Tough Budget expected as govt deals with deficit

Thursday June 12 2014

Finance Minister

Finance Minister Ms Maria Kiwanuka 


Parliament- Finance minister Maria Kiwanuka will this afternoon unveil an ambitious 2014/15 Budget that seeks Shs14 trillion in fresh spending to spur economic growth but also pledges to close the rising deficit by announcing new taxes, slashing consumptive expenses and prioritising job creation .

The focus of this year’s fiscal policy is expected to remain on sustaining efforts towards infrastructure development (especially roads and energy) and boosting agricultural production and productivity. More funds are expected in education, defence and public administration.

Ms Kiwanuka’s much-anticipated Budget speech is expected to outline the President’s ideas for battling the mounting fiscal deficits — standing at -9.1per cent in the new budget up from -5.6 per cent in the 2013/14 financial year. The budget will also seek to speed up GDP growth, deal with inadequate service delivery and the long-standing problem of youth unemployment.

The minister, in her fourth budget to the nation, is expected to deliver what financial analysts and legislators called a budget designed to address the problems of unsustainable spending, restricted resource envelope, inadequate public services, unemployment and corruption for which there are no quick fixes.

The antidote
To fix the economy, Prof Augustus Nuwagaba, an Associate Professor of Social Works/Population and Poverty in the Department of Social Work & Social Administration at Makerere University, yesterday talked of the urgent need for “sustained flagship of the infrastructure sector,” especially electricity generation and roads, plus investment in the standard gauge railway.

The Presidential Budget Committee has since proposed taxes on processed milk, locally produced chocolate, sweets, chewing gum, computers, car fuel, paraffin and wigs. The Committee has also proposed to introduce a tax on private schools and tertiary institutions, a 3 per cent stamp duty on sale of land and buildings and a 1.5 per cent railway development levy.

Investors’ views
But speaking on behalf of the local entrepreneurs and financiers, Mr Sudhir Ruparelia, who owns the Ruparelia Group, said: “Already the economy is very bad and by taxing more without government investments to support GDP growth, they are squeezing people more and this is self-defeating. URA needs to widen the tax base instead of squeezing people who are already paying more.”

With the latest budget forecasts showing that the nation’s growth in productivity is still too low because of the poor performance of the agricultural sector, today’s budget is expected to set out further government reforms in the sector in order to spur economic growth.

“Economy is growing on paper but there are no jobs for our people and unemployment is all over the place,” shadow finance minister Geoffrey Ekanya said. “In the budget we want to see government taking bold steps to remove the bottlenecks.”

Without pre-empting today’s budget speech, Information minister Rose Namayanja promised a year of action and rejected claims by the Opposition that because of corruption in government, the country remains poor; and that without serious interventions in the budget, the government will not be able to fix a weak economy and the unemployment crisis.

“There will be taxes here and there to support the service delivery but, they will not be prohibitive because we would like see more growth,” Ms Namayanja said.

The Minister for Presidency, Mr Frank Tumwebaze, yesterday assured Ugandans that in trying to cover the deficit, the government will not use the 2014/15 budget to balance the books on the backs of the poor.

“The proportion of people living below the poverty line has further declined from above 56 per cent in 1992 to 24.5 per cent percent in 2009/10; and now to 19.7 per cent in 2012/13. These numbers mean that in the coming year, the NRM government will meet its fiscal mandate to balance the budget and deliver the services to the people,” Mr Tumwebaze said.

Workers views
Speaking on behalf of the workers, Mr Wilson Usher Owere, the chairperson of the Uganda National Trade Union said the test of fiscal credibility is whether Ms Kiwanuka is prepared to take the difficult decisions to fulfill the promises made to the teachers and curb financial indiscipline.