Uganda Budget 2012 By Maria Kiwanuka- Minister of Finance
I. INTRODUCTION
1. Madam Speaker, in fulfillment of Article 155(1) of the Constitution, I beg
to move that Parliament resolves itself into a Committee of Supply for
consideration of:
i. The Revised Revenue and Expenditure Estimates for the
Financial Year 2011/2012 and
ii. Proposals for the Estimates of Revenue and Expenditure for
the Financial Year 2012/2013.
2. Madam Speaker, Article 155(1) of the Constitution provides that the
President shall cause to be prepared and laid before Parliament
estimates of revenue and expenditure for each financial year. I am
accordingly performing this duty on behalf of the President, for which I
am thankful.
3. Madam Speaker the Budget Act 2001 requires that the national budget is
prepared following comprehensive consultations with all stakeholders
which obligation, I have fulfilled.
4. Madam Speaker, in the State of the Nation Address a week ago, His
Excellency the President discussed the National Resistance Movement
Government’s vision for the future of this country and clearly laid out the
challenges to development we face today. In addressing these challenges
and in support of His Excellency the President’s vision, the theme for the
budget for next financial year is “Priorities for Renewed Economic
Growth and Development”.
5. Madam Speaker, last October, I stood before this august House and
asked for your support as we tackled the challenges facing us. I wish to
thank you, and the people of Uganda, for the support Government
received when we had to implement strict measures to combat a series of
economic shocks. These strict measures included both tightening fiscal
and monetary policy. I am happy to report that inflation is easing and the
exchange rate of the Uganda Shilling has stabilised.
II. ECONOMIC PERFORMANCE AND OUTLOOK
Economic Performance
6. Madam Speaker, the key macroeconomic and sector developments over
the last year are elaborated in the Background to the Budget 2012/13. I
will therefore first highlight the performance of the economy over the last
year. This serves as a backdrop to the key challenges, Budget strategy
and priorities for renewed growth and economic development in the next
financial year. Fiscal policy will support monetary policy to maintain
macroeconomic stability, while at the same time increase resources
available to address the binding constraints to growth.
Economic Growth
7. Madam Speaker, Uganda has faced both global and domestic economic
challenges over the past year. Real GDP growth is estimated at 3.2% this
financial year. However, there are signs that the economy is turning
around, but requires addressing the challenges on the supply side of the
economy. This involves budget prioritization, improving value for money,
and better coordination across sectors. 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.
8. 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%.
9. Madam Speaker, I am happy to report that the agricultural sector has
performed much better, recording annual growth of 3.0%. This shows
that agriculture can perform well given our climatic advantage. The
performance of the Agricultural sector has been spurred by cash and
food crop production following favourable rains in the first planting
season of the last year. The hotel and restaurant sub sector also
rebounded, coupled with positive growth rates in transport and
telecommunications, real estate activities and other business activities,
as His Excellency the President highlighted in the State of Nation
Address.
External Sector Developments
10. Madam Speaker, 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 and
services during the year totaled US$ 4.1 billion, compared to imports of
goods which amounted to US$ 5.31 billion. In addition, Services
payments were recorded at US$ 2.23 billion. However, the overall
balance of payments was positive, on account of increased inflows of
remittances amounting to US$ 2 billion, foreign direct investments
amounting US$ 834 million, and portfolio flows amounting to US$ 274
million.
11. We must therefore continue to concentrate on export growth in order to
reduce the gap between imports and exports which has been widening
over the past years. This will entail increased production and exports of
staple food to the region, and by shifting expenditures from imports to
locally manufactured goods where this is feasible. Staple food exports
have a sure regional market given high elasticity of demand and have
lower transport costs in view of our neighbour’s proximity.
Inflation and Interest Rates
12. Madam Speaker, 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.In order to achieve this, the Bank of Uganda had to pursue a tight monetary policy using the Central Bank
Rate that led to a rise in interest rates. The Central Bank Rate will be
eased as conditions improve. Tight monetary policy has succeeded in
bringing down the price level and has restored macroeconomic stability.
Supply side (or fiscal policy) and demand management (or monetary
policy) policies are not alternatives; they complement each other and
both are necessary for sound economic management. Tackling inflation
remains Government’s overriding macroeconomic objective in order to
protect macroeconomic stability.
Financial Sector Developments
13. Madam Speaker, new technology is driving our efforts to improve
financial inclusion, especially in the area of electronic money transfer
and agency banking. The necessary amendment to financial sector
legislation to accommodate alternative banking approaches such as
mobile banking, bank assurance, and Islamic Banking are being
undertaken. The Bank of Uganda has licensed four 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. In
addition, Consumer Protection Guidelines were issued by the Bank of
Uganda and are now part of the regulatory regime of all financial
institutions.
