Briefing notes; 2012/13 Uganda Budget analysis

Real GDP growth is estimated at 3.2% this financial year.

Given Uganda’s population growth of 3.5% per annum, it is imperative that we quickly return to faster, more inclusive and sustainable economic growth.

The slowdown in growth this financial year was due to drought, weaker demand of our exports, high international fuel prices, and imported inflation coupled with the weak shilling due to a strong dollar globally.

Growth in the services sector slowed to 3.1%, with trade, financial, education and health services sector registering negative annual growth rates.

The growth in industrial production slowed to 1.1% during the year. The hardest hit industrial sub-sector was formal manufacturing sub sector, where growth contracted by 4.4%.

The Uganda Shilling depreciated against major international currencies earlier in the financial year now ending. The Uganda Shilling has recently been more stable. Depreciation of the shilling was a consequence of the widening balance of trade as imports continued to grow much faster than exports.

Export of goods & services during the year totaled US$ 4.1 billion, compared to imports of goods which amounted to US$ 5.31 billion.

The economy has faced high inflation with prices rising over the early part of the financial year now ending. However, inflation has receded.

Annual inflation peaked at 30.5% in October 2011 but has declined to 18.6 in May 2012. Food crop inflation that was 42.2% in May 2011 has declined to 8%in May 2012.

Tackling inflation remains Government’s overriding macroeconomic objective in order to protect macroeconomic stability.

The Bank of Uganda licensed 4 Mobile Money network operators to offer mobile money services, as a means of bringing about greater financial inclusion with the move towards branchless banking. By February 2012, the operators had registered 2 million mobile money clients and 13.2 million transactions worth Shs.551.0 billion had been processed between January and March 2012.

With reforms undertaken in the pensions sector, The Retirement Benefits Regulatory Authority will be established this financial year. Pension reform when completed will be a key element in the development of our domestic debt market.

Domestically mobilized resources, including tax collections and domestic borrowing will finance about 75% of the budget during 2012/13, whilst 25% will be provided by development partners. This represents a rise in domestic financing of our budget. Revenue collections for next financial year are projected at Shs7,251 billion.

The budget priorities in next financial year will seek to achieve the following:
i. Removing infrastructure constraints in transport and energy to facilitate private sector development as the engine of growth;
ii. Promoting support to the critical productive sectors of the economy including Agriculture, Tourism in order to generate employment and increase production;
iii. Improving the quality of social services focusing on education, health and access to water; and
iv. Strengthening Public Sector Management for efficient service delivery.

INFRASTRUCTURE
Road Transport;
Road transport accounts for about 97% of the freight cargo in Uganda. Government will lower high vehicle operating costs and reduce time delays by improving the national road transport network.

The priorities in the road sector are:-
i. Rehabilitation and expansion of the road network with special emphasis on roads in agricultural areas and export routes; and
ii. Developing alternative access routes to the sea through both the southern & northern corridors.

The allocation to the Works & Transport sector is to increase to Shs 1,651billion in the next financial year from Shs1,291 billion in the year ending.

1. Construction of Second Nile Bridge at Jinja is to start.
2. Construction will be started on the Kampala-Entebbe Expressway (51km)
3. Complete Rehabilitation of Nalubaale-Kiira Bridge;

In order to enhance road maintenance & rehabilitation at the district level, 142 units of road equipment have been procured for local governments to ensure prompt & efficient road maintenance.

Water Transport
A sizable portion of Uganda’s population lives around our rivers and lakes. However, the utilization of water transport remains low. In this financial year, the following projects will be implemented:

i. In addition to the recently commissioned Obong (Moyo)-Sinyanya (Adjumani) ferry, construct the Laropi-Adjumani and Amuru –Rhino Camp ferries routes

ii. Construction of the Lake Bisina & Lwampanga (Nakasongola)-Namasale (Amolatar) landing sites;
iii. Design the Bukungu-Kagwara ferry; and
iv. Repair the Marine Vessel (MV) Kaawa.

Rail Transport
In recognition of railway’s potential, Government will undertake the following actions in this financial year.
i. Complete the feasibility study to upgrade Kampala - Kasese railway;
ii. Start the preliminary engineering design for the Malaba-Kampala standard gauge railway line.
Energy sector;
I. Start construction of 600MW Karuma Hydro Power Project
II. Provide financial support in the construction of 125 MW of renewable Mini Hydro Projects;
III. Further expand the Rural Electrification Programme to increase access to power; and
IV. Ensure aggressive power loss reduction by rolling out prepaid meters & investing in the distribution network.

Agricultural sector;
The total direct & indirect allocations to the agriculture sectors for the next financial year will amount to U. Shs585.3 billion.

Oil & Gas sector
Government has presented legislation to Parliament for establishing a sound legal and regulatory framework, as well as the institutional arrangements for prudent management of the oil resource.
The Bills before Parliament are;
i. The Petroleum (Exploration and Production) Bill 2012
ii. The Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage) Bill 2012
iii. The Public Finance Bill 2012, which contains the petroleum revenue management framework

We look forward to Parliament’s expeditious enactment of these vital legislations.

Business Registration & licensing regimes
A comprehensive review of business licenses has been completed, & recommendations made to simplify requirements, reduce discretionary powers, and eliminate redundant procedures. Therefore, about 27 licenses will be eliminated all of which were found to be either obsolete or redundant.

An electronic licenses registry that will serve as a repository for all approved business licensing in Uganda will be established. Implementation of the agreed recommendations is estimated to lead savings in excess of Shs 78.3 billion for the private sector.

Government to establish a One Stop Centre to provide online registration services for the various licenses required to start a business.

Bills before parliament;
The following bills which are aimed at improving further private sector competitiveness, are before Parliament and need an expeditious passage:-
1) Counterfeit Bill
2) Anti-Money Laundering bill
3) Industrial Property Bill
4) Accountants Bill
5) Uganda National Bureau of Standards Bill

Education sector
This has the largest share of the national budget with a total provision increasing from Shs 1,418billion in the financial year ending, to Shs 1,669billion in the next financial year. This amounts to 17% of the total budget. Shs.290 billion has been allocated for teachers, scientists &other civil servants.

BTVET; Government will work with the private sector to expand skills development to match labour market requirements as a key requirement under Business Technical, Vocational Training & Education.

Graduate Venture Capital Fund
This has been established to address the needs of graduates who have bankable project proposals but lack the requisite funding, with an allocation Shs. 16 billion to be implemented with participating financial institutions.

Water & Environment Sector
The total allocation to the water sector in the FY 2012/13 has increased from Shs 271 billion to Shs 355 billion. Government’s priority in the Water sector will be to provide water for production. In the next financial year, gravity flow schemes and small piped water systems will be constructed, for improved rural water supply.

Revenue collection
Government has set an ambitious target for URA to collect over Shs6 trillion. The government is looking to generate a substantial portion of the proposed more than Shs10.2 trillion budget from domestic sources.


UMA management.
15 June 2012