Your Excellency the Vice President,
Right Honourable Speaker of Parliament,
His Lordship the Chief Justice,
His Lordship the Deputy Chief Justice,
Right Hon. Deputy Speaker of Parliament,
Right Hon. Prime Minister,
Right Hon. Leader of the Opposition
Honourable Members of Parliament,
Your Excellences, Ambassadors and Heads of Diplomatic Missions,
Ladies and Gentlemen,
Madam Speaker, in accordance with Article 155 (1) of the Constitution of the Republic of Uganda and the Public Finance Management (PFM) Act 2015 as amended; and in exercise of the power delegated to me by H.E the President of the Republic of Uganda, I have the honour to present the budget statement for the Financial Year 2016/17. Section 14 (1) of the Public Finance Management Act 2015, requires that Parliament shall, by 31st May of each year, consider and approve the budget for the next financial year.
This being a year when general elections were held, the budget for Financial Year 2016/17 was approved by the 9th Parliament on 3rd May 2016. My presentation today is therefore, a summary of the budget as approved by Parliament. I thank all the Honourable Members of the 9th Parliament, for the excellent cooperation in the preparation and the approval of the Budget.
Madam Speaker, next year’s budget has been finalised and approved by Parliament when Ugandans have once again renewed the mandate of the NRM Government. I wish at this juncture to heartily congratulate H.E. the President upon his resounding victory and thank him for entrusting me with the responsibility to deliver this landmark Budget Statement. I also extend congratulations to you, Madam Speaker and your Deputy, for your re-election to the high offices of Speaker and Deputy Speaker of Parliament, and to you Honourable Members for your election to the 10th Parliament.
Madam Speaker, Government’s policy, priorities and programmes as well as resource allocations are all aligned towards achieving the commitments in the Second National Development Plan (NDPII), and the 2016 NRM Manifesto.
In addition, the 2014 National Population and Housing Census (NHPC) provided evidence that has informed a sound basis for the formulation of the strategic policies and priorities spelt out in next financial year’s budget. The overall national goal is to achieve a middle income status through commercialization of agriculture, acceleration of industrialization, and increasing production and productivity in all sectors of the economy. Accordingly, the theme for the financial Year 2016/17 Budget is ‘Enhanced Productivity for Job Creation’.
Madam Speaker, in my presentation today I will: –
i). Report on the performance of the economy, and the challenges faced in the financial year now ending, but also the future Prospects;
ii). Update Parliament on the Performance of the Financial Year 2015/16 Budget and progress made in the key selected sectors, implementation of measures to address challenges and priorities for the next financial year;
iii). Elaborate the medium term strategy underpinning the Financial Year 2016/17 budget, and;
iv). Highlight the Financial Year 2016/17 revenue and expenditure framework and measures for enhancing domestic revenue mobilization.
- the sharp fall in international commodity prices such as coffee, tea, minerals,which form the bulk of our exports. For example, Tea prices have dropped from US Dollar cents 403.03 per Kg in July 2015 to US Dollar cents 237.99 per Kg in April 2016; and Copper from US$ 5,456.75 per tonne to US$ 4,872.74 per tonne. The shift to Services in China’s economy, has also contributed to the fall in global demand for minerals and other commodities;
- the decline in private sector credit growth as a result of high interest rates, which have constrained domestic activity; and
- the strengthening of the US Dollar as a result of the recovery in the US economy which led to depreciation of our shilling. This caused domestic inflation. The strong Dollar also made imports more expensive, constraining business cash flows.
Madam Speaker, despite these challenges, Services continued to grow strongly rising by 6.6% from 4.5% last financial year. Agriculture, which is the back-bone of our economy, expanded by 3.2% in real terms compared to a growth rate of 2.3% the previous year. Meanwhile Industry grew by 3.0% which is lower than the 7.8% recorded a year before.Economic activity in sub-Saharan Africa, including Uganda, has been lower than anticipated, primarily as a result of the sharp decline in commodity prices, which negatively affected export earnings. Uganda, unlike other Sub Saharan African countries, was able to mitigate these external shocks through investments in infrastructure and a lower import bill resulting from the decline in international oil prices. Our Import bill for the 12 months ending March 2016 was US$ 4,618 million compared to US$ 5,095 million a year before.