14. A significant development in financial inclusion in 2011 was a 60%
increase in agricultural lending by commercial banks and other financial
institutions. This lending was towards financing post-harvest activity and
the purchase of equipment using the Agricultural Credit Facility.
Government will continue to implement positive interventions to increase
Agriculture lending through the banking system including the Uganda
Development Bank.
15. Madam Speaker, Government has undertaken reform of the pensions
sector with the view to increasing private savings which can be leveraged
to finance domestic investment on a sustainable basis. In this regard,
legislation to provide oversight and regulation of the pension sector
became effective on September 2011. The Retirement Benefits Regulatory
Authority will be established in the next financial year. Pension reform
when completed will be a key element in the development of our domestic
debt market.
Fiscal Developments
16. Madam Speaker, as a result of lower economic growth, domestic
revenues performed below target over the year, growing by 17.9%
compared to the 21.6% growth recorded in the previous year. Total
expenditure releases during the financial year were Shs137billion below
the target of Shs. 9,869 billion, mainly because of delayed start to the
construction of Karuma Hydro power station.
Economic Outlook
17. Madam Speaker, the outlook for the Uganda economy must take into
account the risks faced by the global economy. The Euro Zone is
projected to enter a mild recession, while the United States economy has
not yet shown signs of a return to robust economic growth. We must also
be aware of the creeping exposure to global shocks arising from greater
integration, which occurs through financial linkages, export receipts and
workers remittances.
Contrary to arguments that the country is disadvantaged by being land-
locked, Uganda is actually land-linked with her neighbours who are
providing significant demand for our products especially food. For
Uganda to succeed in this global and regional economic environment, we
must seize the opportunities which these challenges present and
implement programs that will spur growth; accelerate social
transformation; and ensure prosperity for all, within the context of East
African Community integration.
III. BUDGET STRATEGY FOR FINANCIAL YEAR 2012/13
19. Madam Speaker, the Budget strategy underpinning next financial year’s
proposals will focus Government’s scarce resources to unlock the most
binding constraints to help restore faster economic growth, while
promoting inclusion and sustainability. The budget proposals presents
emerging thinking on our macroeconomic and sector challenges, drawing
on ideas, feedback and observations from all walks of society and
stakeholder consultations held throughout the past year. The proposals
envisage that Government will focus its resources to improve Uganda’s
business climate and its comparative advantage of a conducive
agricultural climate, land linked location in the middle of East Africa and
a young adaptable workforce, so as to truly undergo a structural change
for economic transformation. Such a process has many challenges and
needs unstinting policy support from across the entire Government and
the Ugandan people.
Macroeconomic Objectives
20. Madam Speaker, the global, regional and domestic economic slow-down
has constrained economic growth this year and affected macro-economic
stability. It is urgent that the economy reverts to a more positive growth rate. Achieving this turnaround will require overcoming formidable
challenges to share more equitably and sustainably. The budget strategy
for Financial Year 2012/13 has been designed to renew economic growth
to enable sustained and inclusive development.
21. The macroeconomic objectives of Government are therefore as follows:-
i. achieve a growth rate of at least 7% per annum in the
medium term;
ii. the return to single digit inflation rates;
iii. improve Uganda’s Balance of Payments by reducing the
current account deficit.
22. Madam Speaker, Government recognizes that its own resources are
limited and that the private sector is the principal partner in economic
growth. Therefore, Government will leverage its resources to support
private sector growth and development by lowering the cost of doing
business in Uganda. Government will invest in infrastructure that
unlocks the growth and development potential of the private sector. It
will improve skills for competitiveness and ensure training matches
requirements of the job market.
23. Madam Speaker, by virtue of its geographical location and favorable
climate, Uganda is capable of becoming the food basket and distribution
hub of the region. This will require the diversification of our markets, in
particular to increase inter-regional trade with our neighbours. We will
therefore concentrate on producing for food security and exporting staple
crops which have a sure market. This approach will benefit from cheaper
transport. The budget strategy will therefore prioritize the removal of
weaknesses that obstruct growth in the productive sectors and hinder
the implementation of critical infrastructure. This strategy will maximize
the economy’s growth potential.
Madam Speaker, the four main strategies to lower the costs of doing
business and marshal private sector investment in Uganda are:-
i. Rehabilitation and expansion of road and electricity infrastructure to
reduce transport costs and improve access to affordable energy to
support the private sector as an engine of growth.
ii. Research and Development to improve productivity, such as
developing improved seeds and other inputs, provision of extension
services in the field, and skilling our workforce to operate agro-
processing industries e.g mechanics, electricians, machine
operators, carpenters, plumbers, e.t.c.
iii. Improving business efficiency by streamlining regulatory rules and
business licensing reform.
25. Madam Speaker, in implementing the Budget strategy Government will
ask the following key benchmark questions when making any investment
decisions and prioritizing support activities:-
i. Does the investment increase infrastructure stock?
ii. Does the investment add value to the product or process?
iii. Does the investment lower the cost of doing business? And if so by
how much.
