Waiting for Uganda's 2007/2008 Budget
Uganda's Finance Minister Ezra Suruma.

Waiting for Uganda's 2007/2008 Budget

Budget scheduled to be read today on Thursday June 14, 2007.

By Gerald Businge
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First published: June 14, 2007

As Ugandans await the 2007/2008 budget which will be read today on Thursday June 14, 2007, many are hoping that the government will be reading a better plan to generate revenue and spend it in the most beneficial manner. The coming year's budget is expected to name energy, infrastructural development and maintenance, information technology as the priorities for government funding in the 2007/2008 financial year. While there are the usual concerns of increase or decrease in taxes, and sectoral expenditure plans, there are concerns on whether the government has learnt from last year's budget, and will provide a more efficient budget this time round. The budget performance will be measured according to how much it contributes to more gainful economic activities (production), and thus contributing to poverty reduction.

Many people say the performance of Uganda's economy in the last financial year came short of the year's budget theme Enhancing Economic Growth and Households Incomes through Increased Production and Productivity. Preliminary estimates by the Uganda Bureau of Statistics show a slowdown in economic growth in financial year 2006/07. The economy last year registered a 5.9% growth, which is short of the targeted 7%. This year's growth rate is lower than the earlier projected growth rate of 6.3%. This 5.9% growth rate is however higher than last year's 5.3%. The Uganda Revenue Authority collected 1,239bn shillings, of the projected 1,242bn between July 2006 and December 2006, showing a 99.78% performance.

As a result, Finance Minister, Dr. Ezra Suruma told a budget review meeting in May 2007 that the government was able to fulfill its projected spending allocations of 2,306bn shillings.

The government has been unable to stimulate economic growth and development as it had expected, majorly due to power shortages and drought. The different sectors of the economy especially manufacturing and agriculture have been held back in contributing to employment, income generation and growth as government had projected. The power shortages resulted in more job loses than those that were created by new investments.

Through the Bank of Uganda, the government was however able to maintain some level of macro-economic stability. This has mainly been through containment of inflation (an average of 7%) and the maintenance of public confidence in an orderly market-based economy.

Growth in road transport, telecommunications and financial services remained strong, while impressive performance was also registered in the hotels and restaurants and air and support services sectors. The telecommunications sector is expected to be announced as the fastest growing sub-sector in the economy, though highly taxed.

The government has reasonably fulfilled its pledge to improve key junctions and roundabouts in Kampala, in order to reduce traffic congestion and pot-holes. Clock Tower, Ben Kiwanuka Street, Garden City, Sixth Street roundabouts have been worked on. Only Jinja Road and Access Road roundabouts of those promised have not been worked on. But little progress was registered in infrastructural improvement in other parts of the country, as no road has been started or finalized this past financial year.

The government has however shown its intentions to prioritize infrastructural development by creating the Uganda National Road Authority, and establishing a Road Fund, which will be launched in July 2007. This fund is expected to get direct funds for road maintenance and construction over the next years. But this may come at a high cost to most Ugandans, as the government is expected to introduce a road user fee, either independently, or to replace the road license as has been proposed by the URA.

The government also made good steps in ensuring transport to the Mombasa sea-port by signing an agreement with Kenya to revitalize the railways services. The pledged industrial park at Namanve has also received $27m (about 45Bn shillings) allocation in the past year. It is expected to be completed in the 2007/2008 financial year and provide investors with land and Export Processing Zones they have been asking for.

The commitment in last year's budget for the reconstruction of northern Uganda also received the 18b shillings commitment, which was used for the resettlement of internally displaced people, supporting post-conflict recovery programmes and bolstering the development of northern Uganda which has been under war for the last 20years. According to the Ministry of Finance, Planning and Economic Development, the government is planning to allocate 623bn shillings for reconstruction programmes in northern Uganda over the next three years.

As promised, the government was able to start the Universal Secondary Education program.

Though the government hasn't managed to fulfill all pledged support to electricity generation, a lot of achievement has been registered through the establishment of an Energy Fund, distribution of over 800,000 free power-saving bulbs and tax incentives on diesel for manufacturers. This is in addition to the commencement of the construction of Bujagali dam expected to generate an extra 250MW by 2011. The government says the Karuma dam project will be undertaken this (2007/2008) financial year to further provide energy in addition to bolstering from oil production in 2009.

But many people have been disappointed with the government's failure to start the prosperity for all (bonabagawale) program, which was the focus of the campaigns that won President Yoweri Museveni another term in February 2006. The government had promised the program would start this year to offer loans to people at the grassroots.

In a bid to further bolster the level of savings mobilization and investment among the poor, the government adopted this strategy in order to support member-used and member-owned financial institutions, commonly referred to as Savings and Credit Cooperative Organizations (SACCOs) [Read Company Profiles: Front Page Microfinance - A Revolution in Microfinance Provision].

The objective was to assist communities to start and operate these institutions for financial service delivery at the sub-county and subsequently at the parish level. Many Ugandans formed or joined these groups waiting for bonabagagawale money, but it didn't come. The government has promised it will be provided for in the 2007/2008 budget.

The government has been talking of increasing local revenue collection in order to be independent from donors with their conditionalities, but this independence will come at an increased cost to ordinary Ugandans. When taxes, are increased whether on beer, airtime, manufactured products or cigarettes for example, it is the local consumers who suffer the tax increments. The service and product providers continue to register profits.

In order to meet the ambitious targets on infrastructure, energy, information technology and provide the usual social service in education and health care, the government is expected to name new taxes and increase some present taxes in order to raise enough revenue in this year and budget of CHOGM as many Ugandans are calling it.

But with more taxes, you present a disincentive to business by not only reducing on profits of business people, but also stopping others from engaging in business. High or more taxes therefore, can be a disincentive for economic growth. Since every government depends on taxes to run and provide services to citizens, it will depend on how much Dr. Suruma mixes the milking with provision of adequate fodder (grass) if the cows (read people) of Uganda are to enjoy better life in the 2007/2008 financial year.

Expected in 2007/2008 budget

More money to provide energy
More funds for education sector to cover USE
New taxes, like road user fees
Increasing taxes on beer, cigarettes, fuel
More funds for infrastructural development
More incentives to service sector, especially hotels ahead of CHOGM
Incentives on computers and other ICTs
Provide funds for bonabagagawale
More or increased business related taxes

2007/2008 Budget: What should Uganda's next budget tackle?

By Gerald Businge
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First published: June 14, 2007
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Gerald Businge is a media practitioner and features Editor at Ultimate Media Consult in Uganda. He is a graduate of Mass Communication and several journalism and leadership certificates. He has been a practicing journalist since March 2001 and has worked at The New Vision as features writer, and has written extensively for different newspapers, magazines, newsletters in Uganda and internationally. He currently does fulltime media communication consultancy work as well as writing and editing at Ultimate Media Consult (U) Ltd where he is a founding member and CEO. You can get his attention so long as you are interested in and you are working for a better world.