First 3rd Term Budget Unveiled
President Yoweri Museveni.

First 3rd Term Budget Unveiled

This is the first time since President Yoweri Museveni came to power in 1986 that the Defence Budget has not changed.

By Gideon Munaabi
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First published: June 16, 2006


The Minister of Finance, Planning and Economic Development, Ezra Suruma on Thursday June 15 unveiled the 2006/2007 financial year budget with little surprises other than the decision by government not to increase expenditure of sectors like defense.


This is the first time since President Yoweri Museveni came to power in 1986 that the Defence Budget has not changed. Even, although many people had thought that there was going to be a lot of budgetary cuts for ministries, there were no changes in the budget.

The defence budget has been increasing mainly because of the two-decade war in northern Uganda and government's plan to modernize the army. The reason for government's decision could be to send out a message that the war is over.

The new Museveni government has instead allocated 18 billion Uganda shillings in the northern Uganda rehabilitation and post war reconstruction program. Suruma noted that the people of northern Uganda have the highest incidence of poverty because of the war.

Energy Sector:

As many had anticipated, government has put more emphasis on the energy sector to avert the power crisis that has been slowly but now seriously eating the economy as production costs have gone up while come businesses have started closing.

In the Financial year 2006/2007, the government is going to spend 70 billion Uganda shillings on thermo power generation and another 99 billion shillings through the energy fund to construct two dams at Karuma and Bujagali. The same budget will be allocated in the next financial year.

As an immediate measure, government is going to procure thermo generators to generate 100 MW of power to reduce the power crisis. The government had earlier revealed that it would take 44 months to complete the two dams at Karuma and Bujagali.

According to President Yoweri Museveni, if the two dams had been built already, Uganda would not be in the crisis it is in today.

"I welcome the energy shortage because it opened my eyes. It helped me to tell the civil servants that what they were saying together with their allies (opposition) are lies," he said after the reading of the Budget Speech by Suruma.

The President said that with even drought, Uganda would not have any energy crisis if the two dams had been built. "If there was no drought, we would have no shortage. Also, if we had constructed other dams, we would be generating more than enough electricity. So, those two things are causing the problem," he said.

While reading the Budget, the Minister of Finance, Planning and Economic Development, Ezra Suruma said that energy ranked high among government priorities followed by rural development and support to the urban poor.

Other priority areas include rehabilitation of northern Uganda, industrial development, support to scientists, as well as infrastructure development and investment in the social sector.

Social transformation:

Suruma said that in the next financial year, the government is allocating 9 billion Uganda shillings in rural development including the training of Sub County Chiefs so that they become change agents for development in the areas they lead.

The government is also set to increase access to financial services through savings and credit cooperatives, setting up information access centers in rural areas as well as improve agriculture production and promote marketing and trade.

Suruma said the budget is meant to ensure that all households have minimum income to meet minimum needs. "As we come out of energy crisis, we shall provide employment opportunities because prosperity for all means employment and income for all," he said, adding that the government was going to increase public spending.

Education Sector:

The biggest news was the increase of Primary Teachers' Salaries from 150,000 Uganda shillings a month to 200,000 shillings beginning next month and the introduction of Universal Secondary Education beginning with next year's senior one intake.

The government is going to spend 30 billion shillings to kick-start free secondary school education beginning January 2007. The government has allocated 30 billion shillings to the program, which will cater for senior ones in government and government-aided schools in the next financial year.

The finance minister also said that a university in Eastern Uganda will also be set up during this academic year and will open doors for the first academic year for the 2007/2008. The budget left the university dons who, on the eve of the reading of the budget, were threatening to demonstrate angrily. The dons were expecting a salary increase.

Infrastructure:

The Minister said that government would capitalize the Civil Aviation Authority (CAA) to meet international standards so that it is competitive. He said that over the years, traffic at Entebbe has increased and this opportunity should be exploited.

