KAMPALA-Uganda’s Shs24 trillion budget for financial year 2015/16 is heavily clouded with new measures to generate more money through taxation, public debt repayment and recurrent expenditure in government ministries departments and agencies.
In his budget for financial year 2015/16 this afternoon, the minister of Finance, Planning and Economic Development Matia Kasaija said the main thrust of tax policy is to progressively enhance revenue mobilization to fully finance the budget.
“This is to be accomplished while ensuring that taxation is not a hindrance to private sector investment, savings, production and social welfare,” he said.
Uganda government has opened a new front of increasing domestic revenue by 0.5 percent annually through taxation over the next four years.
Mr Kasaija explained: “In pursuit of this goal, our efforts are geared towards increasing the tax to GDP ratio by at least 0.5 percentage points of GDP every Financial Year and to attain a target of 16 percent by 2018.”
In totality, domestic revenues are expected to increase to Shs11.333 trillion up from Shs9.799 trillion in the financial tear 2015/16.
Mr Kasaija said this will be achieved through a number of changes to the structure and coverage of taxes, and efficiency improvements in tax collection and compliance.
Though government is determined increase tax ratio to the GDP over the next four years, on the other hand, Mr Kasaija expressed worries that some of the challenges that inhibit the pace of revenue growth include among others; a large informal sector that constitutes 49 percent of GDP, a poor taxpaying culture among many Ugandans and lack of collaboration among Government Ministries, Departments, Agencies and Local Governments.
The total approved budget for financial year 2015/16 is Shs23.972 trillion. Out of this, Shs17.329 trillion is allocated for spending by Ministries, Departments and Agencies (MDA’s), which includes statutory expenditures amounting to Shs1.148 trillion.
Shs6.643 trillion is debt repayments plus interest on total debt. The total debt repayment includes Shs4.787 trillion which is meant to pay maturing domestic debt; Shs200 billion for recapitalization of the Bank of Uganda; Shs1.370 trillion and Shs285.7 billion for domestic and external debt interest payments respectively.
The minister said new domestic debt to be raised through Treasury Bills and Bonds next year is expected to amount to Shs1.384 trillion, which he says these funds will help to finance Government’s contribution to infrastructure investment projects.
Uganda’s public debt has been growing both external and domestic debt; the stock of outstanding public debt is projected to reach $ 7.6 billion by end of this financial year 2014/15, compared to $ 7.2 billion last year 2013/14
Statistics shows that 60 percent of Uganda’s debt stock is external and 40 percent is domestic. The increase in public debt reflects the increased borrowing to finance infrastructure investment.
Uganda’s budget is partly funded by the development partners, Mr Kasaija said: “Next year we expect to receive external financing equivalent to Shs5.649 billion in grants and loans, of which Shs1.095 billion is grants, Shs1.326 billion is concessional loans, and Shs3.228 billion is non-concessional loans. I thank our development partners for this good gesture.”
Uganda’s export is still low compared to what it imports, total export revenue for the period April 2014 to March 2015 are estimated at $ 2.701.6 billion, compared to imports of $ 5.048 billion over the same period.
Consequently, the current account deficit for this year is projected to widen to 8.5 percent of GDP compared to 7.2 percent in the financial year 2013/14. During the 12-month period ending March 2015, preliminary estimates indicate that the overall balance of payments position was a deficit of $475 million, compared to the surplus of $ 287.4 million that was recorded in the previous 12-month period ending March 2014.
The current account deficit has been partially financed by transfers in the form of external grants to Government amounting to $299 million, workers’ remittances amounting to US$ 915 million, and foreign direct investments inflows of $ 1.200 billion.
However, government officials admit that this was not enough to close the deficit, resulting into a reduction in external reserves amounting to $ 266.5 million.
Mr Kasaija said: “Despite the reduction, our reserves remain healthy at $2.972 billion, equivalent to 4.0 months of future imports of goods and services.”
Government projects that Uganda’s economic growth rate will rebound to 6.5 over the medium term, while inflation is expected to be around 5 per cent.