About Uganda’s 2023/24 UGX50 trillion budget

by Business Times
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The National Budget Framework Paper totaling UShs49.9 trillion for the Financial Year 2023/2024 was on February 1, 2023 passed by parliament of Uganda.

The document, which paves way for the budget approval process by Parliament, was tabled during plenary sitting on Friday, December 23, 2022 by the Minister of Finance, Planning and Economic Development, Hon. Matia Kasaija.

The Deputy Speaker, Thomas Tayebwa, who presided over the House referred the framework paper to the committee on Budget and other relevant sectoral committees for consideration.

According to the Public Finance Management Act, the Government should table the budget framework paper before Parliament by December 31, 2022, and by February 1, 2023, the House should have approved the budget framework paper.

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Minister of Finance, Planning and Economic Development, Hon. Matia Kasaija(PHOTO/Courtesy)

Inside the 2023/2024 Budget proposal

Economic growth strategy in the short to medium term has a dual objective of building a self-sustaining economy to withstand future shocks and to harness resources for inclusive economic growth. These are to be attained while maintaining a stable macroeconomic environment.

A self-sustaining economy will  be achieved by  undertaking evidence-based actions for policy implementation; allowing market based economic dynamics and close coordination between fiscal and monetary policies to counter cyclical measures and augmenting investment in the Parish Revolving Fund [(PRF) to avail liquid capital to the vulnerable households without collateral to access credit in the financial market.  This will enhance growth in private and public investments, hence increased employment creation and mobilisation of more domestic revenue.

In accordance with the Charter  for  Fiscal Responsibility (FY2021/2022, 2025/26),   the total debt in nominal terms is to be maintained below 50% of the GDP,  while the fiscal balance including grants shall not exceed 3.0 percent of non-oil  GDP   by FY  2025/26.

Domestic Revenue

In FY  2023/2024, domestic revenues are projected to amount to UShs 28,831.1 billion (13.8% of GDP), from an estimate of UShs 25,550.7 billion.  This translates into nominal growth in revenues of UShs 3,280 billion.  Ninety-three percent (93%)   of domestic revenues will be obtained from tax revenues (UShs 26,810.2 billion) while the remainder will be obtained from Non-Tax Revenue (UShs 2,020.8 billion).  This rise is attributed to gains on account of higher economic growth, and projected revenue  gains due to implementation of the Domestic Revenue Mobilisation Strategy (DRMS).

Government expenditure and net lending         

Expenditure and net lending in FY2023/24 are projected to amount Ush 37,247.4 billion (see table 4 above).  This is slightly less than UShs 37,471.9 billion in the Approved Budget of FY 2022/23.  Over the medium term, current expenditures will average 10.8% of GDP while development expenditures will average 8.5% of GDP.

External Borrowing

A total of UShs 8,343.8 billion is projected as external financing in FY2023/24. Of this, UShs 2,452.1 billion will be obtained as budget financing loans and UShs 5,891.7 billion from project loans.  Majority of project loans [UShs 3,078.3 billion) will be attained under concessional terms.

Domestic Borrowing

Government borrowing from the domestic market for fiscal purposes in FY  2023/24   is projected   at UShs 1,585.0   billion compared   to UShs 5,007.9 billion in FY 2022/23, which is equivalent to 1% of GDP. This is in line with Government’s policy decision to maintain domestic borrowing to no more than 1% of GDP in order to avoid crowding out of the private sector.

Debt Repayments

External debt repayments (amortization) are projected to amount to UShs

2,453.2 billion compared to UShs 2,412 billion in FY 2022/23.  Over the medium term, external debt payments are projected to increase due to the increase in commercial loans over the last few years.  Going forward, the Government’s financing strategy is to reduce borrowing on commercial terms and focus more on concessional borrowing.

Interest Payments

Interest payments are projected to amount to UShs 6,135.5 billion, equivalent to 2.9% of GDP.    Of this,  UShs 5,227.6 billion is projected  for domestic interest payments  while the  remaining amount  equivalent to UShs 907.9  billion  will be  foreign interest  payments and commitment fees.  Over the medium term, interest payments are projected to average 2.3% of GDP.

The preliminary resource envelope for FY 2023/2024 is projected at Ushs. 49,988.7 billion, compared to Ushs.  48,130.7 billion for FY 2022/2023.  This reflects an increase of Ushs.1,858.0 billion. It  should, however,  be   noted that  whereas the resource envelope has increased  by Shs 1,858.0  billion,  the discretionary resource envelope reduced by  Shs 2,533 billion due to  the projected increase in the interest obligations  and obligation to settle  Bank  of Uganda redemptions.

The  total  resource  envelope of UShs 49,988.7   billion is  comprised  of domestic revenues equivalent to UShs 28,831.1 billion,  budget support amounting  to Ushs  2,491.6  billion,   domestic borrowing amounting  to UShs1,585.0  billion,  external project support worth UShs 8,043.6 billion, domestic refinancing (roll-over)  of Ushs.  8,798.9 billion, and local revenue for local government (AIA) of Ushs.  238.5 billion.

While fiscal policy will be constrained in order to stem inflationary pressures, spending on activities that positively impact the private sector will be prioritised, including the clearance of arrears to private sector.

Finance ministry Permanent Secretary Ramathan Ggoobi (PHOTO/Courtesy)

Fiscal guidelines that guided the repurposing of the 2023/24 Budget

There will be no new borrowing next financial year and this shall continue over the short-to-medium term so as to minimize the share of URA revenues being used to service debt in the medium term so as to make more resources available to finance to critical development priorities of Government.

No entity shall receive an increase in the budget in light of the UGX 3.37 Trillion reduction in discretionary resources.

Travel abroad  spending shall be restricted to  only H.E the President, H.E the Vice President, the Rt. Hon. Speaker and Deputy Speaker, His Lordship the Chief Justice and Deputy Chief Justice; Rt. Hon Prime Minister, Principal Judge, and critical travel for security, arbitration of Government cases and resource mobilization.

Salary enhancement is suspended   by  one  year (for  FY 2023/2024) and implementation of the comprehensive salary enhancement plan will commence effective FY 2024/25.

No new non-concessional projects shall commence, except those already provided for in the debt framework, or those with no direct or indirect claim on the Consolidated Fund;

Vehicle purchase is frozen in FY 2023/2024 with the exception of the purchase of hospital ambulances, vehicles for medical supplies/distribution, agricultural extension services, security and revenue mobilization;

Spending on Workshops and Seminars shall be reduced by 50% while considering the mandate of the Vote;

Restored the reduced wage and non-wage for revenue generating subventions and those with statutory requirements;

Only allocations for on-going commitments under multi-year projects and retooling projects have been provided.

In conclusion, government is expected to save up to Shs108.5 billion from the ban on travel abroad, workshops and other non-essential expenditures

Business Times

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