Your Excellency the President,
Your Excellency the Vice President,
The Right Honourable Speaker of Parliament,
His Lordship the Chief Justice,
The Right Hon. Deputy Speaker of Parliament,
The Right Hon. Prime Minister,
The Right Hon. Leader of the Opposition
Honourable Members of Parliament,
Ladies and Gentlemen.
1. Madam Speaker, in fulfillment of Article 155(1) of the Constitution and in exercise of the powers delegated to me by H.E the President, I beg to move that Parliament resolves itself into a Committee of Supply to consider: i. The Revised Revenue and Expenditure Estimates for the Financial Year 2012/2013; and
ii. Proposals for the Estimates of Revenue and Expenditure for the Financial Year 2013/2014
2. Madam Speaker, in March this year, Uganda’s long-term collective development aspirations as embodied in the Vision 2040, was launched by His Excellency the President. Vision 2040 provides a roadmap to transform Uganda from a low income to a modern middle income country within 30 years. Vision 2040 requires a fundamental change on the way of doing things by Government and the Private Sector, to unlock the binding constraints to Uganda’s progress.
3. Madam Speaker, there are no quick answers to the challenges that face us today. The economic and social challenges we are working to address happened over several years and will take time to resolve. This requires patience and coordination. The Financial Year 2013/14 Budget seeks to continue towards socio-economic transformation, one step at a time.
4. Madam Speaker, consistent with our National Development Plan, the ruling Movement Party Manifesto and in pursuit of the Vision 2040, the theme for next financial year’s budget is “The Journey Continues: Towards Socio-Economic Transformation for Uganda”. The Financial Year 2013/14 Budget, like the one last year, will continue to focus on translating the Government’s strategic priorities into practice over the next year. Scarce resources have must allocated to reflect key Government strategic priorities within existing resource constraints.
FINANCIAL YEAR 2012-13 KEY ACHIEVEMENTS
5. Madam Speaker, the interventions that I pronounced last year sought to restore macro-economic stability, accelerate infrastructure development, increase agricultural production and productivity, improve the business climate, and achieve better service delivery, particularly in education and health. A detailed report of sector performance during the last year is provided in the Financial Year 2013/14 Background to the Budget. I wish to highlight the progress achieved in key areas.
6. Madam Speaker, the economy rebounded significantly growing at 5.1% last year. Inflation subsided and was recorded at 3.6% as at end-May 2013, a marked reduction from double digits at the start of the financial year. The volatility of the Uganda exchange rate subsided and currently averages around U. Shs. 2575.
7. Government registered significant progress in the implementation of budget for financial year now ending. In the works and transport sector, 845 kms of several national roads were fully or substantially completed; or have their construction on schedule. Construction of a further 88 km of national roads will commence shortly having had their contracts signed. In addition, the designs for 723 kms of several national roads has been completed, and procurement for contractors will commence. The rehabilitation of the Marine Vessel Kaawa was completed during the year, and now operates between Port Bell and Mwanza.
8. Madam Speaker, in the Energy Sector, the 250 MW Bujagali Hydropower project was fully commissioned during the financial year. In addition a number of small renewable hydropower projects delivering a total of 68.5 MW to the national grid have been commissioned. A total of total of 2,322 km of transmission lines were laid under several Rural Electrification schemes.
9. Madam Speaker, during the year, over 35,000 farmers directly benefited from provision of improved maize seed, in addition to accessing inputs such as fertilizers, under the commodity approach. Furthermore, a total of 13,486 kg of foundation seed for Arabica coffee, beans, maize and rice, were distributed to seed companies and farmer groups. To enhance irrigation for water for production, the rehabilitation of all the three irrigation scheme of Mubuku, Doho and Agoro is substantially complete.
10. Madam Speaker in order to improve accessibility to tourist sites, road access to several tourist areas is being rehabilitated. In order to enhance hospitality standards, 20 East-African Community - accredited hotel assessors were trained and the inspection of hotels accommodation was completed, to enable hotel grading and classification to be undertaken next financial year. The Hotel Training Institute at Jinja also had 390 students graduated in May 2013.