The government is also going to upgrade a number of roads to pitman standard in addition to improve on the existing roads like the Kampala-Mbarara road and Kawempe-Kafu road.

The roads that are going to be upgraded to pitman standard include Fort Portal-Bundibugyo road, Soroti-Dokori-Lira road, Atyak-Moyo road, Kampala-Wobulenzi, Matuga-Kapeka-Semuto road and Masaka-Bukakata road. During the same financial year, government is going to create the Uganda National Road Authority to be in charge of road maintenance.

Suruma said that the government is also going to work on the various roundabouts in Kampala City to ease on traffic jams and also to prepare for the November 2007 Common Wealth Heads of Government Meeting.

In terms of water transport, Suruma said that the government will improve water transport on Lake Victoria, Lake Albert, Lake George and Lake Bunyonyi. Also as a measure to ease transport to the sea, the Uganda and Kenya government have signed a concession agreement with the Rift Valley Railway Company to take charge of the railway network.

"Under the agreement, Uganda Railways and Kenya Railways property remain property of the two governments. The handover is set for the end of June 2006," he said.

The minister said that this would help in reducing operation costs, increase market share of railway by creating better service, foster regional integration and development and protect roads.

Health sector:

The Minister said that government is going to focus on health promotion and training for village health sanitation teams and control of malaria.

He said that the government is constructing water system in 16 districts and that by June 2006, water service in big towns had moved from 67 percent to 70 percent.

"In the 2006-2007 Budget, the government is going to construct 4,600 water sources in rural areas," Suruma said.

Industrial development:

The minister said that in 2006-2007 financial year, the government is going to focus on export oriented production through putting in place an industrial plan as well as setting up agriculture zoning.

Suruma said that the government is to spend 5 billion shillings on the development of the Namanve industrial park. It is also going to strengthen the Uganda Bureau of Standards to ensure that there is quality assurance, as well as support scientists and research.

"I am allocating 8 billion shillings to research. The government has also negotiated a 30 million dollar loan for research and education with the World Bank," Suruma said in the budget speech.

It is here that President Yoweri Museveni revealed that the assembling of brand new boda boda (motorcycles) had started. "Soon, we shall start assembling omnibuses and pick ups using the Chinese," he said.

The minister said that in this financial year, the government is going to finance 59 percent of its budget from local sources. This includes funding of the Chogm; renovation of State House, which President Museveni said, is already available. To fund, its programs, the government has:

  • Increased duty on non-malt beer from 20 to 30 percent and the government expects to generate 4.3 billion shillings.
  • Imposed a 10 percent tax on bottled water where the government expects to generate 1.7 billion shillings.
  • Imposed 5 percent duty on landline phones and public pay phones where the government expects to generate 2.9 billion shillings.
  • Imposed a 10 percent tax on environmental hazardous goods like used vehicles aged 8 year and above which will attract a 10 percent levy to give the government 4.6 billion shillings.
  • Impose a 5 percent increase on traffic fees and licenses on cars other than the commercial ones and the government expects to generate 3.3 billion shillings here.

The government also announced tax exemptions and reductions in which the withholding tax on companies on the stock exchange market is reduced from 15 to 10 percent, gas has been exempted from VAT to increase its use in cooking and lighting. VAT has also been scrapped on contraceptives like condoms to promote its use in the fight against HIV/AIDS.

The donor community has welcomed the budget, saying it is balanced while some opposition members say it will not do much to improve on the welfare of Ugandans.

Ugandans must now wait to see what the budget will do to help get them out of poverty.

By Gideon Munaabi
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First published: June 16, 2006
To learn more about Ultimate Media Consult go to www.ultimatemediaconsult.com.

Gideon Munaabi is a journalist and public relations practitioner with Ultimate Media Consult (U) Ltd. He has been and continues writing widely for different publication locally and internationally. He is a founding member of Ultimate Media Consult (U) Ltd and is currently the chairman of the organisation.