26. I must reiterate that this focus on areas of Government comparative
advantage emphasizes selectivity and not neglect of other sectors, that is
“the greatest sustainable good for the greatest inclusive number”.
27. Before I elaborate the priority interventions reinforcing the budget
strategy for the Financial Year 2012/13, I will first outline the financing
strategy that underpins the interventions I will propose later on.
Financing Strategy
28. Madam Speaker, the interventions I am proposing today will be financed
using the following strategy.
i. Increased Revenue Mobilization from Domestic Sources
ii. External Financing in form of Loans and Grants from
development partners and private creditors
iii. Public Private partnerships that mobilize private sector financing
for public projects
29. Madam Speaker, tax policy will be used to promote investment in the
economy to enable recovery. Domestic revenues are likely to be affected
by a number of opportunities and challenges, including development of
the oil and gas sector, return to a conducive macroeconomic environment
as Uganda returns to faster economic growth, and the integration of the
East African Community. Government will maximize Non-Tax Revenues
and improve tax administration at the Uganda Revenue Authority (URA)
in order to ensure that Uganda is fully prepared to benefit from
opportunities, such as development of the oil and gas sector and the
integration of the East African Community.
30. Madam Speaker, I propose to mobilize Grants and Loans amounting to
Shs. 2,679billion, which represents 25% of the National Budget, and
consists of project and budget support loans. Resources will be allocated
towards counterpart financing of infrastructure projects and the
improvement of service delivery. In addition, Government will borrow
non-concessional loans to undertake major infrastructure projects that
demonstrate the necessary commercial and economic benefits, for which
other financing options are not available.
31. Starting next financial year, Government will speed up project
implementation and ensure that undisbursed borrowed funds will be
utilized faster. Government will provide counterpart funding to unlock
loan disbursements and will seek technical assistance where necessary.
For future projects, the Ministry of Finance, Planning and Economic
Development will undertake rigorous economic analysis and review the
Public Investment Plan to ensure alignment with the National
Development Plan. In addition, selected projects will have to be in line
with national objectives and have satisfactory cost benefit analysis
criteria.
32. Madam Speaker, Government will implement the Public Private
Partnership Policy which entails a streamlined framework for project
appraisal and contracting with the private sector to achieve efficient and
faster development and public infrastructure. The Public-Private
Partnerships Bill will be presented to Parliament in the next financial
year and I seek your support for its enactment.
Debt Sustainability
33. Madam Speaker, Uganda’s public debt is sustainable in both the
medium and long term. The bulk of Uganda’s external debt portfolio has
been contracted on concessional terms with a repayment period of 40-50
years, a grace period of at least 5 years, and interest rates of not more
than 0.75% per annum.
34. Given that our investment programs require more resources that we can
raise domestically, it is feasible to borrow externally and prudently on
favourable terms. Next financial year, Government will implement a
policy that uses contractor facilitated financing as a means of raising
resources for infrastructure projects. Guidelines will be issued to
operationalize this policy. However, these borrowed resources must be
utilised to boost productive capacity of the economy to increase
competitiveness. This will enable our economy to generate the necessary
resources to service debt sustainably over the long term. To achieve this
objective, Government will focus on improving efficiency in the use of
public funds and ensure value-for-money for all Government spending.
Resource Framework for FY 2012/13
35. Madam Speaker, the total amount of resources available in financial year
2012/13 is estimated at Shs11,157 billion. Domestically mobilised
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. Total debt service including interest payments are
projected to amount to Shs1,101 billion in financial year 2012/13. This
means that Shs10,057 billion will be available to support economic and
social development programmes.
IV. KEY SECTOR PRIORITIES FOR FINANCIAL YEAR 2012/13
36. Madam Speaker, in line with the objectives of the National Development
Plan and the long-term vision of the socio-economic transformation of
Uganda, 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; andiv. Strengthening Public Sector Management for efficient service
delivery.
A. INFRASTRUCTURE
Road Transport
37. Madam Speaker, 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 and northern corridors.
38. I am proposing to increase the allocation to the Works and Transport
sector to Shs 1,651billion in the next financial year from Shs1,291 billion
in the year ending.
39. Madam Speaker, this allocation will enable construction to continue on
the following roads:-
i. Fort-Portal-Bundibugyo (104km);
ii. Busega-Masaka (116km);
iii. Nyakahita-Kazo-Kamwenge (143km);
iv. Kawempe-Kafu (166km);
v. Malaba/Busia-Bugiri (82km);
vi. Tororo-Mbale-Soroti (152km);
vii. Mbarara-Katuna (124km);
viii. Jinja-Kamuli (60km);
ix. Mbarara-Kikagati-Murongo Bridge (75km);
x. Hoima-Kaiso-Tonya (85km);
xi. Vurra-Arua-Koboko-Oraba (92km);
xii. Gulu-Atiak (74km);
xiii. Ishaka-Kagamba (35.4km);
xiv. Kabale-Kisoro-Bunagana/Kyanika (101km);
xv. Masaka-Mbarara (154km).