11. Madam Speaker, to improve human development, an additional 6,172 Health Workers were recruited to work at Health Centers and the remuneration of Medical Officers at HC IVs was enhanced. Government also increased salaries for Primary School Teachers by 15%, and Science Teachers in Post Primary Education and Training Institutions received a 30% increase in wages.
12. Madam Speaker I will detail some of these achievements when I return to the sector priorities for next year.
III. FINANCIALYEAR2012/13 ECONOMICPERFORMANCE ANDOUTLOOK
13. Madam Speaker, over the last year the Uganda economy has proved resilient and demonstrated strong signs of growth. At a global level, Uganda recently regained her credit rating of B+ with a stable outlook, by Standard and Poor’s. Uganda’s higher credit rating is important because it lowers our cost of borrowing on international markets. The achievement is remarkable because it happens at a time when major economies are being downgraded.
14. Madam Speaker, economic growth has rebounded strongly during the year. The economy expanded by about 5.1%. This performance is significantly higher than the 3.4% recorded in the previous year. The construction sector grew by 8.2% and electricity supply by 10%. The manufacturing sector recovered strongly growing by 4.2%, compared to a decline of 0.3% the previous year. During the last year, the agricultural sector output grew by 1.4%, improving from a modest 0.8% the previous year. The recovery in agricultural production was driven by a bumper harvest and favorable prices, which signaled the potential of food for household security and incomes for most Ugandans and the region.
Inflation and Interest Rate Developments
15. Madam Speaker, inflation has declined substantially and reached 3.6% in May 2013, compared to 18.0% at the start of the financial year. The drop in inflation is a result of increased production, in addition to the improvements in the global economic prospects. To this end Government will accelerate supply-side measures to remove production bottlenecks.
16. Overall interbank interest rates declined to 8.6 per cent in March 2013 from 26.2 per cent in January 2012. This was a result of a drop in the Bank of Uganda policy reference interest rate, which has translated into lower commercial bank lending rates during the financial year. Commercial bank lending rates have also reduced, from nearly 30 percent in August 2011 to an average of about 24 percent by end March 2013. Commercial bank lending rates are still high because of the non-performing loans which have increased slightly from 3.4 % in March 2012 to 4.7% in March 2013.
17. Madam Speaker, the stock of our foreign exchange reserves amount to US$ 3.3 billion or 4.5 months of future import demand of goods and services. This reflects an improvement in our reserve position of about US$ 2.6bn one year ago which was equivalent to 4.2 months of imports. The balance of payments recorded a surplus of US$ 417 million on account of stromg performance of foreign direct investment and other investment inflows which increased to US$ 1.76 billion and US$723.4 million, respectively; and remittances from Uganda working abroad amounting to US$ 767 million.
Private sector credit
18. Madam Speaker, private sector credit expanded by about 15% during the year, compared to 11% in the previous year. Domestic currency lending stagnated as a result of high lending rates and other factors, including the temporary closure of the land registry, in preparation for its computerisation. With the resolution of these issues, domestic currency lending is now showing signs of recovery.
Financial Sector Development
19. Madam Speaker, access to financial services is key to encouraging savings and providing credit for investment purposes. The financial sector in Uganda has experienced rapid growth. Commercial Banks now number 22 with combined outlets of 360 branches across the country. In addition, four (4) Microfinance Deposit-taking Institutions (MDIs) have been registered with Bank of Uganda and two (2) MDIs have upgraded to Commercial banks status. In addition Rabobank’s investment in DFCU Bank is testimony of the confidence the international financial community has in Uganda’s financial sector.
20. In order to increase access to micro finance, Government has implemented the Rural Financial Services Programme since 2008. As a result, membership to financial cooperatives has grown from 650,000 in 2008 to about 1,150,000 as at end December 2012. There has also been increased implementation of the Village Savings and Loan Associations (VSLA) and Savings and Credit Cooperatives (SACCOs) programs by both Non-Governmental Organizations (NGOs) and Government, and increase in use of mobile money services.
21. Madam Speaker, access to financial services is key. The financial sector will be deepened by proposing amendments to the Financial Institutions Act to allow new innovations in financing. These innovations include agent banking, Islamic banking, micro insurance, and mobile money. The monitoring and supervision of micro-finance institutions will be enhanced to improve management and governance, and ultimately build trust and confidence. Government will also formulate a Microfinance Regulatory and Supervisory Framework to regulate and provide guidelines on the provision and accessing of financial services by all microfinance institutions.