- Under Operation Wealth Creation, planting materials distributed include 65 million coffee seedlings, 48 million tea seedlings in 16 districts, 4.4 million citrus seedlings in 76 districts, 2.7 million cocoa seedlings in 13 districts, and 12 tons of rice seed to establish 480 acres in four local governments of Koboko, Maracha, Nebbi and Yumbe and 1,316 metric tons of de-linted and graded cotton planting seedlings in 59 districts in Eastern, Western, West Nile, Mid-West, Central and Western regions
- The Animal Genetics Resource Centre and Data Bank (NAGRC&DB) has installed a new hatchery with capacity of 13,000 chicks per week to support rearing poultry including the resilient Kuroiler Chicken.
ii. In the areas of pest and disease control, the following performance has been achieved: –
- There has been a significant reduction in the Banana Bacterial Wilt, now estimated at less than 5%. Surveillance also reveals reduced incidence of Coffee pests and diseases with the Black Coffee Twig Borer now standing at less than 7% in most parts of affected areas.
- In the livestock sub-sector, the outbreak of Foot and Mouth Disease was contained in Apac, Kiryandongo, Nakasongola, Luwero, Nakaseke, Kyankwanzi, Wakiso, Mpigi, Mukono, Sembabule, Isingiro, Rakai, Kapchorwa, Kween, Bukwo, Kampala and Masaka.
iii. In order to increase the provision of water for production, 6 valley dams were constructed in Karamoja sub-region; and 46 Valley Tanks in Rakai, Isingiro, Lyantonde, Mubende, Kiboga, Kamuli, Kumi, Apac and Kitgum.
Madam Speaker, the Agriculture sector requires total overhaul and re- organisation. This will involve reforming land ownership and use, farmer training, input delivery, extension service provision, irrigation financing and marketing. These reforms are absolutely necessary if we are to ultimately commercialise agriculture.
Madam Speaker, Government will next financial year continue its thrust to transform the agriculture sector by facilitating mechanization, efficient access to inputs and appropriate technologies, increased storage and market access. Specifically, Government will continue to implement the following: –
- Provision of improved breeding and planting materials, and pesticides;
- Intensification of regulation through increased disease surveillance, improved disease diagnostics and enforcement of animal laws and regulations at both central and local government levels;
- Conducting agricultural research and development;
- Construction of irrigation infrastructure including on-farm valley tanks, valley dams and medium to large scale irrigation schemes for communities. The cumulative water storage will be increased from the current 29.1 million cubic metres to 55 million cubic meters.
- Financing post-harvest handling facilities for commodity storage through the Agricultural Credit Facility.
- Developing and implementation of a comprehensive National Agriculture Finance Policy and Strategy to support private sector investment in agriculture; and
- Establishing an Agriculture Insurance Scheme to reduce farm risks and attract investment in agriculture.
To this effect Madam Speaker, Ì have increased the Agricultural Sector’s budget by Shs. 343.46 billion to Shs. 823.42 billion, an increase of 65% compared to the Financial Year 2015/16. Together with funding to rural development interventions including rural electrification and feeder roads, funding to Agriculture and Rural Development is now Shs. 1,985 billion, equivalent to 9.6% of the non-debt, non-discretionary budget.
- Participating in international tourism fairs and expos, and implementing the single East Africa Tourist visa;
- Upgrading heritage sites such as the Namugongo Martyrs Shrine; promoting cultural theme events, and developing regional tourists circuits in Buganda, Bunyoro, Toro, Ankole and Kigezi, Busoga, West Nile, Acholi, Rwenzori, Ssese Islands, Teso and Karamoja.
- Skilling tour operators, hoteliers and tourism industry workers to deliver world class hospitality services;
- Grading of an additional 200 hotels and restaurants, and increasing inspection of tourism enterprises in Wakiso, Kabarole, Jinja, Mbale, Kabale, Mbarara, Masindi, Jinja, Gulu and Lira; and
- Developing strategic tourism infrastructure with emphasis on tourism roads to improve visitor experience, and attract private investment in tourism.
I have allocated Shs. 188.8 billion to the sector next financial year up from Shs. 158.5 billion in Financial Year 2015/16.
(35Km), Seeta-Namugongo Road (7.2Km), Kyaliwajala-Kira Road (3.5Km), Naalya- Kyaliwajala Road (2.5Km), Namugongo Ring Road (1.8Km) and Shrine Access Road(1.8Km).
