011

Ministry of Information and Communication Technology

The Act was brought into force by statutory

instrument No. 35/2011 on 15th April 2011

The Electronic signatures Act No.

7 of 2011

Ministry of Information and Communication Technology

NITA-U and MTIC consulted stakeholders on draft regulations prepared to operationalise the Act on 26th June, 2012.

The Electronic Transactions Act,

No. 8 of 2011

Ministry of Information and Communication Technology

Ministry of ICT has consulted Stakeholders on the

draft regulations prepared to operationalise the Act and is in the process of causing the regulations to be published and is expected soon to contact First Parliamentary Counsel for finalization of the regulations.

The Retirement Benefits Authority Act 2011

Ministry of Finance, Planning and Economic Development

 
page106image59984

Bills Enacted but not yet Operational

page106image61696

Partnerships Act, No. 2 of 2010

Ministry of Justice and Constitutional Affairs

The ULRC and PSFU are spearheading preparation of the regulations under section 61.

Insolvency Act, No. 14 of 2011

Ministry of Justice and Constitutional Affairs

The commencement date to be appointed by S.I to be the same date as commencement of the Companies Act 2012 because they are closely related.

The Companies Act No. 1 of 2012

Ministry of Justice and Constitutional Affairs

Act was published in the Gazette as Act no. 1 of 2012 on 18th September, 2012. Consideration is being given to appointment of a commencement date as the commencement date of the Insolvency Act because they are closely related.

97

Insurance Amendment Bill

Ministry of Finance, Planning and Economic Development

Enacted but may need an assessment of the effect

of the new amendments to the existing

regulations.

Capital Market Authority (Amendment) Act No. 12 of 2011

Ministry of Finance, Planning and Economic Development

The Capital Markets (Asset Backed Securities) Regulations, 2012, SI No. 46 of 2012 were made under the Act and came into force on 29th June 2012.

The regulations on Takeovers and Mergers were published in the Gazette on 10th August 2012 as SI No.55 of 2012

page107image12056

Bills that are before Parliament

page107image13736

Accountants Bill, 2010

Ministry of Finance, Planning and Economic Development

The Bill was passed on 6th February 2013 and is awaiting the President’s assent.

Geographical Indications Bill

2008

Ministry of Justice and Constitutional Affairs

The Bill was passed on 6th February 2013 and is

awaiting the President’s assent.

Industrial Property Bill

Ministry of Justice and Constitutional Affairs

Bill was reintroduced to the committee on Legal

and Parliamentary Affairs (LPAC) on 23rd

February 2013. The Committee is about to report on the Bill.

Chattels Securities Bill, 2009

Ministry of Justice and Constitutional Affairs (MJCA)

The bill is before the LPAC. A team consisting of

LPAC and other key stakeholders made a study visit to Ghana on 24th March 2013. The key message is that the current bill needs restructuring and to be simplified for use by the average enterprises.

Anti-Counterfeiting Goods Bill No. 22, 2010

Ministry of Trade, Industry and Cooperatives (MTIC)

The bill was reintroduced to Parliament on 23rd

February 2013 and committed to the Committee

on Trade.

Uganda National Bureau of Standards (Amendment) Bill No. 10, 2010

Ministry of Trade, Industry and Cooperatives

The bill was reintroduced to Parliament on 23rd

February 2013 and committed to the Committee

on Trade.

Plant Variety Bill, 2010

Ministry of Agriculture, Animal Industry

and Fisheries (MAAIF)

Before The bill was reintroduced to Parliament on

7th February 2013 and referred to its Committee

on Agriculture

Biotechnology and Biosafety Bill

Ministry of Finance, Planning and Economic Development

The bill is before the Committee of Science and Technology which is currently conducting stakeholder consultations.

Pensions Reform Bill

Ministry of Finance Planning and Economic Development

The bill was read the first time in Parliament in March 2013. However, it cannot proceed before the outcome of the on-going Pensions Reform exercise.

Anti-money Laundering Bill

Ministry of Finance, Planning and

Economic Development (MFPED)

Saved by Parliament and is now before the Finance committee

The Free Zones Bill 2010

Ministry of Finance, Planning and Economic Development (MFPED)

The bill was read the first time in Parliament on

27th August 2012 and committed to the Finance

Committee of Parliament the same day.

