Works and education get lion share in industrialisation budget

Matia Kasaija, the finance minister, on Thursday read a Shs29,008bn budget before Parliament that he said underlines government’s plans to turn around the economy by raising agricultural productiveness and increasing the pace of industrialisation.

The minister said the government will focus on addressing recent challenges to growth, such as the slow growth of average income versus population growth, the rise in unemployment, particularly among the youth, and the effects of prolonged droughts and land fragmentation on agricultural productivity.

While laying out Uganda’s economic outlook and growth strategy, Mr Kasaija said the government’s aim is to graduate Uganda to middle-income status by 2020. To achieve this, average incomes will need to rise to $1,039 from the current $773, while the economy will need to grow by an additional $17bn.

Strategic priorities
The government’s strategy on the road to middle income rests on four pillars, he said. These are increasing production in the key primary growth sectors of agriculture, tourism and minerals, oil and gas; industrialisation through value addition; private sector development; and increased public sector efficiency.

“Madam Speaker, as result of these actions, the economy is expected to rebound to annual growth rates of 7% in the medium term, as a minimum,” Mr Kasaija said.

But that rate of expansion is not enough to see Uganda attaining middle income by 2020, according to the World Bank. Its most recent economic update for Uganda says the economy must grow by 12% each year until 2020 to achieve lower middle-income status. The bank believes that level of growth, much less 7%, will be impossible to achieve in the years to 2020.

Even then, the finance minister announced a number of “strategic interventions” to help steer economic development onto the desired course.

In agriculture, the measures will include reforestation, restoration and prevention of wetland destruction and enhancing irrigation. In tourism, the government will focus on increased promotion of tourist products and building skills in the hospitality industry. In the minerals sector, Mr Kasaija promised a review of the legal framework to “improve governance”, and a fast tracking of the oil refinery and crude oil pipeline projects.

Meanwhile, the industrialisation strategy will hinge on agriculture, agro-processing, and value-addition. “Linking agriculture to industry is the strategy in which the economy will be transformed to deliver inclusive growth and development,” he said.

Mr Kasaija also touted regional efforts to eliminate non-tariff barriers in the East African Community as having brought down the cost of doing business and improving trade. This is a boon to the private sector, he said.

Additionally, he said the government has allocated Shs300 billion to settle domestic arrears owed to private suppliers. A Bank of Uganda survey said the government’s delay to pay suppliers was the single leading cause of the spike in nonperforming loans held by commercial banks.

The government will also reduce its borrowing from domestic markets to 1% of GDP from the current 2% of GDP ” in the short to medium term,” he said, as it crowds out the private sector and drives up the cost of credit.

Sector Allocations
There was little change in sectoral allocations, with works and transport, interest payments, education, and energy and mineral development getting the highest shares in the budget.

The background to the budget shows works and transport getting Shs4,587.3bn, or 20.8% of total allocations. Of this, Mr Kasaija said Shs3,410bn will go to “the continued development of national road infrastructure, including ferries and bridges.”

Interest payments on loans took up the second highest allocation, coming in at Shs2,675.4 or 12.2% of total sectoral allocations, up from 9.9% in the previous financial year.

The education and sports sector was allocated Shs2,501.3bn. In 2017/18, the government will focus on reforming the curriculum with an emphasis on science and life skills, improvement of existing learning facilities at tertiary institutions which will include reconstructing laboratories and workshops, renovating rundown primary schools and traditional secondary schools, and the construction of 12 seed secondary schools in sub-counties which don’t have them.