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Uganda's budget deficit worsens, 50% to be borrowed

Government is aiming at collecting at least Shs 16.35 trillion to support the estimates in the 2018/19 Shs 32.7 trillion year budget presented on Thursday afternoon.

Part of this, totalling Shs 15.9 trillion will be raised from the new tax measures which will come into effect at the beginning of July. The remaining Shs 420 billion will be raised from non-tax revenue sources.

The new tax measures include Shs 200 daily levy on each person using social media platforms like WhatsApp, Facebook, Viber and Skype among others, a 1 per cent excise duty on each mobile money transaction, a Shs 200 levy on every litre of cooking oil and Shs 100 on every litre of diesel and petrol.

Finance minister Matia Kasaija

The other measures include a duty of Shs 650 levied on each litre of opaque beer, Shs 1500 per litre on ready to drink spirits and Shs 200 for every litre of non-alcoholic beverages with the exception of fruit or vegetable juices among others.

To generate more revenues, Finance minister Matia Kasaija says Uganda Revenue Authority (URA) will, among other things, pursue tax evaders, heighten business intelligence, expand tax system management, enhance tax arrears management, combat smuggling, establish container scanners, and increase post-clearance audits.

However, although the budget swelled up to 32.7 per cent, it worsens the country's debt burden as 50 per cent of its financing will be from borrowing and grants. 

Kasaija says that the government expects to raise Shs 7.73 trillion through external financing Shs 6.14 trillion from loans, Shs 1.5 trillion from grants and Shs 1.78 trillion from domestic borrowing. This implies that collections by URA constitute roughly 50 per cent, leaving a deficit of 50 per cent, which will be filled by borrowing.

Donor budget support will be a miserly 289 billion shillings, while appropriations in aid, which is revenues collected by government departments, will be 1.3 percent.

Although the Finance minister said Uganda's debt to GDP ratio is still at 38.1 per cent and still sustainable, because it is still below the 50 per cent danger zone, borrowing 50 per cent to finance the budget will worsen the public debt.

As of March 2018, Uganda's debt burden was $10.5bn, and since there have been more borrowing since March, the debt burden is higher than the 10.5-billion-dollar point. Out of the budget, Kasaija says Shs 5.2 trillion will be for domestic debt refinancing but is silent on external debt refinancing.

According to the 2018/19 budget framework paper, Shs 10.6 trillion, nearly one-third of the budget, will be for debt repayment. If Shs 5.2 trillion is for domestic refinancing, then it means Shs 5.4 trillion will be for external refinancing.

On tax administration, Kasaija says non-tax revenues will be the mandate of URA, warning that accounting officers who will collect non tax revenues (NTRs) and fail to remit to URA will be treated as defaulters.
According to Kasaija, the government has earmarked to invest in tax administration measures so as to improve the capacity of URA to implement the current tax laws and enforce taxpayer compliance.
The budget presents several incentives to promote both domestic and foreign investment including incentives for investments in the development of industrial parks or free zones, the establishment of new factories, and development of hotels and tourist facilities.

Sector allocations

In the budget, the total recurrent expenditure stands at Shs 9.4 trillion while development expenditure is estimated at Shs 13.1 trillion. The additional Shs 10.1 trillion is classified as statutory expenditure. At least Shs 24 trillion of the total will be mobilized from domestic sources and Shs 7 trillion from external support.

Works and Transport sector is taking a lion's share of the budget at Shs 4.8 trillion, Shs 1 trillion above last year's allocation.  The education sector funding now stands at Shs 2.4 trillion on the same footing with the Energy ministry. The health sector will get an allocation of Shs 2.2 trillion while local governments will collectively share Shs 3 trillion. 

According to the budget, at least Shs 1.5 trillion will be spent on public sector management, Shs 1.4 trillion Swill be spent on security, and Shs 1.2 trillion will go the Justice Law and Order sector. The ministry of Agriculture will receive Shs 862 billion, the Ministry of Water and Environment will take Shs 595 billion and the Legislature will receive an allocation of Shs 459 billion.


+2 #1 francis kisero 2018-06-17 00:17
It is insensible to even attempt taxing cooking oil for the poor use this very input tomake a commercial living for example Kabalagala onto which children in schools depend.

The industrialisation process starts with innovations and information exchange.

Taxation of the social media is entirely defeating freedom of expression as the illiterates and the poor who cannot buy newspapers have great potential to circumnavigate the IT technology and influence sensible debates suiting their understanding.

They are indeed poor and taxing them is just killing the little they can contribute.

Taxing opaque beer is vague. Local people in the villages are going to be exploited unfairly but dubious tax collectors who will end up pocketing the un receipted collections for own uses.

What audits are in place to ensure this does not arise? Example of such beer is "Omuramba for Ankole and the rest that side" and "tonto for Bugand a and Bunyoro"
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+1 #2 Phalanch 2018-06-17 11:01
This is not national budget but an Aid budget for Uganda which is all besed on dreams out of thin air on funds that may or may not come .

The more they tax the more they kill the economy .
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+1 #3 Lakwena 2018-06-18 15:09
In other words, Mr. M7 and Matia Gusaija think Ugandans and their remote grandchildren are their slaves to satisfy their immediate and insatiable greed for power and vanity wealth.

No way! And what do current Ugandans get in return for the borrowing?

Nothing in addition to insults, unexcusable excuses and blame-game.
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0 #4 kabayekka 2018-06-19 08:35
Where is that Ugandan NRM tax measure not to tax investors so that international rich people can come to this country.
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