Economy to recover â€" IMF
Jun 16, 2006
UGANDA’S economy is projected to rebound in 2006/07 following increased investments in the energy sector but the cost of power that is likely to be passed on to consumers poses a risk of inflationary pressures, Peter Allum, the outgoing International Monetary Fund resident representative, has sai
By Sylvia Juuko UGANDA’S economy is projected to rebound in 2006/07 following increased investments in the energy sector but the cost of power that is likely to be passed on to consumers poses a risk of inflationary pressures, Peter Allum, the outgoing International Monetary Fund resident representative, has said.
“Solving the energy crisis is important not only for the manufacturing sector but also in sustaining Uganda’s pattern of economic growth,†he said.
“However, manufacturers will have to pass on costs for power hike to consumers, which will create inflationary pressures,†Allum said.
He was reviewing the budget during the PricewaterhouseCoopers annual budget breakfast at Speke resort Munyonyo yesterday.
He noted that government expenditure as a percentage of GDP had risen to 22.5%, its highest level in years, from 21.3% in 2005/06, reflecting increased spending on energy. “Although spending is rising faster than the available resources due to the energy crisis, the pressure on the budget is likely to be temporary,†he said.
According to Allum, the risk to the budget is a shift from public saving to borrowing, which will crowd out private sector credit.
“Government will want the central bank to issue more Treasury Bills to finance the budget, which will put pressure on interest rates and crowd out private sector credit. However, to manage this process, the central bank will need to shift to more foreign exchange sales.â€
Allum says the trend in donor financing shows that while support for projects is strong, cash financing for the budget is on a downward trend. “Donor funding is projected to fall to 39% of budget resources from 42% in the last two years,†he said.
He said IMF would continue working with government to achieve the 2006/07 budget goals and strengthen revenue collections.
Russell Eastaugh, thye PWC tax director, noted that the increase of excise duty on non-malt beer to 30% from 20% would reduce consumption and impact on farmers who grow barley and sorghum.
He said while the tax system was stable, taxpayers should expect more vigorous tax audit and bureaucracy on some new taxes.
The private sector noted that the budget was only focusing on generating revenue and not helping business to thrive.
Noel Meier, the MTN chief, said 5% duty on landlines would hit the 26 million Ugandans who cannot afford mobile phones and were using payphones to earn a living. “The new tax on landlines and payphones is short-sighted, irresponsible and downright disgusting,†Meier said. Ends
“Solving the energy crisis is important not only for the manufacturing sector but also in sustaining Uganda’s pattern of economic growth,†he said.
“However, manufacturers will have to pass on costs for power hike to consumers, which will create inflationary pressures,†Allum said.
He was reviewing the budget during the PricewaterhouseCoopers annual budget breakfast at Speke resort Munyonyo yesterday.
He noted that government expenditure as a percentage of GDP had risen to 22.5%, its highest level in years, from 21.3% in 2005/06, reflecting increased spending on energy. “Although spending is rising faster than the available resources due to the energy crisis, the pressure on the budget is likely to be temporary,†he said.
According to Allum, the risk to the budget is a shift from public saving to borrowing, which will crowd out private sector credit.
“Government will want the central bank to issue more Treasury Bills to finance the budget, which will put pressure on interest rates and crowd out private sector credit. However, to manage this process, the central bank will need to shift to more foreign exchange sales.â€
Allum says the trend in donor financing shows that while support for projects is strong, cash financing for the budget is on a downward trend. “Donor funding is projected to fall to 39% of budget resources from 42% in the last two years,†he said.
He said IMF would continue working with government to achieve the 2006/07 budget goals and strengthen revenue collections.
Russell Eastaugh, thye PWC tax director, noted that the increase of excise duty on non-malt beer to 30% from 20% would reduce consumption and impact on farmers who grow barley and sorghum.
He said while the tax system was stable, taxpayers should expect more vigorous tax audit and bureaucracy on some new taxes.
The private sector noted that the budget was only focusing on generating revenue and not helping business to thrive.
Noel Meier, the MTN chief, said 5% duty on landlines would hit the 26 million Ugandans who cannot afford mobile phones and were using payphones to earn a living. “The new tax on landlines and payphones is short-sighted, irresponsible and downright disgusting,†Meier said. Ends