Economic hardships push Govt to suspend foreign travels, car purchases

by Christopher Kiiza
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economic hardhsip

Due to economic hardships and inadequate revenue generation, the government has announced the suspension of foreign travel, limiting it solely to essential official duties in the upcoming fiscal year.

This is just one of the measures being taken by the government to reduce spending. It is, however, not the only one.

The Minister of Finance, Matia Kasaija, while delivering the 2023/24 financial year budget amounting to 52.7 trillion shillings, said purchase of vehicles for political leaders has also been suspended.

“In order to live within our means, we have reduced consumptive expenditure. During next financial year, there will be no purchase of new vehicles for political leaders and public officers except for hospital ambulances, medical supplies or distribution, agricultural extension services, security and revenue mobilisation,” said Kasaija.

He added: “Travel abroad has also been restricted to statutory functions and for critical legal and resource mobilisation functions. We will also regulate expenses on workshops and seminars.”

While the general public may view these measures positively, they may not be received as favourably by numerous government officials and political leaders. This includes Members of Parliament, who have faced public scrutiny and criticism due to their frequent foreign trips and acquisition of new government vehicles.

This phenomenon has been observed many times in this country, where political leaders frequently embark on international trips.

 Fiscal strategy for FY 2023/24

Kasaija said the fiscal strategy for the next financial year will prioritise the enhancement of revenue collection, the rationalisation of public expenditure and ensuring long term debt sustainability.

“This will reduce reliance on external financing for socio-economic transformation,” he said.

The fiscal strategy will focus on the following: 

i) Continuing effective implementation of the domestic revenue mobilisation strategy.

ii) Repurposing the national budget to achieve high multiplier effect of government interventions on the economy, and improve the efficiency and effectiveness of government programs and projects.

iii) Mobilising external concessional loans and utilising non concessional loans for projects with high economic and financial returns.

iv) Limiting domestic borrowing to an average of 2.2% of GDP in the short to medium term to avoid crowding out the private sector through rising interest rates.

v) Reducing the budget deficit to within a maximum limit of 5% of GDP, and gradually converging towards the East African Community target of a deficit of 3% of GDP. Next financial year, the budget deficit will be reduced to 3.5% of GDP.

ALSO READ: Govt releases UGX 52.7 trillion 2023/24 budget

Domestic revenue mobilisation

The Uganda Revenue Authority (URA) is projected to collect 29.7 trillion shillings for the 2023/24 financial year, of which 27.4 trillion will be tax revenue and 2.3 trillion will be Non-Tax Revenue. This represents a revenue effort of 14.3% of GDP.

Under the Domestic Revenue Mobilisation Strategy, Kasaija said the objective is to improve revenue collection to between 16 and 18% of GDP over the next five years from about 13.5% of GDP currently.

Next financial year priority has been placed on improving tax administration, including use of ICT to fight tax evasion and rationalising tax exemptions to improve their effectiveness and reduce revenue leakage.

Economic growth strategy and outlook

Kasaija said the economic growth strategy underlying the budget

for the next financial year and the medium term includes:

i) Increased domestic revenue mobilization and a reduction in non-concessional borrowing to ensure debt sustainability;

ii) Effective implementation of the Parish Development Model and Emyooga initiatives;

iii) Effective implementation of the various export strategies and

enhancing access to global and regional markets;

iv) Support for the private sector by reducing the cost of doing business through the construction of the Standard Gauge Railway and the rehabilitation of the Meter Gauge Railway; development of small scale solar-powered irrigation schemes to address climate change and ensure food security; maintenance of both tarmac and murram roads; and continued investments in industrial parks and energy transmission lines.

v) Provision of affordable credit for micro and small enterprises and low-income groups through the Small Business Recovery Fund, Emyooga and Microfinance Support Centre; and funding for medium to large enterprises through the Uganda Development Bank.

vi) Provision of quality seedlings, pesticides, fertilisers, storage and marketing in the agro-industrialisation value chain in order to increase agricultural production and productivity;

vii) Rapid development of oil and gas production, specifically the construction of the East African Crude Oil Pipeline and the National Oil Refinery;

As a result of these interventions, Kassija said Uganda’s economy is projected to grow at 6% in financial year 2023/2024.

“Over the next five years, the economy is projected to grow at an average of 6.5-7% per year,” he added.

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