Budget met most of public expectations
Jun 18, 2008
DR. Ezra Suruma, the finance minister, read the 2008/09 budget to parliament last Thursday. Those who have been following the pre-budget discussions will note that some of the key areas of priority for the public included corruption and good governance, poor infrastructure, energy shortage, inflati
By Muhammed Ssempijja
BUDGET ANALYSIS
DR. Ezra Suruma, the finance minister, read the 2008/09 budget to parliament last Thursday. Those who have been following the pre-budget discussions will note that some of the key areas of priority for the public included corruption and good governance, poor infrastructure, energy shortage, inflation, food security, provision of basic social services, waking up the agriculture sector and huge public expenditure.
I will therefore try to highlight the extent at which the budget addressed these key public priorities.
Infrastructure
Development and maintenance of transport infrastructure is one of the budget priority areas in the financial year 2008/09.
The Government hopes to embark on new road development and implement a vigorous national district and community road maintenance programme and increase efficiency and effectiveness in implementation of road projects.
Energy
Shortage of power is one of the severe constraints to the economic growth.
The Government has tried to implement several power generation projects like the Bujagali and Karuma dam projects to bridge the short-term power deficit in the country.
It is also noted that there are high losses in the electricity distribution sector because of high power thefts and dilapidated distribution system.
The budget has good budget allocations for hydro power dams to generate more electricity particularly in Bujagali and Karuma and more power from private power plants.
However, the issue of high electricity tariffs, which in my view is the main reason for the high theft approximated at 25%, was not dealt with in the budget.
This is a major omission because even if the power becomes less scarce, the energy cost will not come down without lowering the tariffs.
Inflation
Although the inflation figure reported is below 10%, we have seen a worrying trend of price increases of most consumer goods in the past few months going up by over 50% not excluding fuel.
Corruption
The public has raised a lot of concerns on the dismal efforts in the fight against corruption in this financial year.
The budget highlighted a grant of $10.2m from the Millennium Challenge Corporation with sh1.5b contribution from the Government earmarked to deal with the issue of corruption especially strengthening the office of Inspector General of Government, the Directorate of Public Prosecution, the ethics and integrity ministry.
The public and donor community are waiting to see tangible benefits of the fight against corruption in form of concluding court cases and recovering the stolen public funds from the culprits.
Health and Education
The Universal Primary Education and the Universal Secondary Education still remain government priorities for the education sector and the Government hopes to improve efficiency, quality and education standards and to undertake the inspection function.
The Government has also proposed an income tax exemption of private investments in schools and tertiary institutions to encourage more investments in this area and also to lower the cost of education.
Health
The health system has continued to suffer from poor service delivery and inefficiency with continued drug stock outs in health centres.
The Government proposes for an inspection function to be introduced in the health sector to deal with inefficiency and poor service delivery.
Funds were earmarked to focus on provision of basic health infrastructure, recruitment of health workers and provision of drugs.
There are, however, more challenges in this sector including the controversial discoveries that a lot of drugs expired yet health centres were having an acute shortage of the same drugs.
A proper system of managing the drugs in National Medical Stores needs to be put in place.
Another issue which needs to be addressed in the salary of medical personnel who were threatening to strike a few weeks ago according to press reports.
Agriculture
The budget addresses improvement of farming methods and production techniques through NAADS training farmers in use of fertilisers and pesticides and there has been a 62% increase in funds allocated to NAADS to support small farmers who cannot afford to purchase the necessary agricultural inputs.
The budget also addresses mechanisation of agriculture starting in September with the purchase of tractors to increase agricultural production.
The budget also allocates sh2b for marketing research and will also support a loan guarantee scheme for commercial banks that provide credit to agro-processing projects.
Related to this area are the planned government interventions in the area of provision of micro-finance to be tapped through Savings, Credit and Cooperative Organisations (SACCOs) at county level (sh32b is earmarked for SACCOs), provision of tax incentives for investments in agro-processing outside Kampala and helping farmers on marketing research.
There are, however, concerns that if the new proposed Land Bill (which has been very controversial) is passed without taking care of the issues raised by various stakeholders, may hinder the proper use of land, which is the most important factor of agriculture production.
The budget did not address the issue of the huge public expenditure and therefore the taxpayer will continue to shoulder the burden of the huge public administration.
Regarding the area of food security, the minister proposed interventions in the agriculture and rural sector aimed at increased production and productivity but no mention was made of how to tackle the risk of farmers selling most of the food in external markets where they will get high prices but leaving Uganda with an acute food shortage.
We need to be reminded that Uganda is being seen as the source of food to many of the neighbours like Kenya and South Sudan.
The restocking of the Government fuel depots in Jinja would be a prudent intervention to avert the recurrence of ugly situations of acute fuel shortage like the one experienced during the January in Kenya post-election violence. To my surprise, this was left out.
Taxes
Despite those concerns, the budget was a good budget and we should give the Government the benefit of doubt that they are going to walk the talk this time round and that more distance will be covered in the journey to achieve the Prosperity For All (Bonna Bagaggawale) objective sooner rather than later by implementing the budget as presented by the minister to the letter.