Public Private Partnership Bill,

2010

Ministry of Finance, Planning and Economic Development (MFPED)

The bill was read the first time in Parliament on 19th February 2012 and committed to the Finance Committee of Parliament the same day

page107image65584

Bills that are before Cabinet

page107image67424

Investment Code Bill, 2010

Ministry of Finance, Planning and Economic Development (MFPED)

Bill was presented to Cabinet and referred to a Cabinet Sub-Committee headed by the Office of the Prime Minister for assessment of the Cost implication of operating a One-Stop-Shop.

Sale of Goods and Supply of

services Bill, 2008

Ministry of Trade, Industry and Cooperatives.

Bill was drafted by FPC on basis of Cabinet Minute No.59 (CT 2008). More consultations on the Bill to be done by the responsible ministry

Consumer Protection Bill

Ministry of Trade, Industry and Cooperatives.

Principles were presented to Cabinet, and referred back to the responsible ministry.

98

In 2011 Government also embarked on an exercise which aimed at reviewing all business licenses in all sectors of the economy in order to streamline licensing procedures and to reduce the administrative burden of complying with licensing requirements. The inventory of all business licenses identified a total of 788 licenses/permits/user charges/authorizations, issued by both Central and Local Government agencies. It was estimated that the total annual cost incurred by businesses in complying with licensing requirements amounts to Shs. 725.7 billion representing 3.49 percent of GDP.31 A summary of the Business licenses findings is provided in Table 33 below

Table 33: Licenses and Administrative Burden per Sector

  page108image9168

No. of License

page108image10528   page108image12240

Administrative

Burden

page108image13672  
page108image15152

No. of Licenses

page108image16400 page108image16840

Percentage of

page108image18048
page108image18488

Sector

page108image19656

s

(percentage)

(Shs. billion)*

GDP

Agriculture

87

10.13 %

81.42

0.39 %

Trade & Cooperatives

87

11.15 %

131.00

0.63 %

Education & Sports

15

1.92 %

3.12

0.02 %

Energy, Mining, Oil & Gas

40

5.13 %

3.37

0.02 %

Financial Services

34

4.36 %

0.99

0.00 %

Health and Nutrition

82

10.51 %

5.63

0.03 %

Housing & Urban Development

6

0.77 %

ICT & Media

37

4.74 %

3.61

0.02 %

Labour& Employment

15

1.92 %

44.48

0.21 %

Manufacturing

9

1.15 %

4.37

0.02 %

Tourism & Wildlife

18

2.31 %

2.15

0.01 %

Transport & Logistics

88

11.28 %

50.51

0.24 %

Water, Forestry, Sanitation & Environment

22

2.82 %

15.25

0.07 %

Professional Services

22

2.82 %

3.04

0.01 %

Local Government

226

28.97 %

376.80

1.81 %

page108image91400

Total

page108image92736

788

page108image94504

100.00

page108image95840 page108image96280

725.73

page108image97616

3.49 %

It was found that there are several overlaps in terms of licenses, levies, fees, and permits at national and local government levels. Several businesses required licensing approval from more than one central government agency for the same business activity and were further subjected to licensing requirements by the local governments in which they operated. Moreover, there appears to be a general absence of information about licenses and licensing requirements in various sectors of the economy which calls for electronic repository and e-registry of all valid operational licenses.

In response to these findings Government initiated a comprehensive business licensing reform in FY2012/13. In FY2013/14, Government will continue to implement business licensing reforms as one of the measures to improve business efficiency and lower the costs of doing business. The following activities will be prioritised:

  1. Establishment of an electronic registry (e-registry) of business licenses at the Uganda Registration Services Bureau (URSB).

  2. Alignment of business registration processes at the URSB to other business registration processes such as tax and social security.

31 Note that this cost arises from the license fees and administrative charges related to obtaining all licenses identified by the inventory exercise. The relation to the national GDP emphasises the magnitude of the burden to compliant businesses.

page108image113976

99

  1. Elimination of 20 licenses that were found to be either redundant or obsolete.

  2. Strengthening the Regulatory Impact Assessment (RIA) mechanism to ensure that all new laws and business licenses are subjected to a systematic and rigorous scrutiny process before they are introduced.

  3. Streamlining business licensing procedures by amending laws and regulations to remove redundant and unnecessary processes as well as overlaps in licensing regimes.