40. Madam Speaker, construction will be started on the following roads:-
i. Kampala-Entebbe Expressway (51km);
ii. Muyembe-Nakapiripirit-Moroto-Kotido (193 kms)
iii. Dualing of Kampala Northern Bypass (17km);
iv. Construction of Mbarara Bypass (40km);
v. Upgrading of Kamwenge-Fort Portal (66km);
vi. Upgrading of Atiak-Nimule (35km);
vii. Kalangala Infrastructure Project.
41. Madam Speaker, Government is in advanced stages of finalizing
funding for the following priority road projects:-
i. Olwiyo-Gulu-Kitgum (167 kms)
ii. Moroto-Nakapiripirit (92 kms)
iii. Soroti-Katakwi-Moroto-Lokitanyala (208 kms)
iv. Kapchorwa-Suam (77 kms)
v. Villa Maria-Sembabule (48 kms)
vi. Mpigi-Maddu-Sembabule (135 kms)
vii. Mukono-Kyetume-Katosi-Nyenga (74 kms)
viii. Ntungamo-Kakitumba/Mirama Hills (37 kms)
ix. Rukungiri-Kihihi-Kanungu-Ishasha (74 kms)
x. Kyenjojo (Kabwoya)-Hoima – Masindi- Kigumba (137 km)
xi. Buwaya-Kasanje-Mpigi-Kibibi-Mityana (90 kms)
xii. Hoima-Butiaba-Wanseko (111 kms)
xiii. Kayunga-Galiraya-Bbale (88.5 kms)
xiv. Kabale (Ikumba)-Kanungu-Buhoma (120.0 kms)
xv. Ishasha-Katunguru (88.0 kms)
xvi. Kabale-Bunyonyi (6.0 kms)
xvii. Mbale-Lwakhakha (41.0 kms)
xviii. Atiak-Adjumani-Moyo-Afoji (104.0 kms)
xix. Masaka - Bukakata
42. Madam Speaker, in addition, the construction works and repairs of the
following bridges will be undertaken:-
i. Commence construction of Second Nile Bridge at Jinja;
ii. Complete Rehabilitation of Nalubaale-Kiira Bridge;
iii. Complete Bulyamusenyu and Muzizi Bridges;
iv. Complete 3 bridges on Atiak-Moyo-Afogi Road;
v. Construct Kanyamateke (Kisoro), Karujumba (Kasese), Alala
(Nebbi) and Kasaigi (Kibale) and Semuliki Bridges;
vi. Construct bridges in North and North Eastern Uganda at
Olyanai, Obalanga, Alito, Ajeliek, Ojanai, Opot, Aakol, Airong,
Balla, Agali, Engeti, Kochi and Nyawa.
43. Madam Speaker, in order to enhance road maintenance and
rehabilitation at the district level, 142 units of road equipment have
been procured for local governments. We expect that this equipment
will ensure prompt and efficient road maintenance.
Water Transport
44. Madam Speaker, a sizable portion of Uganda’s population lives around
our rivers and lakes. However,the utilization of water transport
remains low. In the next 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 and Lwampanga
(Nakasongola)-Namasale (Amolatar) landing sites;
iii. Design the Bukungu-Kagwara ferry; and
iv. Repair the Marine Vessel (MV)Kaawa.
Rail Transport
45. Madam Speaker, in recognition of railway’s potential, Government will
undertake the following actions in the next financial year.
i. Complete the feasibility study to upgrade Kampala -
Kasese railway;
ii. Commence the preliminary engineering design for the
Malaba - Kampala standard gauge railway line.
Electricity
46. Madam Speaker, access to electricity is essential for economic
development especially for agricultural and industrial processing and
production. Government will prioritize increased generation capacity,
and expand the transmission and distribution network to reduce
systems’ losses. This will result in higher efficiency in the electricity
sector and better quality of power. In the next financial year,
Government will undertake the following:-
i. Fully commission the 250MW Bujagali Hydro Power
Project;
ii. Start construction of 600MW Karuma Hydro Power
Project;
iii. Complete preliminary designs for the 600MW Ayago and
140MW Isimba Hydro Power Projects;
iv. Provide financial support in the construction of 125 MW of
renewable Mini Hydro Projects;
v. Further expand the Rural Electrification Programme to
increase access to power; and
vi. Ensure aggressive power loss reduction by rolling out pre-
paid meters and investing in the distribution network.
Oil and Gas
47. Madam Speaker, with respect to the Oil and 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
48. We look forward to Parliament’s expeditious enactment of these vital
legislations.