22. Madam Speaker, driven largely by private sector, the investment rate rose to 25.2% of GDP compared to 24.5% in the previous year. While the trend in investment is encouraging, key findings from the Investor Survey Report (2012) estimates survival rates of investments in Uganda at 46%. This is on account of projects being negatively affected by high cost of borrowing, limited access to credit, and energy and transport infrastructure bottlenecks. The survey reveals that the most binding constraints to investors are poor infrastructure such as inadequate all-weather roads, reliable power, and piped water; and a skilled human resource.
23. Madam Speaker, during the year, Government tabled the Public–Private Partnerships (PPP) Bill before Parliament. The proposed law aims to efficiently mobilize Private Sector investment in the development of key infrastructure projects that boost competitiveness. Preparatory work for some PPP projects was started, including the relocation of Kigo Prison; and the Uganda Police housing project
24. Madam Speaker, ultimately, the maintenance of macroeconomic stability is vital for Uganda’s long-term economic growth and structural transformation. The macroeconomic objectives underlying the budget strategy next year and over the medium term, are therefore the following:
i. The achievement of real economic growth of at least 7% per annum;
ii. Keep annual consumer price inflation to within single digit;
iii. The maintenance of a prudent level of foreign exchange reserves of at least five months import cover, to mitigate external shocks and;
iv. The maintenance of a competitive real exchange rate to support the growth of exports.
25. Madam Speaker, the economy is expected to accelerate its recovery to an estimated growth rate of 6.0 percent per annum next financial year. This continued recovery in growth is premised on maintaining macroeconomic stability, and improving resource mobilization and utilization. In addition, investment in priority sectors including the commencement of major infrastructure projects will spur economic growth.
26. Inflation is projected to average about 6% p.a next financial year and around 5% over the medium term. The exchange rate, which is a key determinant of economic competitiveness and has a major effect on the resource envelope, is expected to remain stable owing to the improvement in the trade balance.
27. Madam Speaker, increased investment needs will require non-traditional approaches to supplement our domestic revenues. In addition to traditional grants and concessional loans, other non-traditional financing sources such as limited non-concessional borrowing, contractor facilitated finance or suppliers’ credit, and using the external and domestic debt markets will be judiciously used to finance key infrastructure investments.
28. Madam Speaker, Government will increase external borrowing to scale up essential investments in infrastructure, particularly in roads, railways, energy and water for production. Preference will be given to contracting debt on concessional terms in order to maintaining debt sustainability. I wish to reiterate that non-concessional borrowing for consumption expenditures is not productive, as it does not generate the necessary returns required to enhance growth and development. Any future borrowing therefore, both from external or domestic sources, will only be secured for financing the productive sector, specifically to address our infrastructure needs.
29. Madam Speaker, in order to simplify business licensing, I am pleased to announce that an e-licensing registry was launched on June 11th, 2013. Uganda Registration Services Bureau (URSB) will host and coordinate all relevant stake holders in transitioning their processes to an online service. The total saving anticipated from the implementation of this portal is Ushs 32.1 billion. KCCA implemented a 25% reduction in Trade License fees that was issued by the Minister of Trade, Industry and Co-operatives. KCCA further streamlined the time taken to issue a Trade License through decentralization of issuing authority and this has reduced the time from 60 days to 4 working days. These reforms translate into annual cost savings of Ushs 23.4 billion.
30. In order to partly address the challenge of unemployment, Government has implemented the Youth Venture Capital Fund to enable youth start up enterprises. Over 5,200 small businesses have been supported through this scheme and U. Shs. 21 bn had been disbursed to eligible youth by the end of May 2013.
IV. FINANCIALYEAR2013/14 BUDGETSTRATEGY
31. Madam Speaker, in the next year, Government will accelerate implementation of interventions aimed at improving competitiveness and reducing the cost of Doing Business. Key aspects to this strategy will be the acceleration of investment in infrastructure.