- Recruitment of tutors for the 20 Technical Institutes started this financial year. I have provided Shs. 6.672 billion for this purpose;
- Operationalising three Public Universities in Soroti, Kabale and Lira which are to offer Science related programmes which are critical to the Economic Development of the Country. For this, a total of Shs.14.09 billion has been allocated;
- Expand the Student Loan Scheme to cater for the Second Cohort of 1,000 University students and 200 students of Diploma courses to improve access to higher education. An additional Shs. 6 billion has been provided for this purpose;
- Increase of salaries of Primary teachers by 15% which will be the last instalment in Government’s commitment to increase teachers’ salaries by 50% in a phased manner. For this, an additional Shs. 122 billion has been provided.
Madam Speaker, in order to justify these salary increases, school teachers, including head teachers must forthwith desist from absenteeism, late reporting and early departure from work.
- Construction, equipping and operationalising of 12 new technical institutes in Amuria, Hoima, Kamuli, Masaka-Lwengo, Mukono, Nakasongola, Namutumba, Pader, Yumbe, Kyenjojo, Lyantonde and Kiboga districts have been completed. Nakaseke technical institute was also completed, but is awaiting handed over to the district officially;
- The rehabilitation,expansion and equipping of Uganda Technical Colleges at Lira and Elgon, and the National Teachers College at Unyama in Gulu district, has been completed. Civil works are still ongoing at the Uganda Technical Colleges at Bushenyi, Kichwamba and Kyema. Civil works also commenced at four Technical Institutes:- Ahmed Seguya in Kayunga, Tororo, Kalongo and Kibatsi in Ntungamo.
Madam Speaker, Government will continue to strengthen institutional capacity of BTVET institutions to narrow the gap between the formal education and the labour market. This will enable skills development to be streamlined towards private sector labour market requirements. Government will also increase awareness of BTVET career opportunities.
- Finalize the update of national curriculum for Business, Technical Vocational and Education and Training courses;
- Complete six technical and vocational national certificate assessment guides;
- Complete orientation manuals for 6 technical and vocational programmes; and
- Train 237 instructors on the 6 technical and Vocational national Certificate programmes.
- Government will restructure Ministries, Departments and local governments to enhance the efficiency and effectiveness of their systems and processes;
- Further consolidate the decentralized payroll and pensions’ management system by integrating payroll system with the Budgeting System and strengthening the Human Resource Management function;
- Deepen Fiscal Decentralisation by devolving more financial decisions closer to the frontline service delivery units including consolidating the decentralised budgeting and payment of salaries, pension and gratuity;
- Cross payment of allowances between Ministries, Departments Agencies and Local Government will not be permitted forthwith, with the exception of Local Government officials required to attend Central Government organised workshops; and
- In an effort to save public funds on workshops and seminars, these must be held in Government facilities, unless not to do so is absolutely unavoidable. In addition, benchmarking trips abroad should be limited and conducted under respective Votes. Any Accounting Officer funding benchmarking trips outside their institutions will be held responsible for mischarging expenditure.
Madam Speaker, in order to improve the entire Government project cycle, the processes including identification, design, appraisal, and approval of Government projects will be revamped with special focus on major projects in sectors like transport, energy, water and agriculture.
Continued poor absorption of funds, particularly borrowed resources, which lead to suspension or cancellation of loans will not be entertained. Accounting Officers will forthwith be penalised for unsatisfactory performance of externally funded projects under their charge. The most affected sectors in terms of poor absorption have been Education and Water sectors where the proportion of projects with unsatisfactory performance was at 100%, followed by the Energy Sector at 92%, Health Sector at 86%, Agriculture at 80%, and Public Sector Management at 77%.
In order for expeditious Parliamentary approval of externally funded projects, I appeal to you, Madam Speaker, under your new mandate, to have Parliamentary approvals for projects within 45 days.
Madam Speaker, enhanced supervision and monitoring of Government programmes is necessary to strengthen accountability for public service delivery. The Strategic Result Matrix will be used to monitor the implementation of the strategic interventions presented in the budget.