B. PRODUCTION SECTORS
Agriculture
49. Madam Speaker, the priorities in the agricultural sector is to ensure
food security, provide raw materials and enhance export revenue.
Therefore, the sector holds the key to Uganda’s economic
transformation, job and wealth creation. To complement Government
Agricultural Zoning Strategy, Government has adopted a commodity
based approach which will focus on 11 selected commodities for
increased exports to regional and international markets. Apart from
traditional commodities of coffee and tea, other crops were selected for
both their versatility as food security and export earning potential.
50. Government will implement the following actions in the next financial
year:-
i. the provision of improved seed and farm inputs and
implements to increase production and productivity of seven
food security commodities of the 11 commodities, namely:-
maize, beans, coffee, market fruits and vegetables, and fish;
ii. supporting the seed industry and provision of improved
breeding stock for the seven commodities; and
iii. Completing the ongoing rehabilitation of irrigation schemes
and embarking on establishing of new ones to increase the
provision of water for irrigation, livestock and for aquaculture
by partnering with the private sector.
51. Madam Speaker, the commodity approach implemented with the
zoning strategy will concentrate on a particular commodity in a specific
zone. In this way, we will be able to produce sufficient quantities that
will support domestic and regional trade, as well as agro-
industrialization to add value and create non-farm jobs required for the
youth. In addition concentrating in a specific zone will allow the
efficient provision of relevant services such as extension services, road
and electricity infrastructure and financial services.
52. For instance maize farmers in specific zones in the country will be
facilitated to access both improved seed, and also the means to access
flour milling plants and equipment to add value to their produce. This
will enable maize farmers to benefit from higher prices paid for maize
flour instead of lower receipts earned from grain.
53. Madam Speaker, in order to increase production, Government is
consulting nucleus farmers in the private sector on how to provide cost
effective agricultural mechanized support to small holder farmers. This
will increase value addition, and therefore household income for small
holders farmers across the country.
54. Madam Speaker the total direct and indirect allocations to the
agriculture sectors for the next financial year will amount to U.
Shs585.3 billion.
Tourism
55. Madam Speaker, Uganda has emerged as a top tourist destination over
the last year. Uganda is rich in flora and fauna, offering wildlife safaris,
variety of bird species and has hospitable people.
56. Government will use its resources, working with the private sector, to
undertake the following:-
i. Improve accessibility to tourist sites by upgrading road
infrastructure
ii. Support enactment of hospitality standards through grading hotels
and hospitality training
iii. Promoting eco-tourism
iv. Implementation of cost effective tourism promotion using tourist
companies and on-line.
Private Sector Competitiveness
57. Madam Speaker, Government will continue to focus its efforts on
improving Uganda’s private sector competitiveness by:
i. Reducing physical costs in transport and electricity, among others);
and
ii. providing the necessary policy, legal and regulatory framework.
58. Madam Speaker, I am pleased to announce that a comprehensive
review of business licenses has been completed, and recommendations
made to simplify requirements, reduce discretionary powers, and
eliminate redundant procedures. As a result of the review, I will
eliminate about 27 licenses 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. These measures will be implemented in the next financial year.
59. Government will also establish a One Stop Centre to provide online
registration services for the various licenses required to start a
business. In addition, a Small and Medium Enterprises (SMEs) Business Guide has been developed to provide SMEs with information
on available financial, business development services (BDSs), and
business licensing information.
60. Madam Speaker, the following bills which are aimed at improving
further private sector competitiveness, are before Parliament for which
I am requesting expeditious passage:-
i. Counterfeit Bill
ii. Anti-Money Laundering bill
iii. Industrial Property Bill
iv. Accountants Bill
v. Uganda National Bureau of Standards Bill
C. SOCIAL SERVICES
Education Sector
61. Madam Speaker, in the Education sector, Government will continue to
enhance the quality and relevance of education at all levels. This will
be achieved by improving the effectiveness and efficiency in the sector
by reducing teacher and pupil absenteeism, provision of scholastic
materials and enhancing school inspection.
62. Madam Speaker, the education sector has the largest share of our
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. The sector provision will
also cater for includes salary increases for Primary School Teachers
and Science Teachers in Post O-Level institutions. I have allocated Shs.
290 billion for teachers, scientists and other civil servants.
Creating Employment Opportunities
63. Madam Speaker, Government will work with the private sector to
expand skills development to match labour market requirements as a
key requirement under Business Technical and Vocational Training
and Education (BTVET). Government recognizes that jobs will be
created by the private sector, for which it will continue to support with
skills development of the workforce.
64. One such joint venture with the private sector is the Youth Venture
Capital Fund for which Shs. 25 billion is being lent out to youth, with
the help of participating financial institutions. I am happy to report
that remarkable progress has been made in the first few months of the
scheme’s implementation. To date, Shs. 8 billion has been disbursed to
3,000 youth. In addition, a dedicated desk officer at a senior level has
been appointed at the Ministry of Finance to deal with all youth
venture capital matters and liaise with stakeholders. The Youth
Venture Capital Fund progress report will be tabled when Parliament
reconvenes. I am allocation an additional Shs 3.25 billion towards the
scheme.
