How govt intends to jumpstart economy

Man carries matooke in Nakasero Market near Radio One on November 30.  Photo | Gabriel Buule 

What you need to know:

  • The Finance ministry says in the next financial year the government will bolster efforts to lower production and trade costs to promote competitive production of quality tradable goods.

The government has set an inclusive economic growth target of 6.0 percent for the Fiscal Year 2023-24 with strong focus on the private sector development.

It says growth of an economy depends on the strength and buoyancy of its private sector to create jobs and increase incomes as well as improve living standards.

The National Labour Force Survey of 2020-2021 by the Uganda Bureau of Statistics that was released last month, revealed that unemployment increased to 12 percent from 9 percent in the Fiscal Year 2019-2020, which calls for policy actions to reverse the trend.

In the Budget Framework Paper (BFP) for Financial Year 2023-2024, the Ministry of Finance, Planning and Economic Development says the private sector contributes about 83 percent of the total formal sector jobs, currently estimated at 2.3 million and producing approximately 80 percent to Uganda’s Gross Domestic Product (GDP).

Focus

Private sector employment is concentrated in agriculture, including forestry, livestock and fishing, which accounts for about 69.4 percent.

Manufacturing accounts for 5.6 percent, trade and repairs at 8.9 percent, hotels and restaurants at 2.0 percent, transport and communication at 2.3 percent, construction at 2.0 percent and education at 3.0 percent.

The Finance ministry says in the next financial year, the government will promote efforts to lower production and trade costs to promote competitive production of quality tradable goods. It will also promote access to affordable capital through Uganda Development Bank (UDB) and the Uganda Development Cooperation (UDC).

The BFP further outlines that during the period, the focus will be in enterprise groups. Small and Medium-scale Enterprises (SMEs) shall be financed through Emyooga, the Parish Development Model (PDM) and related Government schemes. It also includes access to regional and global markets as a key element in strategically building resilience of the economy.

Key growth areas

Increasing private sector investments in key growth areas and achieving value-added growth in exports has been considered too. The ministry also says economic growth strategy in the short to medium-term has a dual objective of building a self-sustaining economy to withstand future shocks and to harness resources for inclusive economic growth. These are to be attained while maintaining a stable macroeconomic environment.

“A self-sustaining economy will be achieved by undertaking evidence-based actions for policy implementation, allowing market-based economic dynamics and close coordination between fiscal and monetary policies to counter cyclical measures, and augmenting investment in the Parish Revolving Fund (PRF) to avail liquid capital to the vulnerable households without collateral to access credit in the financial market,” the ministry says.  

Inclusive growth

The BFP adds: “This will enhance growth in private and public investments, hence increased employment creation and mobilisation of more domestic revenue.

Furthermore, inclusive growth will be attained by the economic policy in the Financial Year 2023-24 and in the future will therefore seek to achieve the following; ensure peace and stability through enhanced security and macroeconomic stability, with critical coordination of both the monetary and fiscal policy measures.”

The Finance ministry points out that during this period, there will be initiatives to mitigate the impact of internal and external shocks through building buffers that cushion the country against economic shocks and maintaining a competitive environment that supports continuous supply of goods and services.

The others include mobilisation of resources to sustain the Parish Development Fund, strict follow-up on resource use for effective investment outcome, and maximisation of returns to public investments through implementing reforms geared towards strengthening public investment management systems.

Economic growth is expected to strengthen to 5.3 percent, supported by government initiatives such as the PDM and Emyooga, the pickup in oil sector construction activities, growth in regional trade, and a rebound in agricultural production owing to government interventions into agricultural productivity.

Over the medium term, the Finance ministry says economic growth is projected to average between 6 percent and 7 percent, driven by anticipated increase in productivity within agriculture and manufacturing sectors, supported by government interventions, recovery in the private sector activity, public infrastructure investments and operations in the oil and gas sector.

The government is also designing an agro-industrialisation programme to support both agricultural development and industrialisation policy in place.