The Matrix will be used to hold Accounting Officers responsible for the achievement of results under their mandates. Across Government enhanced political and technical inspection especially for key service delivery sectors including education and health facilities will also be undertaken in order to address challenges such as shoddy works, staff absenteeism, and late coming. Parish and Sub-County Chiefs, and Chief Administrative Officers will be required to show what actions they have taken for
- Strengthen the capacity for prevention and detection of corruption through implementing risk management and enhancing internal controls across Government in accordance with the PFM Act 2015. All Accounting Officers are required to implement effective systems of internal controls, risk management and internal audit;
- Enhance Multi-Sectoral collaboration consisting of the Inspectorate of Government, PPDA, Office of the Auditor General, Internal Auditor General’s Office (Under MoFPED), DPP, CID, Financial Intelligence Authority (FIA), Anti- Corruption Court, OPM, Public Service Commission (PSC) and the Ministry of Public Service has been put in place to strengthen Anti-Corruption measures. This will enhance capacity to detect, investigate and successfully prosecute cases of corruption;
- Accounting Officers who do not account in full and in time for funds provided under their respective Ministries, Agencies and Local Governments will be recommended for removal in public interest.
- Deterrence of corruption will be enhanced through increased support to the Judiciary and other similar organisations for custodial sentences, plea bargain and asset recovery of ill-gotten wealth.E. MEDIUM TERM ECONOMIC STRATEGY
Madam Speaker the priority interventions I have enumerated are anchored on a Medium term Strategy that is built on three pillars: (i) a sound Macroeconomic policy framework; (ii) Productivity Enhancement Programme and Employment; and (iii) Employment and Job Creation interventions. These will enable the attainment of a middle income status for Ugandans by 2020.
Madam Speaker, the Macroeconomic Policy Framework seeks to deliver sustained average GDP growth rate of at least 6% per annum. The Framework will also maintain single digit inflation, a stable and competitive exchange rate, adequate foreign exchange reserves, and prudent debt levels. These objectives are consistent with the requirements of the East African Monetary Union Protocol.
As highlighted in His Excellency the President’s State of the Nation address, Government is committed to increasing Uganda’s export earnings through increasing export volumes, industrial production and value addition in agriculture and minerals. Government is also developing energy infrastructure to reduce the cost of electricity in the medium term to facilitate manufacturing and value addition.
In addition, Government will implement the local content policy, and strengthen institutions responsible for promotion and quality standards of our export products.
Madam Speaker, evidence from the 2014 Population and Housing Census reveals that households relying on employment income as the main source of livelihood have declined from 22% in 2002 to 16%. In addition, only 10% of households reported that commercial activities such as business, commercial farming and cottage industry, are their main source of livelihood.
Madam Speaker, increased employment and jobs will be achieved by creating opportunities for self-employment, skills development and promotion of Value addition. This will not be achieved overnight. The employment strategy will involve skills development including apprenticeship, together with the promotion of Value addition to projects that ultimately absorb excess labour. Government will continue with affirmative action with the Youth Livelihood Programme.
To date, the Programme has developed skills of 83,000 youth and provided financial support to implement almost 6,500 projects worth Shs. 45.5 billion. The programme builds the capacity of Youth to invest in their own innovative projects, and eventually develops them into entrepreneurs economically empower women by rolling out the Uganda Women Enterprise Programme (UWEP).
This has already been piloted in 20 Local Governments.
Value addition through Micro,Small, and Medium sized enterprises
Madam Speaker, the strategy for Domestic Revenue Mobilization in the Financial Year 2016/17 is to expand the tax base by gradually formalizing the large informal sector, improving efficiency in tax collection and compliance.
Government will aggressively mobilize additional sources of revenue by raising the revenue effort from the current ratio of 13% of GDP to 16% by Financial Year 2019/20. Madam Speaker, this will be done through implementing tax policy reforms that align the tax regime with best practice, both in the regional and global context, in order to generate necessary resources to finance the budget and also promote private sector investment. In the forthcoming year, Government will continue to simplify the tax regime, enhance compliance and eliminate tax avoidance and evasion.
Madam Speaker, the Financial Year 2016/17 tax measures approved by the 9th Parliament will facilitate investment, including emerging industries, particularly in the petroleum, mining and construction sectors.
These measures include the following:-
- Taxpayers who merge or acquire loss-making businesses and continue to operate this same business after this transaction, will be allowed tax relief for such losses in order to promote Uganda’s investment climate and facilitate mergers and acquisitions.
- VAT relief will be granted in respect of supplies procured from the domestic market for aid-funded projects, in order to cure the imbalance suffered by domestic suppliers and producers.
