Uganda’s Minister of Finance & Economic Development, Hon. Matia Kasaija on June 14, 2022, delivered a 48.1 trillion shillings national budget for Financial Year (FY) 2022/2023 from the Kololo Independence Grounds which was designated as Parliament for the occasion.
The theme of the budget speech was; Full Monetization of Uganda’s Economy through Commercial Agriculture, Industrialization, Expanding and Broadening Services, Digital Transformation and Market Access. The budget for FY 2022/2023 seeks to enhance economic recovery from the shocks caused by the COVD-19 pandemic through efficient collection of taxes among other things. Besides, the country is undergoing unprecedented economic times due to spikes in prices of essential commodities and fuel. This has led to a 6.3% rate of inflation. These have been attributed to external factors notably, the Russia-Ukraine war. Therefore, no new taxes were introduced because of the prevailing economic challenges.
The budget strategy applied for FY 2022/23 and over the medium term aims at restoring economic activity to pre-pandemic levels and subsequently accelerating the pace of socio-economic transformation. These form the background to allocation of resources to the various sectors to enable sustaining peace, security and stability as well as macro-economic stability. Some key foundations for economic recovery and growth considered are; the mitigation of the COVID-19 impact on livelihoods, business activities and the overall economy as well as speeding up socio-economic transformation by re-purposing the budget towards wealth, job creation and other impactful investments.
The Parish Development Model (PDM) is taking off and will be implemented fully under this budget. It is expected that 39% of households still engaged in subsistence economy will transition to the money economy. This ambitious plan by the government has come under intense scrutiny and criticism by some political leaders though. Ugx 1.059 trillion has been budgeted for the Parish Development Model projects. It is to be distributed to 10,594 parishes and each parish will receive 100 million shillings revolving fund for purchase of agricultural inputs.
If well implemented, the Parish Development Model is set to become a game changer in the lives of many Ugandans. Some major budgetary allocations for FY2022/2023 were as follows; Security & Governance Ugx 7.2 trillion, Education & Skilling Ugx 4.4 trillion, Transport infrastructure Ugx 4.3 trillion, Health Ugx 3.722 trillion, Power infrastructure Ugx 1.573 trillion, Agro-industrialization Ugx 1.449 trillion, Water & Environment Ugx 1.027 trillion. Additionally, no new taxes were introduced with the hope that revenue targets could be achieved by improving the efficiency in tax collection and enhancing compliance to tax laws. Uganda’s total public debt stock at the end of last year stood at Ugx 73. 5 trillion ($20.7 b), of which external debt amounted to Ugx 45.72 trillion ($12.9b) and domestic debt amounted Ugx 27.77 trillion ($7.48 b). This represents nominal debt to GDP ratio of 49.7%.
Whereas the rise in debt stock is attributed to the need to support the economy, preserving the welfare of households as a result of the COVID-19, other external and domestic shocks, financing shortfalls in domestic revenue and the nominal debt to GDP ratio raises very serious concerns about Uganda’s state of economy.
Award winning journalist for reporting on Business, Economy and Finance based at Daily Monitor (MPL-NMG), Ismail Musa Ladu shared his perspective and what the public debts mean; “Look by the close of the financial year, which is just days away, the country’s public debt will have surpassed the 50% mark that the government promised severally it will never attain. Already, the budget earmarked for just debt servicing is much higher than the budget allocated to key economic sectors such as health, education and agriculture.
If this is not treading on slippery ground, then what is?” “This is the first budget in many years where the Executive arm of government doesn’t seem to have as much leg room as it would have liked. It has come at a time of inflation pressures, most of which are beyond government control. The move not to introduce new taxes is not because of empathy towards the citizens of Uganda but it is the way to go considering the prevailing economic environment”, added Ladu. Overall, the budget focuses and attempts to boost recovery of the economy, but ultimately, it will be decided by how effective the budget is implemented.
By jimmy Odoki Acellam
