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Inside Uganda’s Shs44.7trillion spending plan

Human capital, security and governance take lion’s share of the 2021 national budget

| THE INDEPENDENT | Uganda’s newly appointed State Minister for Planning Amos Lugolobi on June.10 unveiled the contents of the 2021/22 national budget to the public.

Setting out the government’s tax and spending plans for the year ahead starting next month, he announced new measures to help businesses and companies through this pandemic as well as support the Uganda government’s long term development plan now pegged on the National Development Plan III.

However, the budget has also come up with mixed reactions on how it will spur growth of business and economy in the wake of the pandemic.

Fred Muhumuza, an economist and a lecturer at Makerere University said during the budget breakfast organised by Ernst and Young Uganda on June.11 that the current budget fails to resonate with the realities on the ground.

“The government failed to acknowledge to the fact that the pandemic is still with us. Schools, for instance, which thought that they had been re-opened have been closed again as a result of a new wave of coronavirus pandemic. This means that some of the schools might never open again or will be sold to other investors who may use them for other purposes,” he said.

Muhumuza said the government, like it has always done, plans to borrow from the domestic market to finance its budget, limiting the private sector access to such credit at a much a lower interest rate.

Barbara Mulwana, the chairperson of the Uganda Manufacturers’ Association and the executive director at the Nice House of Plastics said the although the government plans to inject Shs103bn into the Uganda Development Bank for onward lending to businesses, the funds are too minimal.

She said the government should have widened the manufacturer’s access to cheap capital such as corporate bonds so that they are able to become competitive in the region and beyond.

“We also appreciate government’s steps in tax administration through initiatives like Electronic Fiscal Receipting and Invoicing Solutions and Digital Tax Stamps but as the tax collection keeps on increasing, the government should be in position to meet the costs of these initiatives,” she said.

The government budget stands at Shs 44.7 trillion in the financial 2021/22 compared with Shs 45.5trillion in financial year 2020/21, with a huge chunk planned to be spent on interventions related to human capital development, security and integrated energy and transport infrastructure services.

Themed, ‘Industrialization for Inclusive Growth, Employment and Wealth Creation’ Shs 7.7 trillion has been earmarked for human capital development, 6.9 trillion for peace, security and good governance interventions, 5.1 trillion for development of integrated transport infrastructure.

The other provisions are Shs 1.6 trillion for agro-industrialization, Shs 49 billion for mineral development interventions, Shs 560 billion for procurement of Covid-19 vaccines, Shs 376.9 billion for the Judiciary and Shs 134.9 billion to enhance digitization of the economy.

Budget financing

The budget will be financed through domestic revenue amounting Shs22.42 trillion of which Shs 20.83 trillion will be tax revenue and Shs 1.58 trillion Non-Tax revenue.

The other sources of budget financing are domestic borrowing amounting to Shs 2.94 trillion, Petroleum Fund Shs 200 billion, budget support Shs 3.58 trillion, external financing for projects Shs 6.86 trillion, of which Shs5.51 trillion will be from loans, and Shs 1.34 trillion will be grants.

Appropriation in Aid, collected by Local Governments amounts to Shs 212.4 billion and domestic debt refinancing will amount to Shs 8.547 trillion.

Lugoloobi said, “The fiscal strategy for financial year 2021/22 and the medium-term aims to create resources to finance priority interventions, while maintaining fiscal and debt sustainability. It is premised on mobilizing a higher level of domestic revenue and enhancing returns from public investment. The government will also undertake a review of public expenditure to improve efficiency.”

Lugoloobi said the local revenue will be raised from several tax measures set by government.

“The increase in tax collections will be realized from an improvement in the level of economic activity, increased efficiency in tax collection by Uganda Revenue Authority-URA through strengthening compliance and enforcement, as well as new tax measures and administration reforms,” he said.

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