- Producers of solar, wind and geothermal energy will be allowed relief on VAT incurred on their business inputs, in order to reduce the cost of production of alternative sources of energy.
- VAT imposed on imported services used by Business Process Outsourcing (BPO) companies will be refunded at the time of export or offset if the services are consumed in Uganda.
Madam Speaker, additional tax measures approved by Parliament include the following:-
i. Increase in Excise duties on:-
- diesel and petrol by Shs.100/=;
- soft cup cigarettes to Shs. 50,000/= per 1000 sticks and Hinge Lid cigarettes to Shs. 80,000/= per 1000 sticks
- 3. sweets and confectionaries to 20%ii. Increasefrom1%to1.5%inStampdutyontransferofproperty.
- Increase from Shs. 5,000,000/= to Shs. 20,000,000/= Registration Fees for personalized number plates.
Details of the new tax measures can be found in the respective amendment acts that will become effective on 1st July 2016.
Madam Speaker, the performance of non-tax revenue remains low, accounting for only 1 to 2% of total revenue collection, despite concerted reforms over the last five years. This compares poorly with other developing countries in Latin America, where NTR collections are as high as 10% of total government revenues.
Non-Tax Revenue is mainly fees and other payments for government services charged by state-owned enterprises. All Accounting Officers with the responsibility for collecting levies and fees will be held accountable for collection and accountability of Non-Tax Revenue in accordance with the Public Finance Management Act 2015.
Madam Speaker, furthermore measures to enhance capacity for tax administration will be implemented. These include the completion of establishment of One Stop Border posts (OSBPs) at Malaba, Mutukula, Busia, and Mirama Hills border points to facilitate faster and simplified clearance of goods at border posts.
Next year the Uganda National Single Window which allows lodging standardized documents at a single point to fulfil all import, export and transit related regulated requirements, will be fully operationalised. This will reduce the cost of doing business, create transparency in the supply chain and increase Government revenue. Electronic Fiscal Devices (EFDs) which record business transactions and share this information with the tax authority will also be rolled out in a phased manner.
Madam Speaker, I have provided Shs. 8 billion to implement the Taxpayer Registration Expansion Project (TREP) to enhance coordination between institutions such as the Uganda Revenue Authority (URA), Uganda Registration Service Bureau (URSB), Kampala Capital City Authority (KCCA) and other local authorities. The program will help businesses to formalize their operations through business licensing and registration. I have also increased the budget of the Uganda Revenue Authority by Shs. 40 billion to rollout taxpayer education programs to increase tax awareness, compliance and remedial mechanisms, as well as cover other operational activities. The scope for revenue improvements are detailed in the Background to the Budget.
Madam Speaker, pre-Budget Consultations of the East African Community Ministers of Finance were held on 7th May 2016. Among the issues considered at the Consultations was implementation of the EAC Summit directive on industrialization with a focus on the development of the Motor Vehicles, Textiles and Leather industries in the Community. The Consultations also agreed to adjustments in Common External Tariff (CET) rates, details of which will be gazette by the EAC Secretariat.
Madam Speaker, Government has also developed a new policy to guide Double Taxation agreements. We will forthwith be commencing the process of re- negotiating Double Taxation Agreements that do not comply with this policy.
Madam Speaker, in conclusion, I wish to commend this budget to all Ugandans in our quest for the country to attain middle income status. The strategic choices we have made in the budget for next year concretize the foundation for the prosperity of future generations. Uganda’s Vision 2040 aspires for “A transformed Ugandan Society from a Peasant to Modern and Prosperous Country by 2040”. This budget represents yet another milestone towards this goal.
For Ugandan households, next year’s budget seeks to make you all healthy and wealthy.
To school teachers and university staff, together with health workers, His Excellency the President has fulfilled his pledge, and the Uganda people now demand a quid-pro quo in service delivery.
To the youth I implore you to engage in production, as activities like sports betting have no future for you and the country.
To private sector entrepreneurs, seize the vast opportunities that abound in agriculture, agro-processing, tourism, mining and other sectors in Uganda. Please invest, make profits, expand your businesses, become millionaires, multi- millionaires and multi-billionaires; while creating jobs and ultimately making a significant contribution to the growth of our economy.
Madam Speaker, I beg to submit.
FOR GOD AND MY COUNTRY