4.3.2. Enhancing Agricultural Production and Productivity

Growing regional export markets, rising incomes and rapid urbanization entrench a huge potential for enhancing agricultural production and productivity in Uganda. However, despite commitment of significant public resources to exploit this potential, through interventions like National Agricultural Advisory Services (NAADS), Agricultural Credit Facility (ACF) or the Rural Financial Services Programme (RFSP), performance has so far been below expectations with agriculture growing on average 4.1 percentage points slower than the economy as a whole, since FY2007/08.

The reasons for this are manifold. Smallholders, who dominate the agricultural sector, face particularly acute constraints which include unpredictable climate, poor quality inputs, pests and diseases, inadequate storage, lack of relevant knowledge and use of rudimentary technology. This undermines both the quantity and quality of their agricultural produce and the stability of their incomes. But it also implies that existing agribusinesses cannot be adequately supplied by local producers. Agribusinesses, therefore, often fail to expand and invest in more mechanized processing of agricultural commodities leading to low value addition and low output growth in agriculture. At the same time, poorly integrated value chains hinder rural dwellers from participating more actively in the development process of the country. To facilitate the development of a well-functioning integrated value chain for various commodities, requires structures that facilitate the alignment of agricultural produce at the local level to production necessities of agribusinesses and that agribusiness are able to obtain appropriate financing that allows them to achieve higher levels of productivity.

During FY2012/13, Government adopted the agricultural Commodity Approach Strategy with the aim of enhancing food security, household incomes and exports. This strategy is expected to increase production levels for the selected commodities, namely: maize, beans, rice, bananas, cassava, dairy cattle, beef cattle, fish, cassava, coffee, tea and fish. To that end, a number of initiatives were undertaken during the financial year. These include: 500,000 Tea seedlings were generated and given to farmers in Kabale for the tea expansion programme; funds were disbursed under NAADS to Kisoro, Kabale and Kanungu to raise tea seedlings; 20,000 Arabic Coffee seedlings and 60,000 pieces of banana distributed to farmers in Butambala. In addition, government has raised 11.94 million seedlings of Robusta coffee and 11.28 million seedlings of Arabica coffee under the Community Based Nurseries (CBNs). Government has also supported other crop subsectors such

100

as cocoa where a total of 61,000 cocoa seedlings were provided to the cocoa growing districts (Mukono,Mpigi,Wakiso, Luwero, Iganga, Mayuge,Jinja, Luuka, Kamuli, Hoima, Masindi, Kibale, Kamwenge and Bundibugyo). A cocoa processing plant is also being constructed by Ruby Hill Chocolate in Nsambya to process Uganda Cocoa into Chocolate.

The manufacturing sector is also increasingly adopting contract farming, which is expected to increase production, market, and farmer incomes. SAB Millers is contracting farmers around the country to grow Barley and Sorghum. A new US$.90Million (over Shs. 243 billion) plant located in Mbarara Municipality with capacity to produce 5.5 million crates of beer per year is being set up and is slated to be opened in June this year. The investment will create direct employment to approximately 150 people and about 27,000 indirect jobs. Sugar and Allied ltd a new sugar manufacturing company in Kaliro plans to crash 2,000M/T of cane per day and produce 12MW of power. The firm has engaged over 5000 farmers in the surrounding districts, with a total of 18,000 acres under sugarcane.

The edible oil industry is growing fast under contract farming. BIDCO has engaged over 1,300 farmers who have 2,100 ha under palm trees. This is expected to produce at full maturity 42,000 tonnes of palm fruit and therefore Shs. 21 billion to the farmers annually. In the Lango sub region, the vegetable oils is growing fast especially Sunflower due to processing plants in Lira (Mukwano and Mt. Meru) which advance farmers with improved seed, fertilisers and guaranteed purchase price . In 2011, over 210,000M/T of sunflower was grown which produced 46,000M/T of vegetable oil and 160,000M/T of seed cake. However, it is worth noting that over 130,000M/T of this seed cake was exported to Kenya.

However, in order to further build on these success stories, the institutional set-up of the sector needs to be re-aligned to reflect prioritized commodities. The Agriculture Sector is currently guided by the Development Strategy and Investment Plan (DSIP) which consists of 22 sub-programmes aiming to (i) enhance agricultural production and productivity, (ii) increase access to markets and value addition, (iii) create an enabling environment for the private sector in agriculture, (iii) and strengthen agricultural institutions. The sector is not adequately structured and capacitated to fully implement all of these 22 sub-programmes. The Ministry of Agriculture and Animal Industry and Fisheries has therefore prepared a series of investment plans to accelerate the implementation of the full DSIP. In addition, Government will restructure management and funding of the Agricultural Sector along commodity lines. This will ensure that funds going to the sector are adequately linked to measurable outputs and outcomes and those interventions deliver highest value for money.