Food security management

The ministry says the government will focus on climate change, food security management and irrigation, stressing that this will also be enhanced by the PDM.

“Therefore, resources will be directed towards food security management. To boost food production and productivity for households and large scale farms, the government will redirect resources towards provision of improved quality of inputs as well as post-harvest handling and storage of agricultural products,” the ministry notes.

Enhanced production, storage, agro-processing and value addition will be achieved through increased market access, supporting competitiveness of agricultural enterprise groups while guaranteeing quality agricultural products for the domestic, regional, and global market destinations.

Agricultural research

The PDM will work through agricultural insurance and related grants to pursue increased mobilisation, access, and utilisation of agricultural financing.

Agricultural research through the National Agricultural Research Organisation (Naro), National Animal Genetics and Resources Centre and Data Bank (NAGRC&DB) and the academia will target mainly the development of climate resilient crops and animal species.

Diseases and pest control will also be prioritised in the budget of agriculture to support production, productivity and large-scale mechanisation.

For irrigation, the ministry said the move is to boost production and productivity and to climate change, among others. Emphasis will be on increasing the volume of and access to water for both agricultural and industrial production.

Expanding investments will increase productive arable land in areas through small-scale solar-powered and medium-term irrigation schemes to improve production and productivity for small-scale producers, industry and increased exports.

Mobilisation and support of farmer groups is aimed at increasing uptake of the available irrigation infrastructure. Construction of both community and private water infrastructure such as valley tanks and dams at the parish level in line with the PDM framework will also be implemented.

The Ministry of Finance says the government shall deepen implementation of the PDM beyond the financial inclusion pillar.

“Government shall maintain disbursement of Shs100 million per parish supported by data collection and management, as well as enterprise development and fast tracking of interventions for efficient value chain development. Through the implementation of this model, the government will ensure that Saccos, Emyooga and other investment groups are coordinated to strengthen their linkage with business development services in a sustainable way,” Ministry of Finance says.

Electricity

On sustainable energy development (electricity), the ministry says government interventions for efficient energy shall focus on electricity generation, transmission, distribution and investment in renewable energy.

Specific undertakings will include prioritising rural electrification to the remaining sub-counties, electricity connections for upcoming industrial zones and factories in different parts of the country.

Others include construction of additional power sub-stations to boost and regulate the generation, transmission and distribution, empowering the Uganda Electricity Generation Company Limited (UEGCL) and Uganda Electricity Distribution Company Limited (UEDCL) to manage the generation and distribution of power respectively throughout the country.

“In this regard, the government has commenced the buy-out of the ESKOM concession at the Kira-Nalubaale Power Station, and on the same note, the existing Umeme concession for distribution of power is scheduled to expire by the year 2025. Government shall, therefore, ensure availability of funds for investments under UEGCL and UEDCL to seamlessly fill the gap that shall be caused by the exit of Umeme upon expiry of the existing concession in 2025,” the Ministry of Finance says.

Development plan

On development plan implementation and regional development, the ministry says:  “Under these two programmes, plans that reflect specific local advantages that need to be harnessed for local economic development will be designed and implemented to guide regional development as follows; growth corridors covering the Gulu-Hoima-Kasese and the Arua-Gulu-Soroti-Malaba axes will be designed and developed to complete nationwide industrial development, in addition to the Malaba-Kampala- Mbarara corridor.”

“Transport and power infrastructure will be extended to key growth areas, including tourism sites, to facilitate production and value addition. Fast-tracking the establishment of e-mobility (electric vehicle) charging infrastructure in readiness for energy transition from fossil energy to renewable energy and supporting the electric motorcycle and motor vehicles industry,” the Finance ministry says.

Concentration

Private sector employment is concentrated in agriculture, including forestry, livestock and fishing, which accounts for about 69.4 percent. Manufacturing accounts for 5.6 percent, trade and repairs at 8.9 percent, hotels and restaurants at 2.0 percent, transport and communication at 2.3 percent, construction at 2.0 percent and education at 3.0 percent.