National Budget to hit Shs30 trillion

Kampala.

The Uganda government is expected to increase spending in the next financial year by about Shs4 trillion as it seeks to support public spending that would in-turn improve economic prospects and create jobs for the country.

In the National Budget Framework Paper (NBFP) for 2017/18 seen by Daily Monitor, government is expected to increase spending by 18 per cent to Shs30.2 trillion up from Shs25.6 trillion in 2016/17 due to increased expenditure on infrastructure, security and interest payments.

“The Budget for FY2017/18 prioritises public infrastructure investments which are necessary to facilitate private sector development and enhance the productive capacity of the economy,” the NBFP reads, in part.

Indeed, the expenditure increments are noticeable in the key infrastructure areas of energy and works and transport sectors. The two sector budgets allocations are expected to rise to Shs3 trillion and Shs4.8 trillion in 2017/18 respectively from Shs2.3 trillion and Shs3.8 trillion respectively in 2016/17.

Additional increments in expenditure are also going to the security budget that will grow from Shs1.5 trillion in 2016/17 to Shs1.9 trillion in 2017/18.

These are some of the areas of focus that the Budget for the next financial year will focus on, inclined towards addressing some of the 23 presidential directives issued by President Museveni, the second National Development Plan and the NRM Manifesto 2016 – 2021.

“The budget framework, therefore, requires allocation of resources to areas that address the strategic and immediate constraints in order to achieve inclusive growth with the aim of transforming Uganda into a competitive middle-income country.

In accordance with the above objectives, the proposed theme for the Financial Year 2017/18 Budget is ‘Enhanced Productivity for Inclusive Growth and Job Creation’, the NBFP reads.

Health, Education budgets cut
For some sectors such as education and health, their allocation has declined.

The education sector will decline by about Shs77 billion to Shs2.37 trillion in 2017/18 whereas the health sector will get Shs540 billion less than in 2016/17 to Shs1.2 trillion. The education sector budget will decline on account of reduced external financing for the sector.

More-so, the health sector budget allocation is declining after a projection that external financing will decline by about Shs487 billion in 2017/18.

Revenue target raised
Funding for the Budget is expected to be generated from domestic resources and external support. The government has the expectation that despite collection shortfalls being faced Uganda Revenue Authority (URA), they are being given a target of Shs14.5 trillion up from Shs12.6 trillion in 2016/17.

It should be noted that in the first quarter of the 2016/17 URA had a revenue collection shortfall and is projected to be heading for another in the second quarter.

In order for URA to reach their target, taxpayers could face additional taxes. Already in the NBFP, it states that they will also review the current tax holidays. They government plays down any form of tax reduction or increment for investors.

“Given the limited revenue options and demand to raise revenues, there is no scope for tax rate reductions or increases this is a disincentive to investors,” it reads.
New tax measures are expected to be tabled one the NBFP is approved by parliament.

Increased domestic borrowing
After scaling back on domestic borrowing in 2016/17, the government is to increase domestic borrowing to Shs1.45 trillion in 2017/18 from Shs612 billion.

Government had made the option to slow-down on domestic borrowing in the current financial year in order to allow commercial banks lend with ease to the private sector.
However, that is subject to change as the government need for infrastructure is pushing them back to borrow more through Bank of Uganda.

Government says it is increasing domestic borrowing because of “the need to finance interventions aimed at increasing food production and food security, promotion of value addition and construction of oil roads and bridges to ensure oil production by FY 2020/21.”

Debt repayments
Already, domestic borrowing has increased government’s annual bill on interest payments. The budget of interest payments has overtaken the allocation for the education sector in 2017/18. Interest payments are expected to rise to Shs2.7 trillion, from Shs2 trillion in 2016/17.

The education sector allocation declined to Shs2.37 trillion. The reason for increased interest payments is being attributed to higher domestic borrowing requirements for the governments.

Government has also opted to roll-over Shs6.2 trillion of domestic debt, up from Shs4.9 trillion. The roll-over is done when the government doesn’t have the resources to clear domestic borrowing arrears.

The procedure
Steps followed. Under the Public Finance Management Act, 2015 once the NBFP is tabled to Parliament by December 31, it will be up for scrutiny until Ministerial Policy Statements are tabled in March. On April 1, the Finance ministry has to table the proposed Budget. Members of Parliament are then expected to have passed the Budget by May 30 in preparation for the Budget Speech in June.