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2020/2021 Financial year budget to increase after negotiations with donors

Budget

Kampala, Uganda | THE INDEPENDENT  | The Director Budget in the Ministry of Finance, Kenneth Mugambe says that the proposed budget for the coming financial year 2020/2021 is expected to increase once on-going project negotiations that require external financing are concluded.

According to the Budget framework paper accessed by URN, government proposes a total shillings 39.64 trillion 2020/2021 budget which is slightly lower than the current shillings 40.48 trillion budget. This is despite a new set revenue target of Shillings 21.54 trillion up from Shillings 20.4 trillion in the current financial year.

While appearing before Parliament Finance Committee on Wednesday, the Minister of State for Planning David Bahati and Mugambe were tasked to explain the reduction in the proposed budget despite an increase in the estimated revenue that will finance the national envelope.

Rubanda East MP Henry Musasizi, the chairperson of the Finance Committee questioned why the resource envelope was reducing compared to the previous financial years.

In his response, Mugambe said that the reduction is largely on the account of reduction in project external financing.

“The reason why there is that reduction is because, as members know, there are projects which are still being concluded, both in parliament and also negotiated between government and the financiers. So, we expect that between December 2019 when the Budget Framework Paper was presented and when the budget is finalized all those negotiations and discussions will have been concluded and definitely a number of projects will come on board,” said Mugambe in part.

He explained that by the time the Finance Minister presents the final proposed budget in March, they will have bridged the gap between the current proposed 39.64 trillion by accommodating additional projects that are currently being negotiated.

However, the Finance Minister Matia Kasaija earlier indicated that the reduction in the national budget means that there is limited fiscal space to fund the expenditure pressures.

Bahati defended the proposed budget for the coming financial year 2020/2021 saying that they have been reforms in place that are to control inefficiencies.

Government intends to collect 21.54 trillion shillings in domestic revenue in the 2020/2021 financial years to finance the proposed Shillings 39.64 trillion election-year budget. According to Bahati, the tax proposals are still being studied and soon to be tabled before parliament.

According to the revenue projections,, Shillings 20.040 trillion will come from tax revenue while Shillings 1.505 trillion will come from Non-Tax Revenue (NTR).

The Budget framework paper indicates that over the next financial year and medium-term, government will implement reforms covering several aspects of tax policy and administration.

Some of the identified tax policy initiatives include the establishment and publications of a comprehensive Tax Expenditure Governance Framework, development of an appropriate, evidence-based Tax Expenditure Governance Framework to limit leakages and improve transparency and address the informal economy that is outside the scope of the tax system as well as the regulatory frameworks while preserving Uganda’s entrepreneurial spirit and others.

The others are streamlining tax policy and the tax laws and where necessary propose adjustments to tax rates with a view of widening the tax base, complete the review of the Common External Tariff (CET) which aims at enhancing the protection of East African Community (EAC) manufacturers by using relevant trade defence measures and facilitate businesses to take advantage of various incentives in the EAC that favour exporters.

Uganda Revenue Authority (URA), according to the government proposals will also be charged with strengthening the revenue-raising capacity of local governments to boost their revenue base and broaden the range of revenue instruments available to them. This is intended to help them become more independent of transfers from the central government.

According to the breakdown of the budget, government seeks to spend Shillings 5.96 trillion on Works and Transport, Shillings 3.28 trillion on Education, Security Shillings 2.86 trillion, Health 1.55 trillion, Agriculture 950.6 billion, Accountability 1.85 trillion, Energy and Mineral Development 2.46 trillion Justice, Law and Order 1.76 trillion, Legislature 667.8 billion and others.

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URN

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