One of the major hindrances to increasing agriculture production and productivity continues to be the predominance of subsistence and rain-fed cultivation. To address this challenge, government is keen to promote and support the use of irrigation and has invested in a number of irrigation schemes across the country. These include: Agoro Irrigations scheme for

101

which 75 percent of the civil works are complete; Mubuku Irrigation Scheme (72 percent complete); and Doho Irrigation Scheme (70 percent complete)

Agriculture sector priorities for FY2013/14

Government, in 2013/14, will continue to prioritize the commodity approach by ensuring availability of improved seeds, planting, breeding and stocking materials. Government will also continue to support interventions that foster investment in water for production. Specific interventions will include:

  1. Setting up 30 small scale irrigation demonstration sites in different parts of the country and also undertake feasibility studies for establishment of 3 Medium to Large scale Irrigation Schemes in Eastern Uganda (Doho Phase 2; Namatala Swamp; and Sironko).

  2. Development of 2 new rice irrigation schemes through PPPs with M/S Pearl Rice (U) Ltd and M/S Tilda (U) Ltd. Government is also keen to develop infrastructure for commercial fish farming (aquaculture). To that end, government will support the establishment of aquaculture parks and cages in L. Victoria, L. Albert, R. Mpologoma and other small lake and river systems.

  3. Pursue efforts to enhance productivity, particularly through investing in technology development, agribusiness advisory services, and improving the interface between agricultural research and advisory services (extension).

  4. promote the use of fertilisers: finalize the fertilizer policy and regulations; procure fertilizer laboratory analytical equipment; conduct field trials of different fertilisers; develop fertilizer user guidelines; and distribute soil testing kits to district production departments.

  5. Improve post-harvest handling and mechanization of value addition processes for strategic cereals and legumes, root crops and tubers.

  6. Regulation and disease control: scale up efforts to increase regulation and enforcement especially in fisheries and livestock subsectors. Increase efforts to control crop pests and livestock diseases.

4.3.3. Harnessing Uganda’s Tourism Potential

Uganda has been widely praised for being a tourist destination with its huge possibilities for recreational activities and outstanding scenery. The country was voted by Lonely Planet the first best tourist destination in 2012 and figures regularly in specialised journals and documentaries on hiking, birding, game viewing. It is therefore not surprising that Uganda continues to attract increasing numbers of visitors year after year. In 2011 the number of tourist arrivals reached 945,899 representing 17 percent increase from the previous year.

Further harnessing Uganda’s tourism potential will play an important role in contributing to the country’s economic and social development. Not only is the sector estimated to employ over 530,000 people, tourism is becoming a major source of foreign exchange earnings. It is estimated that the sector

102

contributed about USD 660 million in FY2011/12 or 11 percent of foreign exchange earnings.

However, the sector has faced a number of barriers which have constrained its full development. Inadequate infrastructure and an insufficiently developed road network pose accessibility problems to major tourist sites. In addition, the sector suffers from a chronic shortage of adequately trained workers, inadequate tourist information, low levels of ICT provision of tourist services, and low investment in building and marketing the country as a tourism brand.

In FY2012/13 Government’s efforts in the tourism sector have thus focused on increasing accessibility of main tourist sites through the development of key road infrastructure, the enactment of hospitality standards, the provision of hospitality training, the promotion of eco-tourism, and increased tourism promotion through increased marketing and the establishment of a national brand. These priorities will continue throughout FY2013/14, but Government will devote additional efforts to the promotion of domestic tourism which has started to increase in recent years. For instance, out of approximately 200,000 visits to the Uganda Wildlife Education Centre in Entebbe 95 percent were made by nationals. Government will therefore partner with schools to promote domestic tourism and sensitize younger cohorts of the population about conservation efforts of the country’s wildlife and heritage. These initiatives will be accompanied by a wider promotion of cultural tourism sites and awareness building across the country. In addition, Government plans to re-develop the Source of the Nile and Kalagala Itanda Falls as world class tourist sites. Finally, the provision of adequate training and the promotion of appropriate skills for critical human resources will receive a substantial boost through the Competitiveness and Enterprise Development Project which will upgrade the National Hotel and Tourism Training Institute (HTTI).