Infrastructure Development Strategy
32. Madam Speaker, Infrastructure Development will address gaps to reduce the cost of doing business, promote private sector growth and create jobs. Improved infrastructure will stimulate increased output in the productive sectors through Value Addition, particularly in Agriculture, Manufacturing and the Services. Accelerating road infrastructure development will enable connectivity between centers of production, processing and national and regional markets, that increases Uganda’s export earnings. Increased electricity generation, transmission and distribution infrastructure will increase productivity.
33. Government will continue improving the business climate for better private sector competitiveness. Government of Uganda will continue to further efforts in reforming the licensing regime by unnecessary laws and regulations in order to streamline and simplify the business registration and licensing processes. Government will eventually fully automate these two processes. In order to increase the security to land ownership rights and enhance the role of land markets country-wide a further 21 zonal land offices, especially in northern Uganda, will be rolled out.
34. Madam Speaker, the computerization of the land registry was completed during the year. The digitization of land titles has improved the security, retrieval and time for carrying out transactions requiring land titles. Six zonal land offices have been operationalized to improve access and reduce cost of processing land titles.
35. To enhance private sector competitiveness, Government commenced implementation of business licensing reforms, following a review of licensing laws and regulations in various sectors. The total estimated saving from the reforms carried out this Financial Year is UGX 54.56 billion, representing 7.52% reduction from the total cost of 725.73 billion from the previous Fiscal Years.
36. In addition several Commercial Laws enacted by Parliament had their regulations operationalized. Other key enabling legislation such as the PPP Bill, the Bio-technology and Bio-safety Bill, the Free Zones Bill, Anti-Counterfeits Bill, Insurance Amendment Bill; Anti–Money Laundering Bill and the Investment Code (Amendments) Bill, are before Parliament. Madam Speaker, I am appealing that these laws be enacted expeditiously to further enhance competitiveness.
Tackling Unemployment and Job Creation
37. Madam Speaker, creating work opportunities for young people remains one of our most pressing development challenges. In the words of former British Prime Minister Margaret Thatcher, “…young people ought not to be idle because it is very bad for them and for the country. There are few worse things that society can do to its young than to leave them in limbo…” The skills gaps that exist between the education system and the job market will be addressed through re-aligning the curriculum and establishing partnerships between the private sector and educations institutions.
38. While regulation of the labour market through promulgation of legislation for a minimum wage seeks to protect workers’ rights, this should not detract from the importance of creating employment of the vast majority of the unemployed. The first step to ensuring strong protection of workers’ rights is the creation of as many job opportunities as possible, while ensuring security and safety at work. The rest will ultimately follow.
39. Youth unemployment in Uganda is widespread due to a number of different causes:-
i. A demographic “Youth Bulge”
ii. A mismatch between the mostly academic focused curriculum being taught under UPE and USE on one hand and the more technical based skills demand from the market place,
iii. A prevailing mindset that “it is government’s job to provide jobs” as well as free basic education and healthcare;
iv. An overall global economic context where governments (including Uganda) are rationalizing their operations i.e. moving away from state-subsidized enterprises and shifting to market-based economy.
40. All these factors are happening against global economic crisis which has impacted foreign investment and the capacity of the domestic private sector to quickly expand job opportunities. Fortunately Uganda has a comparative advantage for agriculture production which is relative labour intensive and includes opportunities for all workers (rural as well as urban).
41. Our overseas Uganda diaspora is also another solution of how to fight unemployment. The diaspora send home foreign exchange and we often highly skilled. They can be engaged to enhance not only to provide financial inflows, but also in efforts to collect the best international lessons in employment generation e.g. upgrading skills levels, exchange of knowledge and technical employment initiatives especially higher-knowledge industrial start-ups.
42. Therefore, government (including the ministries responsible for Economic Development, Labour and Foreign Affairs) will collaborate with the private sector, the Uganda overseas diaspora and international development partners. This collaboration will develop a well-designed employment market programme to address the various identified causes and formulate multi solution packages including basic education shifts, relevant technical education and quality assurance measures opportunities and modalities to include skills, knowledge and experience of the Uganda diaspora.