The writer is a tax partner at Ernst & Young Certified Public Accountants of Uganda.
uhammed.ssempijja@ug.ey.com
BUDGET ANALYSIS
DR. Ezra Suruma, the finance minister, read the 2008/09 budget to parliament last Thursday. Those who have been following the pre-budget discussions will note that some of the key areas of priority for the public included corruption and good governance, poor infrastructure, energy shortage, inflation, food security, provision of basic social services, waking up the agriculture sector and huge public expenditure.
I will therefore try to highlight the extent at which the budget addressed these key public priorities.
Infrastructure
Development and maintenance of transport infrastructure is one of the budget priority areas in the financial year 2008/09.
The Government hopes to embark on new road development and implement a vigorous national district and community road maintenance programme and increase efficiency and effectiveness in implementation of road projects.
Energy
Shortage of power is one of the severe constraints to the economic growth.
The Government has tried to implement several power generation projects like the Bujagali and Karuma dam projects to bridge the short-term power deficit in the country.
It is also noted that there are high losses in the electricity distribution sector because of high power thefts and dilapidated distribution system.
The budget has good budget allocations for hydro power dams to generate more electricity particularly in Bujagali and Karuma and more power from private power plants.
However, the issue of high electricity tariffs, which in my view is the main reason for the high theft approximated at 25%, was not dealt with in the budget.
This is a major omission because even if the power becomes less scarce, the energy cost will not come down without lowering the tariffs.
Inflation
Although the inflation figure reported is below 10%, we have seen a worrying trend of price increases of most consumer goods in the past few months going up by over 50% not excluding fuel.
Corruption
The public has raised a lot of concerns on the dismal efforts in the fight against corruption in this financial year.
The budget highlighted a grant of $10.2m from the Millennium Challenge Corporation with sh1.5b contribution from the Government earmarked to deal with the issue of corruption especially strengthening the office of Inspector General of Government, the Directorate of Public Prosecution, the ethics and integrity ministry.
The public and donor community are waiting to see tangible benefits of the fight against corruption in form of concluding court cases and recovering the stolen public funds from the culprits.
Health and Education
The Universal Primary Education and the Universal Secondary Education still remain government priorities for the education sector and the Government hopes to improve efficiency, quality and education standards and to undertake the inspection function.
The Government has also proposed an income tax exemption of private investments in schools and tertiary institutions to encourage more investments in this area and also to lower the cost of education.
Health
The health system has continued to suffer from poor service delivery and inefficiency with continued drug stock outs in health centres.
The Government proposes for an inspection function to be introduced in the health sector to deal with inefficiency and poor service delivery.
Funds were earmarked to focus on provision of basic health infrastructure, recruitment of health workers and provision of drugs.
There are, however, more challenges in this sector including the controversial discoveries that a lot of drugs expired yet health centres were having an acute shortage of the same drugs.
A proper system of managing the drugs in National Medical Stores needs to be put in place.
Another issue which needs to be addressed in the salary of medical personnel who were threatening to strike a few weeks ago according to press reports.
Agriculture
The budget addresses improvement of farming methods and production techniques through NAADS training farmers in use of fertilisers and pesticides and there has been a 62% increase in funds allocated to NAADS to support small farmers who cannot afford to purchase the necessary agricultural inputs.
The budget also addresses mechanisation of agriculture starting in September with the purchase of tractors to increase agricultural production.
The budget also allocates sh2b for marketing research and will also support a loan guarantee scheme for commercial banks that provide credit to agro-processing projects.
Related to this area are the planned government interventions in the area of provision of micro-finance to be tapped through Savings, Credit and Cooperative Organisations (SACCOs) at county level (sh32b is earmarked for SACCOs), provision of tax incentives for investments in agro-processing outside Kampala and helping farmers on marketing research.
There are, however, concerns that if the new proposed Land Bill (which has been very controversial) is passed without taking care of the issues raised by various stakeholders, may hinder the proper use of land, which is the most important factor of agriculture production.
The budget did not address the issue of the huge public expenditure and therefore the taxpayer will continue to shoulder the burden of the huge public administration.
Regarding the area of food security, the minister proposed interventions in the agriculture and rural sector aimed at increased production and productivity but no mention was made of how to tackle the risk of farmers selling most of the food in external markets where they will get high prices but leaving Uganda with an acute food shortage.
We need to be reminded that Uganda is being seen as the source of food to many of the neighbours like Kenya and South Sudan.
The restocking of the Government fuel depots in Jinja would be a prudent intervention to avert the recurrence of ugly situations of acute fuel shortage like the one experienced during the January in Kenya post-election violence. To my surprise, this was left out.
Taxes
Despite those concerns, the budget was a good budget and we should give the Government the benefit of doubt that they are going to walk the talk this time round and that more distance will be covered in the journey to achieve the Prosperity For All (Bonna Bagaggawale) objective sooner rather than later by implementing the budget as presented by the minister to the letter.
The writer is a tax partner at Ernst & Young Certified Public Accountants of Uganda.
uhammed.ssempijja@ug.ey.com