65. Madam Speaker, to address the needs of graduates who have bankable
project proposals but lack the requisite funding, I am establishing the
Graduate Venture Capital Fund with an allocation Shs. 16 billion to be
implemented with participating financial institutions.
Health Sector
66. Madam Speaker, the health sector has achieved progress by increasing
availability of basic medicines, achieving immunization rates of
children against major killer diseases of 90%. In addition, infant and
maternal mortality rates have reduce to 54 per thousand persons and
352 per hundred thousand persons, respectively. However, the health
care delivery system still requires major improvements to ensure
access to quality basic health care for all.
67. Madam Speaker, Government’s objective in the next financial year is to
address poor child and maternal health, weaknesses in the drug
management system, inadequate health infrastructure and personnel
constraints. The following specific actions will be implemented:-
i. Motivate and retain health workers through gradual
salary increases and construction of staff houses. With
support from the Italian Government, 88 staff houses will
be constructed in the Karamoja Region alone;
ii. Commence rehabilitation of Mulago National Referral
Hospital and construction of referral hospitals in Kirudu
and Kawempe zones of Kampala, including finalisation of
negotiations to construct a modern women’s hospital at
Mulago.
iii. Commence refurbishment of Kabale, Hoima and Fort
Portal Regional Referral Hospitals
iv. Rehabilitate Kawolo Hospital in Lugazi and Itojo Hospital
in Ntungamo utilising support from the Spanish
Government v. Provide solar powered fridges, Emergency Obstetric Care
(EmONC) lifesaving medicines and kits, Family Planning
equipment and commodities to health facilities
countrywide
vi. Conduct maternal and pre-natal death audits and
undertake community sensitization and mobilization
vii. Protect children from pneumonia and diarrhoea by
introducing pneumococcal and Rotavirus vaccines.
viii. Reduce the prevalence of malaria by conducting indoor
residue spraying and use of Rapid Diagnostic Tests (RDTs)
to improve diagnosis.
ix. Mitigate the effects of HIV/AIDS by undertaking
Prevention strategies such as ABC, Circumcision, and
Elimination of Mother to Child Transmission, in addition
to enrolling an additional 100,000 people infected with
HIV/AIDS on Anti-Retroviral Treatment
Water and Environment Sector
68. Madam Speaker, Government’s priority in the Water sector will be to
provide water for production. The component for bulk water supply
previously under the Agricultural Sector has now been transferred to
the water sector. As a result, the total allocation to the water sector in
the FY 2012/13 has increased from Shs 271 billion to Shs 355 billion.
69. Madam Speaker, in the next financial year, gravity flow schemes
supplying Nabweya, Lirima and Kanyampaga and small piped water
systems for Luanda, Kabumba and Ongino Rural Growth centers will
be constructed, for improved rural water supply. Piped water systems
will also be built in Lamwo, Agago and Nwoya, among many others.
Piped water systems in Paidha, Patongo, Opit, Omugo and Agwegtownships will also be completed and construction of new
systems in Moyo, Ibuye, Kalongo, Purongo and Akujo will commence.
Further investments in urban water supply will include the following:-
i. Completion of Nakaseke town water supply system and
restoration of existing systems in Kakiri, Bukomansimbi
and Wakiso towns;
ii. Drilling of boreholes and construction of water supply
systems in the towns of Ntwetwe (Kyankwanzi), Kasenje
(Wakiso) and Zirobwe (Luwero);
iii. Construction of new, expansion of existing and
rehabilitation of water supply systems in Kaabong, Abim,
Karenga, Namalu, Bukedea, Busia, Kapchorwa,Katakwi,
Matany, Serere, Kachumbala, Namutumba, Kaliro and
Bombo Townsand Alwi Dry Water Project.
70. Madam Speaker, Government, through National Water and Sewerage
Corporation, will also undertake the following projects:-
i. Construction of Lubigi Water Treatment Plant;
ii. Rehabilitation of Bugolobi Sewage Treatment Plant, and
the construction of the Nakivubo and Kinawataka waste
water management plant;
iii. Emergency rehabilitation and upgrading of Gaba I and II
intake to increase water production capacity to 300
million litres per day;
iv. Construction of a 4 million litres reservoir at Namasuba
Hill.
71. In order to address constraints in water for production, the following
projects will be undertaken during the year:- i. Construction of Andibo dam in Nebbi district, Kajodi
Valley Dam in Mityana District, Nakabala and Nyamiringa
(Kiboga).
ii. Rehabilitation of Windmills in Karamoja Region;
iii. Construction of Kitasi-Sanga-Kanyaryeru bulk water
scheme in Kiruhura district;
iv. Design of Rwengaaju irrigation scheme in Kabarole and
Kulwodong dam in Abim District.
