BUDGET 2020: UGANDA HIGHLIGHTS

June 16, 2020 - 5 minutes read

The Uganda 2020/21 national budget is based on the theme: Stimulating the economy to safeguard livelihoods, jobs, business and industrial recovery. It was delivered by Hon. Matia Kasaija Minister of Finance Planning and Economic Development on 11th June 2020.

The Ugandan Economic Stimulus and Growth Strategy by Government provides various opportunities including:-

·       The acceleration of import substitution and export promotion strategy for a range of goods including medicines and other health products; and the products of agro-industrialization  and light manufactures, which Uganda can produce with a comparative advantage;

·       Digitalization of many aspects of socio-economic activity to improve efficiency and reduce costs.

·       Strengthening contingency planning to mitigate the impact of disasters, and protect the most vulnerable persons;

·       Transforming Informal business to formal business;

·       Reform of Urban Transport to reduce congestion, starting with the Greater Kampala Metropolitan Area and eventually Regional Cities; 

·       Domestic tourism stimulation to encourage many Ugandan residents to explore local touristic destinations.

Hon. Kasaija added that Uganda’s GDP is expected to grow to sh138 trillion in the forthcoming financial year. He reported that the economy grew by 3.1% in the 2019/20 financial year, which was slower than the 5.4% in the previous years. There was a tone of optimism when he reported that agriculture grew by 4.2% in the financial year ending June 30 while the services sector grew by 3.6%.

The Economic Stimulus and Growth Strategy that the NRM Government will implement commencing next financial year and in the medium term, is aimed at achieving the following three key objectives:- 

·       Improving wellbeing of Ugandans;

·       Boosting economic transformation; and

·       Improving peace, security and good governance

 Improving wellbeing of Ugandans;

Agriculture: H.E. the President has identified 14 products that will be developed commercially. These products include maize, cassava, banana, beans, Irish potato, sweet potato, millet, sugar cane, cattle (beef), dairy, coffee, tea, cocoa and fish. To reduce post-harvest loses, the construction of storage facilities of 42,000 Metric Tonnes capacity that commenced in Iganga, Isingiro, Amuru, Kalungu, and Nebbi will continue.

Providing Emergency Social Protection: Government will  prioritise targeted support to the most vulnerable groups and those at higher risks of food insecurity, old age and the chronically ill.  An allocation of U Shs 45B has been made towards this intervention. The government will also roll out the Social Assistance Grant for the Elderly (SAGE) nationwide to persons aged 80 years and above, including the elderly aged 65 years in the piloted 15 districts. An allocation of UShs. 107B has been made for this intervention.

Boosting Economic Transformation

The specific measures that Government will implement include: 

1.)   Restoring Household incomes and Safeguarding Jobs

·       Enhancing the  provision of improved agricultural inputs using NAADS e-Voucher Scheme to farmers and upscaling agriculture extension services to boost production of key agricultural commodities, for which an allocation of UShs. 300 B has been made

·       Create jobs for the vulnerable but able bodied persons affected by Corona Virus by expanding labour intensive public works in urban and peri-urban areas; for which  an allocation of Ushs 130 B has been made

·       Provide seed capital to organised special interest groups under the Youth Fund, Women Entrepreneurship Fund and the ‘Emyooga’ Talent Support scheme; for which an allocation of UShs. 256 B has been made.

2.) Re-Igniting Business Activity

In order to improve the availability of investment finance and the cash-flows of Micro, Small and Medium Enterprises and other manufacturing firms, the Government shall:

·       Provide credit through SACCOs and Micro Finance Institutions to support micro and small-scale enterprises through an allocation of UShs 94 B for FY2020/21; 

·       Increase access to credit at Uganda Development Bank to offer low interest financing to manufacturing, agribusiness and other private sector firms, for which I have provided UShs. 1,045 B over the medium term;

·       Increase funding to Uganda Development Corporation for public-private partnership investments to facilitate import substitution and export promotion strategy with an allocation of UShs. 138 B;

·       Provide for Banks to restructure loans to their borrowers who are facing liquidity constraints and provide additional liquidity on a case by case basis, as recently guided by the Bank of Uganda;

·       Reduce charges on mobile banking and mobile money transactions, to improve efficiency, reduce person-to person contact to prevent spread of the Corona Virus; 

·       Expedite the payment of arrears owed by Government to private sector firms commencing July 2020, for which UShs 673 B has been allocated in order to address liquidity constraints faced by suppliers

3.) Tax Relief to Businesses

To address the short term emergency liquidity requirements of businesses, boost their cash-flows, and ensure business continuity, the minister proposed the following tax relief measures:

·       Defer payment of Corporate Income Tax or Presumptive tax for Corporations and Small, Medium Enterprises (SMEs)

·       Defer payment of PAYE by sectors affected

·       Waive interest on tax arrears

·       Provide for Tax Deductibility of Donations for the Corona Virus Response.

·       Expedite Payment of outstanding VAT refunds

Kasaija said next financial year’s revenue target is UGX 21,810 B, comprised of tax revenue amounting to UGX 20,219 B and non-tax revenue of UGX 1,591 B. This target translates into a revenue effort of 14.3 % of GDP. To achieve this target, the Ugandan Government  will implement the following new interventions: –

·       Further roll out use of digital tax stamps and expand the range of products covered;

·       Widen the scope of the income tax withholding agents across all sectors in order to broaden the tax base; 

·       Enhance rental income tax collection and compliance by implementing a digital collection solution;

·       Gazette VAT withholding agents with an applicable VAT rate of 6 %, and provide for penalties for failure to withhold;

·       Rollout the use of Electronic Fiscal Devices (EFDs), which are interconnected to the Uganda Revenue Authority, to improve record keeping and tax compliance.

Other fiscal and budgetary  proposals include:

a)    Development of local industries

To promote import substitution and the development of local industries, Uganda has increased import duties on goods that are produced or can be produced locally. The import duty on agricultural products has been increased to 60% and other products to 35 %.

b)    VAT exemptions

VAT on the supply of agricultural equipment will be exempted. The supply of processed milk will also be VAT exempted.

c)    Access to Justice

To improve access to justice, additional 5 one-stop Justice Law and Order Service Centers will be constructed.

RESOURCE ENVELOPE AND ALLOCATIONS FOR FINANCIAL YEAR 2020/21

·       The Resource Envelope of Financial year 2020/21 totals Shs.45,493.7 B of which Domestic Resources amount to Shs. 25,585.6 B

·       Domestic Financing amounts to Shs 3,560.3 B while External Financing consists of Project Support of Shs. 9,515.3 B and General Budget Support Shs. 2,906.7 B.

·       Domestic re-financing amounts to Shs. 7,486.1 B and Appropriation in Aid is Shs. 215.6 B

·       The total Expenditure amounts to UShs. 37,792 B of which Recurrent Expenditure is UShs. 19,787.8 B and Development Expenditure is UShs. 18,004.2 B.

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