Government sets ambitious targets in Shs21.9 trillion budget

Kampala. The government has laid out an ambitious revenue target in the leaked Financial Year 2018/19 budget.
According to the new Budget Framework Paper (BFP) to Parliament, Finance Minister Matia Kasaija has widened the scope of domestic revenue mobilisation to raise the required funds for the country to achieve the middle income status by 2020.
In the BFP for 2018/19-2022/23, Mr Kasaija says: “The estimated domestic revenue collections for FY 2018/19 amount to Shs15.547 trillion, of which Shs15.1 trillion is tax revenue and Shs418 billion is non-tax revenue.”
The gap will be covered by borrowing and project support.

In the medium term, the government will put emphasis in some broad thematic areas.
These include: Increasing production and productivity in agriculture, enhancing industrialisation to support job creation and exports, investment promotion and private sector growth and infrastructure development.

The other priority sectors are: Transport, energy, ICT; harnessing tourism potential, improving service delivery and managing emerging issues such as increased poverty, population growth, urbanisation and climate change and improving governance.

The budget for the Financial Year 2018/19 is however, subjected to approval by Parliament after the ministries, departments and agencies have presented their policy statement spelling out their respective budgets.

In the current budget for Financial Year 2017/18, Parliament approved domestic revenue amounting to Shs15.062 trillion of which Shs14.686 trillion will be collected by Uganda Revenue Authority as tax revenue and Shs376 billion and Shs376 billion as nontax revenue.
In the BFP 2018/19-2022/23 the Ministry of Finance explains that whereas the primary objective of Uganda’s tax policy is to generate revenue to meet government expenditure requirements, there are other key objectives that are considered in designing the tax policy and these include promotion of savings, investment, exports and regional integration.

Tax measures
The Ministry of Finance says in order to achieve all these objectives, during the FY 2018/19, appropriate tax policy changes will not substantially tilt the tax regime in order to preserve stability of the tax system.

“In this regard, government will propose modest adjustments to the current tax regime to ensure revenue productivity of the tax system, close loopholes in the tax laws, index specific tax rates for inflation, enhance tax administration efficiency and facilitate tax payer compliance,” the finance ministry stated.

Mr Kasaija further stated that in the medium to long term, revenue mobilisation effort will focus on strengthening tax administration and compliance of tax payers.

“Domestic resources are projected to rise by 0.3 per cent of GDP to Shs15.5 trillion in FY2018/19 and by 0.5 per cent of GDP in the medium term. This will be supported by revenue administration measures; enhanced efficiency in tax collections as well as reforms in the tax system reads the BFP 2018/19-2022/23,” Mr Kasaija said in the new BFP.

“The projected increase in domestic revenues will lead to a rise in the percentage of the budget financed by domestic resources from the anticipated 64.4 per cent this financial year, to 69.0 per cent during FY 2018/19, and by approximately 83.6 per cent by FY 2022/23.”
He adds: “Government expenditure (excluding domestic debt refinancing) is projected to amount to Shs22.5 trillion in FY 2018/19. This is equivalent to 21.2 per cent of GDP. The bulk of the increase in spending will largely be driven by development spending, as government continues to invest in infrastructure projects.”

Development spending
The BFP further shows that development related spending is projected at 9.6 per cent of GDP in FY 2018/19, but is expected to average 8.6 per cent of GDP over the medium term as large infrastructure projects are being completed.

In the next FY 2018/19, budget support is projected at $40 million and remains broadly at the same level over the medium term while projects support is expected to amount to $1.773 trillion in FY 2018/19.

Project support is projected to decline in the following three years and is estimated at $786.4 million in FY 2021/22.
The decline in project support over the medium term, in part reflects the planned completion of some of the huge infrastructure projects like Karuma and Isimba which are expected to be finalised in December 2018.

“Domestic borrowing in FY 2018/19 of Shs940 billion is projected to be raised from the domestic market through issuance of securities. Domestic borrowing is projected to decline further to Shs.611 billion in FY 2019/20 and reach Shs409 billion by FY 2022/23,” reads BFP.

The bulk of this expenditure (10.5 per cent) is largely on account of increase in development spending arising from the scale up of public investments by government.

Recurrent expenditure is projected to increase by Shs166 billion during FY 2018/19 mainly driven by an increase in domestic interest payments.

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