Uganda Budget 2015/16...

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2. www.pkf.com Global Expertise, Local Knowledge
GOU Budget 2015/2016
ECONOMIC ANALYSIS OF THE
NATIONAL BUDGET 2015 -2016

3. Challenges
• The structure of our economy consists of sizable informal
sector that accounts for 49% of the economic output.
• The external sector suffers from an imbalance between
growing imports compared to the poor performance of
exports (political instability faced by trading partners in
the region, and an economic slowdown in Europe).
• Low competitiveness of the private sector which is
constrained by infrastructure (unreliable electricity and an
inadequate rail and road networks). The resulting high
costs combined with the landlocked status make dampen
Uganda’s competitiveness.

4. • Increasing (youth) unemployment.
• Low value addition (limiting Uganda’s ability to exploit its
competitive advantage in agriculture and mineral wealth
endowment).
A major objective of the 2015-2016 budget is to address
the above challenges. The focus of the budget
infrastructural development and socio-economic
transformation hence the theme: “Maintaining
Infrastructure Investment and Promoting Excellence
in Public Service Delivery”.

5. 2014/15 ECONOMIC
PERFORMANCE
Sector Performance
Economic Growth
Recent re-assessment (‘re-basing’ of the economy)
shows that the economy is 17% larger than previously
estimated, and it is now valued at Shs. 75.183 Trillion
(approximately US Dollars 25 billion).
Projected growth is 5.3% in real terms - reflecting
recovery from the slowdown that happened in financial
year 2012/13.

6. Sector Growth in 2014-
2015
Services (Information & Telecoms) 10.2%
Construction 6.6%
Industry 5.5%
Agriculture, forestry and fishing 2.3%
Inflation and Domestic Prices

7. Inflation is an economic reality.
Headline inflation measures the increase in general
price levels (including food, energy, fuel and utilities).
Core inflation which measures the increase in the
general price level (excluding food crops, energy, fuel
and utilities).

8. Year Core Inflation rate
2013 12.2%
2014 5.6%
2015 2.7%

9. Monetary and External Sector
Interest Rates
• Interest rates remain high due to two main factors:
(i) the limited supply of long term capital in the
economy due to absence of a savings
mechanism to mobilize long term capital, and
(i) (ii) the risk profile of borrowers which remains
high, as demonstrated by high default rates and
non-performing loans in the past.

10. Monetary and External Sector…
Negative Balance of Payments
• Due to poor performance of exports, and
• A surge in import demand (driven by infrastructure
investments in oil, the road network and Karuma and
Isimba Hydropower projects), as well as net outflow of
short term capital in equity and government securities.

11. Monetary and External Sector …
Negative Balance of Payments
• Total export revenue for the period April 2014 to March
2015 is estimated at US$ 2,701.6 million, compared to
imports of US$5,048.9 million over the same period.
• Current account deficit for this year is projected to widen
to 8.5 % of GDP compared to 7.2 % in the financial year
2013/14.

12. Monetary and External Sector…
• The overall balance of payments - a deficit of US$475
million, compared to the surplus of US$ 287.4 million that
was recorded in the previous 12-month period ending
March 2014. This is ‘worsening’ by USD 762.4m.
• External reserves currently amount to US$ 266.5 million.
Despite the reduction, reserves remain healthy at
$2,972.4 million, equivalent to 4.0 months of future
imports of goods and services.

13. Monetary and External Sector…
Exchange Rate and Foreign Reserves
The Uganda Shilling, has been weakening against the US
Dollar as a result of mainly two major factors;
• Strength of the US Dollar.
• An increase in demand for foreign exchange to meet the
import bill.
Revenue Performance
• Total projected tax collections of Shs. 9,577 billion up
from 8,031 billion in financial year 2013/14.

14. • Government has approved a budget of Ushs 23.9 trillion
as follows;
Source of Funding UShs
External Financing 5,649 billion
Domestic Funding (TBs)
Other sources
Tax Collections
1,384 billion
5,606 billion
11,333 billion
TOTAL 23,972 billion
2015/16 Fiscal Framework

15. Public Finance
Expenditures
Total Government expenditure is estimated at Shs 13,988
billion compared to Shs 11,456 billion in financial year
2013/14.
Of this, recurrent expenditure is projected at Shs 7,550 billion
and development expenditure at Shs 4,881 billion.
Domestically raised revenues will fund 100 % of the recurrent
expenditures and 66 % of development expenditure.
Statutory expenditure projected to increase to Shs. 1,400.7
billion from 753.9 billion.

