HELLO? Ex-MP Ken Lukyamuzi (left) greets Museveni at the Budget cocktail on Thursday

Uganda will spend sh202b ($108.9m) in 2006/07 tackling a power crisis that is expected to hit economic growth this year, Finance Minister Ezra Suruma said in a budget speech on Thursday.
He said the economy was expected to grow by 5.9% in 2006/07, below the government’s target of 7%.
Preliminary estimates showed the economy grew 5.3% in 2005/06, slightly higher than earlier forecasts of 4.9%.
“GDP growth is projected at 5.9% in 2006/07. This would be an improvement but still below our target of 7%,” Suruma told parliament. “The impact of this energy crisis is yet to be fully known.”
The east African nation has suffered crippling electricity shortages for months. Residents in the capital Kampala receive power for just 24 of every 48 hours and almost every business has been forced to run costly, diesel-powered generators.
Under pressure to end the blackouts as quickly as possible, Suruma said the government had set aside sh202b to tackle the power crisis.
He said sh99b would be used to launch an energy fund tasked with building two hydropower dams on the Nile.
A further sh70b would be used to install more thermal generators in the capital Kampala. Suruma said the government would allow power generating and power distributing companies to defer loan repayments to the government worth sh$33b in 2006/07. “The development of immediate generating capacity is a critical focus of this year’s budget,” he said.
“Revenues from tariffs cannot themselves cover the high cost of thermal power generation.”
The initial investment in the fund only amounts to about an eighth of the cost of either Nile power station.
“But if the move were repeated annually for four years, by the time one is built you would have about $200m there,” one analyst said.
“That sort of amount could be attractive to an investment partner like the World Bank.” Suruma said Uganda would finance about 59% of the 2006/07 budget, compared to 60% in the previous year.
Donors will provide the rest, he said.
Meanwhile, he will attempt to boost domestic revenues by increasing excise duties on lower-priced beers, cement and mineral water.
He said he would also impose a 5% duty on landlines and public telephones. “There has not been any great change to the tax system,” said Russell Eastaugh, a tax expert at PricewaterhouseCoopers.

“People were hoping mobile phones tariffs would come down, so the duty on fixed lines came as a surprise. Taxing telecoms in a market like Uganda seems counterproductive to me.”
But Suruma had little room to move as he confirmed a government pledge that free universal secondary education would begin in phases, starting in the 2007 school year. He also said he would increase primary school teachers’ salaries by a third to sh200,000 a month.
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