Uganda Budget Brief 2013: Economic and budget commentary
On 13 June 2013, the 2013-14 Budget was presented in the Ugandan Parliament. Uganda Budget Brief is a general guide summarising some of the main features of the proposed Budget, including Economic and Budget commentary, and Tax Highlights.
The overall performance of the Ugandan economy, as measured by the real GDP at market prices, is estimated to have grown by 5.1% for the fiscal year 2012/13 – which is a 1.7% increase compared to the revised growth of 3.4% that was recorded in the fiscal year 2011/12. This improvement is largely attributable to growth in construction; transport and communication; manufacturing; and real estate activities.
The IMF projects that Uganda’s GDP will grow by 4.8% and 6.2% in 2013 and 2014 respectively, as major reforms, are expected in revenue management and budget discipline.
Uganda’s 2012/13 growth
The Agriculture, Forestry and Fishing Sector is estimated to have grown by 1.4% in 2012/13 up from 0.8% in 2011/12.
The Industry Sector is estimated to have grown by 6.8% in 2012/13. This growth surpassed the average for the last five years.
This was largely attributed to very strong performance of the construction sector which recorded an estimated growth of 8.2% compared to 3.2% in the previous year.
The Services Sector registered modest recovery to a growth rate of 4.8% during 2012/13 compared to 3.6% in 2011/2012. The key drivers of this recovery include transport and communications, financial services, and public administration.
Uganda’s 2012/13 economic performance
Inflation Rate pressures declined in 2012/13. From a peak in October 2011 with a headline rate of 30.5% and a general price rate (annual inflation) of 30.8%, inflation has steadily declined and in May 2013. Headline inflation was 3.6%, while general price inflation was 5.6% compared to the Government’s medium term target of 5% per annum.
The reduction in price levels is mainly attributed to government tightening monetary policy and government expenditure which was consistent with low inflation, easing international commodity prices, and a stable exchange rate.
Like in Kenya, the Bank of Uganda reduced the Central Bank Rate (CBR) from 19% in July 2012 to 12% in March 2013, to curb high inflation and support a recovery in real growth. As intended, the changes to the CBR have been reflected by reduced Interest Rates by commercial banks, thus having the desired effect.
On the Exchange Rate, the Shilling opened trading at Shs. 2,472.36 against the US dollar at the beginning of July 2012 and closed at Shs. 2,594.5 at the end of May 2013, representing depreciation of 4.9% in the first 11 months of the fiscal year. The depreciation results from the continued loosening of monetary and fiscal policies adopted by the Central Bank.
The theme for this year’s budget is “The Journey Continues: Towards Socio-Economic Transformation for Uganda”. The focus areas are:
- To prioritise resources in order to improve the Transport Sector. Government will also accelerate efforts to rehabilitate the country’s railway network, and improve the quality of water transport on the major water bodies.
- In the Oil and Gas Sector, construction of the Kenya–Uganda and Uganda–Rwanda Oil pipelines using the Public Private Partnership arrangement will be fast tracked in 2013/14.
- To improve performance in the Agricultural Sector, Government will focus on 10 key commodities strategic for household food security and export earnings. Particular focus will be given to improving domestic capacity in the production, disease control and multiplication of improved seed varieties, and their distribution to and utilisation by farmers.
- The Education Sector, which will continue to take a large share of the budget. The 2013/14 budget will place greater emphasis on imparting the necessary skills and knowledge required to tap the creative abilities of individuals, in order for them to lead a better life and enhance society’s wellbeing.
The resource kitty for 2013/14 is projected to be Ushs 13,169 billion, of which Ushs 248 bn is external debt repayment. Ushs 10,509 (81%) is to be funded from domestic sources and Ushs 2,660 bn (19%) from external loans and grants.
2013 Budget focus going forward
In summary, the Ugandan economy grew by 5.1% during the fiscal year 2012/13, the construction sector has been a major contributor to Uganda’s GDP growth, the Central Bank played a crucial monetary role, and agriculture remains a key pillar of the economy. The budget themes going forward will be as follows:
- Invest in infrastructure development;
- Support increased agricultural production;
- Enhance scientific innovation;
- Improve the quality and access in social service provision; and
- Enhance transparency and accountability.
Keep an eye out for our Tax Highlights from the 2013-14 Uganda Budget.
About David Okwara
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