Public spending will rise by 23 per cent, says NPA

Entebbe.

The National Planning Authority (NPA) has projected Uganda’s public spending will go up by 23 per cent of the Gross Domestic Product (GDP) because of the many development projects being planned to usher in sustainable economic growth and development.

The country’s fiscal policy has generally been ambitious and expansionary over the past decade in support of the National Development Plan and Vision 2040 with the national Budget reaching Shs26.3 trillion. The national Budget is normally a reflection of public spending.

The World Bank said recently that between 2008/09 and 2014/15 financial years, the value of total expenditure increased from 15 per cent to 19.4 per cent with Uganda’s average annual expenditure amounting to a value of 17.4 per cent of GDP over this period. This was 10 percentage points lower than that of any of its regional peers, with Kenya’s average expenditure standing at 29 per cent, Rwanda’s at 28 per cent and Tanzania’s at 27 per cent.

Making a keynote address on behalf of the State minister for Planning during the 4th Economic Forum of the Institute of Certified Public Accountants of Uganda (ICPAU) at Imperial Resort Beach Hotel Entebbe last week, the executive director NPA, Dr Joseph Muvawala, said: “In our new economic policy planning, we believe that public spending will go up by 23 per cent of the GDP.”

Dr Muvawala added: “We are proposing to expand our fiscal space and this also means recapitalising Bank of Uganda (BoU) by an extra Shs500 billion to be able to clean up the mess like high inflation that comes with government increased public expenditure (expansionary fiscal policy).”

The Central Bank’s principal objective is formulation and implementation of monetary policy directed to achieving and maintaining stability in the general levels of prices in the entire economy. The aim is to achieve stable prices - that is low inflation - and to sustain the value of the currency.

Recent fiscal expansion in Uganda is largely a result of significant increases in expenditure to implement an ambitious public investment programme, without corresponding increases in terms of revenue collection which has been in the range of 12 to 13 per cent of the GDP.

Dr Muvawala explained there is a cost in maintaining macroeconomic stability which people do not know and is the reason BoU should be adequately capitalised.

While opening the ICPAU Economic Forum earlier on, the State minister for Planning David Bahati, said government is focusing on transforming the country into an industrialised economy by ensuring value addition in agricultural products.

On the financing aspects of development programmes and private sector enterprise, Mr Bahati, said: “The government is focusing on recapitalising Uganda Development Bank (UDB) and going back to concessional borrowings.”
In the last few years, government has been borrowing heavily on non-concessional basis which is expensive compared to concessional loans.

However, as the government refocuses on UDB to support enterprise development in the country, Dr Muvawala advised UDB should be managed on private sector principles. “If we do it the other way round like that of the 1970s to 1980s, we are dead. We do not want a development bank which competes with the commercial banks. We also want a development bank which is restructured,” he said.

Uganda is among the countries in the world with highest population growth.
Currently, the country’s current population growth rate per annum is 3.1 per cent compared to world average of 1.2 per cent.

On the proposed revival of Uganda Airlines, Dr Muvawala said government should have a 51 per cent stake in it and the other should be private, adding in case the national carrier is revived as plans are, then government should handle Uganda Airlines as an infrastructure to support development needs in the country.

Despite the difficulties the airlines are faced with, Dr Muvawala said: “Nowhere in the world a country has become a middle income country without a national airline.”

The chief executive officer ICPAU, Mr Derick Nkajja, said the institute’s economic forum aims at shaping policy debates in the country to find solutions to the country’s economic challenges.

Individual spending
Quoting Uganda Bureau of Statistics figures, Dr Fred Muhumuza, a Kampala-based economist and researcher, said: “Household expenditure in Uganda per month stands at Shs244, 000 which is very low. It means one person spends Shs1, 200 per day.”