43. Madam Speaker, the Budget Priorities for Financial Year 2012/13 continue to prioritise the following:-
i. Productive Infrastructure
ii. Agriculture Production and Productivity
iii. Human Resources Development especially in technical skills
44. The strategy will entail the following:-
v. Creation of Jobs opportunities in agriculture and industry
vi. Provision of rural electrification to agro-industries
vii. Empowering agricultural production
viii. Ensuring food security, enhanced household incomes and creating market surplus for agro-processing and exports
ix. Facilitating growth of the service sector
x. Increase competitiveness at national and regional level.
V. FINANCIALYEAR2013/14 REVENUE ANDEXPENDITUREFRAMEWORK
45. Madam Speaker, before I elaborate the sector priorities for the next year, I would like to present the revenue and expenditure framework for the FY 2013/14 Budget. The framework has been developed in line with the recent trends in the domestic, regional and international economy. In particular, the framework has been impacted by GDP sluggish recovery of the global economy, the performance of domestic revenues and expected level of external support from development partners.
46. Next financial year, total resource inflows in Financial Year 2013/14 are projected to amount to Shs 13,169bn. Domestic sources will contribute Shs 10,509bn representing 81.1% of the total budget resource for the year. The Uganda Revenue Authority will collect taxes amounting to Shs 8,486bn; and Non-Tax Revenues of U. Shs 275 bn will be collected. The Budget will also be financed by issuing Government securities worth Shs 1,040bn on domestic markets; and net Government drawdown from our savings of Shs 708bn.
47. Total external financing of the Budget will amount to Ushs 2,660bn, equivalent to 20 per cent of the total while project aid amount to resources. Budget support comprises of Shs 213 bn while Project aid amounts to Shs 2,447bn, an increase of Shs.234bn over the financial year now ending. There is need to examine non-traditional sources of financing in light of declining budget support.
48. The resources available to finance discretionary Government expenditure next year, therefore amount to Ushs 9,498bn, excluding project aid and statutory external and domestic debt repayments which amount to Shs 2,695bn. The total resources available for discretionary Government expenditure next financial year represent an additional Shs 1,427bn above the level in the year now ending.
VI. FINANCIALYEAR2013/14 SECTORPERFORMANCE ANDPRIORITIES
49. Madam Speaker, the sector performance over this year serves as a basis for priorities for next year. There has been significant progress with implementation of the priority interventions that I announced in last year’s budget statement. This progress has contributed to economic recovery significantly, following the challenges of increasing prices and volatile exchange rates that Uganda and the East African region has faced. I now wish to elaborate the sector priorities for next year.
50. Madam Speaker, the Financial Year 2013/14 Budget will continue prioritising the creation of an enabling environment for growth, development and socio-economic transformation. Sector priorities to achieving these goals are as follows:- i. Aggressively continue to invest in infrastructure development particularly in Transport and Energy;
ii. Support Increased Agricultural production and enhancing productivity;
iii. Enhance Scientific Innovation for Industrialisation and Private Sector Competitiveness;
iv. Improve the Quality and Access in Social Service Provision in Health Water and Education; and
v. Enhance Transparency and Accountability to improve Value for Money and fight Corruption vigorously in Public Service Delivery.
51. Madam Speaker, Government will continue to build Uganda’s stock of infrastructure to serve as the springboard for economic growth and development. Interventions in this area will include the improvement of transport, provision of electricity, the development of the oil and gas sector and enhance information and communication technology.
52. Madam Speaker, in accordance with Government’s priority accorded to transport infrastructure, I have allocated Ushs 2,395 bn to the roads and works sector next financial year, an increase from U. Shs. 1,650.75 bn this year. The additional allocation to Roads and Works budget totals Shs 744.7 billion over the last year’s provision.
53. During the forthcoming financial year, we have prioritized clearing of outstanding contractual obligations for completed roads, completion of ongoing projects and commencing construction of new ones. Government will also accelerate efforts to rehabilitate the country’s railway network, and improve the quality of water transport on the major water bodies. The key interventions to be undertaken next year include the construction and rehabilitation of major strategic national roads, new bridges, equipping local government road units, and the maintenance of district and community roads. This is aimed at stimulating increased agricultural production, improving connectivity to Tourist site and facilitating national and regional trade.