D. IMPROVING GOVERNMENT EFFECTIVENESS
72. Madam Speaker, experiences from the fastest growing world economies
point to the important role an efficient public service plays in
facilitating growth and development. An efficient and transparent
public sector procurement process facilitates rapid private sector
growth, and access to credit from financial institutions. An effective
public sector facilitates the private sector to create jobs, supports
forward and backward industrial linkages and ultimately leads to
faster economic transformation.
73. In order to attain our socio-economic transformation objectives faster,
public sector efficiency and effectiveness service will therefore be of
paramount importance starting next financial year. This is especially
critical for six key service delivery sectors, namely –agriculture, roads,
energy, health, education, and water. This is because the vast majority
of infrastructure and social services provided to the bulk of the
population are delivered by these sectors. These sectors also take a
substantial share of the National Budget, and form the major focus of the National Development Plan (NDP) strategies. In order to improve
service delivery, the following actions will be emphasized;-
i. Further alignment of sector priorities and allocation of
resources across the board towards strategic interventions
of the National Development Plan (NDP). This means that
resources will only be allocated to programmes and
projects that have the highest impact on unlocking the
binding constraints to socio-economic transformation as
identified in the NDP.
ii. Enhance implementation of the first phase of the National
Identity Card Project by allowing economically active
Ugandans to pay for the Identity Cards on a cost sharing
basis
iii. Strengthened Performance and Contract management
across the whole of government with emphasis on the six
service delivery sectors,
iv. ring fencing of allocations and quarterly progress
reporting on budget implementation to Cabinet for closer
oversight of performance of the six service delivery sectors
to ensure the growth stimulus is attained.
v. Enhancing the Cluster approach to planning, monitoring
and evaluation to harness synergies between sectors;
vi. Salary Enhancement for Public Servants with emphasis
on Teachers and Scientists; The Ministry of Public Service
is finalizing a paper to guide the establishment of a Salary
Review Commission to address issues of wage disparities
across Government vii. Continued implementation of measures to eliminate
inefficiency and wastage in public expenditure by
minimising allocations to consumptive areas such as
allowances, printing, workshops and seminars.
viii. Review the entire budget to allocate more resources
towards the critical growth sectors of the economy as
identified in the National Development Plan (NDP).
ix. Strengthen Public Financial Management by automation of
Government financial management, payroll and procurement
processes and systems,
x. support anti-corruption agencies to tackle corruption in all
Government agencies by strengthening controls and
enforcement to reduce opportunities for corrupt practices.
74. Madam Speaker and Honourable Members of Parliament, in view of the
substantial resources allocated to the Roads, Energy, Water, Health,
Education and Agriculture sectors, respective votes will be required to
submit quarterly reports to Cabinet to provide progress
implementation of agreed work plans. V. CONSTITUTIONAL SELF ACCOUNTING BODIES
75. Madam Speaker, the budgetary proposals of the following Self
Accounting Bodies have been submitted in compliance with Article
155(2) of the Constitution.
(i) Courts of Judicature
(ii) Electoral Commission
(iii) Inspectorate of Government
(iv) Parliamentary Commission
(v) Uganda Law Reform Commission
(vi) Uganda Human Rights Commission
(vii) Uganda Aids Commission
(viii) National Planning Authority
(ix) Office of the Auditor General
76. 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 Constitution
77. 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.
VI. TAXATION AND REVENUE MEASURES
78. Madam Speaker, the objectives of the Revenue measures for the
Financial Year 2012/13 are for revenue generation, reform of the tax
laws, enhancing taxpayer compliance and to support tax
administration.
79. Madam Speaker, I will also announce some of the decisions agreed
upon by the Sectoral Council on Finance and Economic Affairs held on
18th May 2012 in Kampala.
Income Tax
Income derived from Treasury Bills and Bonds
80. Madam Speaker, I propose to increase the withholding tax on income
derived from Treasury Bills and Bonds from 15% to 20% as a final tax.
This measure will generate Shs.16.3bn. The details are contained in
the Income Tax (Amendment Bill) 2012.
PAYE Threshold
81. Madam Speaker, Hon. Members, I am proposing to increase the PAYE
threshold from Shs.130,000 to Shs.235,000 per month and the tax
bands will be adjusted accordingly. The details are contained in
Income Tax (Amendment Bill) 2012.
82. Madam Speaker, I am also proposing that an additional 10% be
imposed on individuals with chargeable income of Shs.120 million and
above, per year. The details are contained in the Income Tax
(Amendment Bill) 2012.
31
Value Added Tax (VAT)
Re-instating VAT on the supply of water
83. Madam Speaker, in this financial year, I propose to reinstate VAT on
water at 18%. This measure will generate Shs.21.7bn.
