Budget 2018: Government pledges to address development challenges

Uganda’s NRM government, in power since 1986, has pledged to address the development challenges the country still faces as it guides the economy into lower middle-income status.

Matia Kasaija, the finance minister, said the government will focus on the commercialisation of agriculture, industrialisation to unlock productivity in agriculture, and addressing constraints to private sector investment in the next three financial years.

Mr Kasaija was reading the government’s budget for the 2018/19 financial year which starts on 1 July. He said the government is expected to spend Shs32.7 trillion – equivalent to about 32% of the economy’s output – in the year, up from the Shs29 trillion estimated for this year. Of this, Shs12.9 trillion, or 39.4% of the budget, will be spent on public capital investments while Shs13.3 trillion (40.6%) will be spent on recurrent costs.

To achieve its strategic objectives, the minister said the government will promote commercial farming practices through smallholder farmer cooperatives, increase the provision of agricultural extension services and promote agricultural exports to widen the market for agricultural products.

He added that the government will support investors in manufacturing using tax incentives, provide serviced industrial parks, and continue infrastructure development – particularly electricity, roads and railways, and information technology. Uganda will also push for stronger regional integration to open up export markets, he said.

Just like last year, the biggest spend will go to the works and transport sector, which was allocated Shs4.7 trillion up from Shs4.5 trillion in the budget read last year, with the National Roads Authority getting Shs1.5 trillion of which Shs1.4 trillion will be spent on capital investments.

Education was allocated Shs2.7 trillion, higher than this year’s Shs2.5 trillion, while health received Shs2.3 trillion, of which Shs1 trillion was from external funders. The energy sector was allocated Shs2.4 trillion, with the estimated spend of the rural electrification agency increasing to Shs636.5bn compared to Shs449.6bn in the previous budget.

Although the allocation to the agriculture sector increased to Shs892.9bn from Shs828.5bn in the budget for this financial year, the amount budgeted for the National Agricultural Advisory Services decreased by Shs29.8bn to Shs249.9bn.

Naads provides extension services throughout the country, which Mr Kasaija said the government will increase in the next three years. The two agricultural research agencies responsible for improving the quality of crops and animals, the National Agricultural Research Organisation and the National Animal Genetic Research Centre and Data Bank also had their budgets slashed.

Mr Kasaija said domestic revenue is projected at Shs16.4 trillion next financial year, Shs1.9 trillion more than the amount the revenue authority is expected to collect this year, with tax revenue is projected to increase to Shs15.9 trillion. He added that Parliament had approved amendments to tax laws to reduce tax avoidance and also increased tax rates. Yet, in a departure from custom, he did not say what taxes had gone up, down, or had been introduced.

But even as the government this year presented Bills that sought to introduce taxes on Savings and Credit Cooperatives and mobile money – initiatives that have been credit with increasing savings and improving financial inclusion – it is also offering more incentives to ostensibly “promote both domestic and foreign investment”. The incentives, which the minister did not name, focus on industrialisation, he said.