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4.4. Sector Allocations

Table 34: Sector Budget Allocations, FY2012/13 and FY2013/14

page113image4000   page113image4544 page113image5416

ALLOCATIONS (Shs

page113image6456 page113image7232

SHARE OF BUDGET (%)

page113image8688

BILLION)

page113image9856   page113image10400 page113image10840

Approved Budget

page113image11992 page113image12424

Projected Budget

page113image13568 page113image14008

Approved Budget

page113image15152 page113image15592

Projected Budget

page113image16744
page113image17352

SECTOR

page113image18512 page113image18960

FY 2012/13

page113image20336 page113image20768

FY2013/14

page113image21768 page113image22216

FY2012/13

page113image23376 page113image23824

FY2013/14

page113image25160

SECURITY

945.1

1,034.4

8.7%

8.2%

WORKS AND TRANSPORT

1,650.7

2,395.4

15.1%

18.9%

AGRICULTURE

378.9

382.9

3.5%

3.0%

EDUCATION

1,592.5

1,556.9

14.6%

12.3%

HEALTH

852.2

940.4

7.8%

7.4%

WATER AND ENVIRONMENT

354.1

376.8

3.2%

3.0%

JUSTICE/LAW AND ORDER

537.6

585.5

4.9%

4.6%

ACCOUNTABILITY

580.1

655.6

5.3%

5.2%

ENERGY AND MINERAL DEVELOPMENT

1,481.8

1,741.1

13.6%

13.8%

TOURISM, TRADE AND INDUSTRY

72.5

53.8

0.7%

0.4%

LANDS, HOUSING AND URBAN DEV’T

26.1

28.1

0.2%

0.2%

SOCIAL DEVELOPMENT

58.0

31.0

0.5%

0.2%

ICT

15.5

15.3

0.1%

0.1%

PUBLIC SECTOR MANAGEMENT

1,044.5

1,113.8

9.6%

8.8%

PUBLIC ADMINISTRATION

238.8

394.1

2.2%

3.1%

LEGISLATURE

235.4

237.3

2.2%

1.9%

INTEREST PAYMENTS DUE

839.2

975.4

7.7%

7.7%

SALARY SHORTFALLS ARISING OUT OF SUPPLEMENTARY FUNDING IN FY2012/13

 

128.5

0.0%

1.0%

page113image108088

GRAND TOTAL

page113image109128 page113image110000

10,903.2

page113image111336 page113image111776

12,646.3

page113image112776 page113image113552

100.0%

page113image114552 page113image115328

100.0%

page113image116928

Sectoral allocations largely reflect government’s priorities as laid out in chapter 4. Allocations to the works and transport sector are projected to increase by 45.1 percent in nominal terms, with the sector’s share of the national budget increasing from 15.1 percent in FY2012/13 to 18.9 percent in FY2013/14, the highest of any sector. This is reflective of the importance of investments in this sector to other priority sectors, that is, Agriculture, Tourism and Energy and Mineral Development.

Increase of funds to works and transport is indicative of Government’s commitment to reducing the infrastructure deficit so as to accelerate the structural transformation required to maintain high economic growth and improve household incomes. Among other benefits, better transport systems will:

  1. Reduce the cost of moving food from the farm to the market and from areas with food surplus to those with deficits;

  2. Make it easier to access major tourism sites through improvement of “tourism roads”;

104

  1. Reduce transport costs and duration for businesses which have to transport their products to different parts of the country and within the region;

  2. Improve access to schools and hospitals;

  3. Facilitate the exploration of natural resources, particularly crude oil

    through construction / rehabilitation of major roads within the Albertine Region.

The other important sector with regard to infrastructure – energy and mineral development – is also projected to have a significant increment to its budget, with a nominal increase of 17.5 percent in funds allocated to it. The bulk of funds allocated to this sector will go towards enhancing the country’s electricity generation and distribution capacity, in line with government’s priority of providing stable and affordable electricity. This will lead to reduced business costs, significantly improving the business environment and leading to increased investment from both local and foreign investors. In addition, it will help to realise government’s objective of ensuring environmental sustainability by increasing the proportion of renewable energy in the energy mix, and reducing the use of biomass.

105