Standard rating of biodegradable packaging materials
84. Madam Speaker, Hon Members, I propose to reinstate VAT on the
supply of biodegradable packaging materials which is currently
exempt. This is to enable suppliers to claim input VAT related to their
products produced. This measure will generate shs 2.2 billion. The
details are contained in the Value Added Tax (Amendment) Bill 2012.
Re-instating the VAT exemption on gambling and lottery services and
Increasing the Gaming and Pool Betting tax
85. Madam Speaker, Hon Members, since the introduction of VAT on the
supply of betting, lotteries and games of chance (Gambling), tax
administration has encountered challenges in application. I am
therefore proposing to reinstate the VAT exemption on gambling but
increase the Gaming and Pool Betting Tax from 15% to 20%. This
measure will generate Shs.4.3bn.The details are contained in the VAT
(Amendment Bill) 2012.
Excise Duty
Increasing excise Duty on spirits
86. Madam Speaker, Hon Members, I am proposing to increase excise duty
on spirits made from locally made raw materials from 45% to 60%.
Madam Speaker, I am also proposing to introduce a specific rate and
an ad valorem duty rate on undenatured spirits of Shs.2, 000 per litre
or 80 per cent, respectively, whichever is higher, as a means to control undervaluation. The measure will generate Shs.10.4 billion. The
details are contained in the Excise Tariff (Amendment) Bill 2012.
Imposing Excise Duty on cosmetics and perfumes
87. Madam Speaker, I am proposing to impose excise duty on cosmetics
and perfumes at a rate of 10% as a revenue measure. The details are
contained in the Excise Tariff (Amendment) Bill 2012. This measure
will generate Shs.4.1bn.
Non Tax Revenue
Other Fees and Charges
88. Madam Speaker, Hon Members, I am proposing to vary various fees
and charges for the provision of Government services, authorizations
and permits so that they are commensurate with the cost of rendering
the service. This measure will generate Shs.31.7bn. The details are
contained in the Finance Bill 2012.
Review of Tax laws on Excise Duty, Stamp Duty and Lotteries and
Gaming.
89. Madam Speaker, I am proposing to reform the Excise Duty Law, the
Stamps Act, the Lotteries, Pool Betting and Gaming Act and also
introduce a Tax Procedure Code to improve compliance and ease
tax administration. These Bills will be introduced to Parliament next
Financial Year.
Decisions made at EAC Pre-Budget Consultations by the
Ministers of Finance
90. Madam Speaker, Hon. Members, the First Sectoral Council of Finance
and Economic Affairs considered Pre- Budget issues and the
following decisions, among others, were made and the details will be
contained in the East African Community (EAC) Gazette.
Duty Remission, exemption regimes and preferential trade schemes
91. Madam Speaker, the Sectoral Council of Finance and Economic Affairs
recognized the need to take stock and an analysis of the existing duty
remission schemes within the region to ensure equity and uniform
implementation of intra EAC trade regime.
Set Top Boxes for analogue digital and terrestrial transmission
92. Madam Speaker, to facilitate smooth transition from analogue to digital
terrestrial transmission by use of Set Top Boxes, import duty on Set
Top Boxes was reduced from 25 percent to 0 percent for a period of one
year.
Food supplements and mineral premix used in fortification
93. Madam Speaker, given that food supplements and mineral premix are
essential in improving nutritional deficiencies, the import duty was
reduced from 25 percent to 0 percent for food supplements and
mineral premix.
Vacuum packing bags
94. Madam Speaker, import duty was reduced from 25 percent to 10
percent on vacuum packing bags for one year to ease packaging by the
manufacturers. 95. Madam Speaker, all these measures will come into effect on 1st
July 2012.
VII. REPORT OF TAX EXPENDITURE FOR FY 2011/12
96. 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 have not exercised powers
conferred by the Income Tax Act and Value Added Tax Act to waive any
tax.
97. Madam Speaker, Government has however paid Shillings eleven billion
six hundred one million five hundred forty two thousand four hundred
forty three only (11,601,542,443) for some institutions and Non-
Government Organizations with tax exemptions clauses in their
agreement.
VIII. SCHEDULE OF INDEBTEDNESS
98. Madam Speaker, article 159 (4), section 13 (1), (2) and (3) of the
Budget Act 2001 require an account of the total indebtedness of
Government. I therefore lay before the House a report reviewing all
loans contracted and Grants extended to the Government. I wish to
mention that Government did not extend any guarantees to any
Agency, Company or Statutory Corporation in the FY 2011/12.
IX. CONCLUSION
99. Madam Speaker, this budget statement reflects mutual positions and a
collective determination for renewed economic growth and addresses
the key challenges to socio-economic transformation of Uganda. In
conclusion, I commend this budget to all those Ugandans that have
tirelessly worked and contributed to the economic transformation of
our dear country.
For God and My Country
I beg to move.