16. Economic Outlook
The economy is projected to grow at 5.8 % next financial year.
The medium term outlook for our economy is bright, with real Gross
Domestic Product projected at average 6.5 % in the next 5 years.
Consumer prices increases are expected to remain within the 5 %
policy target.
The current account deficit is projected to widen slightly on account
of import demand driven by higher non-oil private and public
infrastructure related imports; and expectations of weak exports
earnings.
Uganda’s international reserves are projected to improve gradually
to achieve about 4.5 months of import of goods and services cover
in the medium term.

17. Economic Outlook
Prospects for the development of Uganda’s oil sector
remain positive.
Government strategy in the medium term will focus on
accelerating infrastructure developments.
The budget deficit for the coming financial year is
projected to increase to 7 % of GDP compared to 4.5 %
for this year.
Development expenditure is budgeted to grow by 58 %
next financial year (Entebbe International Airport, new
roads and the Karuma and Isimba hydropower projects).

18. Economic Outlook
• The deficit will largely be financed by external sources
and, to a lesser extent, by issuance of domestic debt
(concessional loans).
• Non-concessional external borrowing will be considered
only for the financing of highly productive fixed capital
investments.
• Government will avoid excessive domestic borrowing to
keep the current level of debt sustainable, and to avoid
crowding out of the private sector.

19. Sector Interventions
The sector interventions/investment will focus on
SECURITY AND DEFENSE
• Considerable resources have been committed to defense
and security.
AGRICULTURE
• Agriculture employs 66 % of Uganda’s labour force. The
role of agriculture in the livelihood of most Ugandans,
cannot be overlooked. Government has pledged to
expedite the transformation of this sector from
subsistence farming to viable commercial enterprises.

20. Sector Interventions
The ongoing major Government interventions include;
‒ reform of agricultural extension and advisory
services;
‒ providing seed, planting, breeding and stocking
materials to famers;
‒ funding agricultural research and animal genetic
improvement

21. Sector Interventions
‒ support to commodity value chains to improve
household food security and incomes; and
‒ Constructed 179 valley tanks with capacity of over
500,000 cubic meters across the country
‒ enforce agriculture standards and regulations
including the fisheries regulations;
‒ Control of pests, vector and disease, especially
Foot and Mouth Disease.

22. Sector Interventions
Government has allocated Shs.479.96billion to the agriculture
sector. The strategic interventions to be implemented under the
Commodity Based Approach, include the following:-
• Provision of agricultural inputs to farmers;
• Promotion of value addition for strategic commodities;
• Fund research to increase productivity and disease resistance
varieties;
• Control of pests and diseases, with special emphasis on Banana
and Coffee Bacterial Wilt and Foot and Mouth Disease;
• Construct valley tanks and dams for livestock and crop irrigation;
and
• Provide affordable long term financing under the Agricultural
Credit Facility (ACF) for agriculture, agro-processing and agro-
based value addition.

23. Sector Interventions
Value Addition and Industrial Development
Interventions were listed by the Hon Minister.
Tourism Development
• Government has developed a 10 year tourism master plan and a 5
year sector Development Plan to guide the implementation of critical
activities to drive tourism growth in the country.
• Shs. 81.3 billion has been approved towards the Tourism sector to
implement these activities.

24. Sector Interventions
Business Climate
• In order to improve the business climate, Government
has undertaken legal and regulatory reforms including:
reforms in Land administration, business registration and
licensing. These reforms have thus far resulted in the
following:-
• Comprehensive inventory and review of all business
licenses;
• Establishment of a business license e-registry as the
sole repository of business licenses to create a one stop
center linking to other agencies;

25. Sector Interventions
• Launch of a business regulation feedback portal at the
Private Sector Foundation Uganda; and
• Completion of computerization of 21 land registries.
• Rationalization of business licenses and procedures to
eliminate red-tape in business transactions.
• Improvement of efficiency of the judiciary to reduce
commercial case backlog by introducing new technology,
making procedures faster, including instituting small
claims procedures.

26. Sector Interventions
STRATEGIC INFRASTRUCTURE DEVELOPMENT AND
MAINTENANCE
• There are substantial allocations in the Transport
Infrastructure and Energy Infrastructure.
HUMAN CAPITAL DEVELOPMENT
HEALTH SERVICE DELIVERY
EFFECTIVE SERVICE DELIVERY
FIGHTING CORRUPTION