Uganda National Budget 2019/2020, as it was read

    0
    651

    Yesterday the Finance Minister Hon. Matia Kasaija read to the public the budget for the Financial Year (FY) 2019/2020 from Kampala Serena Conference Center.

    The theme for this FY is “Industrialization for job creation and shared prosperity”.

    The budget speech (as delivered by Finance Minister, Hon. Matia Kasaija)

    Salutations & Preamble

    Your Excellency the President

    Your Excellency the Vice President

    The Right Honorable Speaker of Parliament

    The Right Honorable Deputy Speaker

    His Lordship the Chief Justice

    His Lordship Deputy Chief Justice

    The Right Honorable Prime Minister and Leader of Government Business Right Honorable Deputy Prime Minsters

    Madam Leader of the Opposition  

    Honorable Ministers and Members of Parliament

    Members of the Diplomatic Corps

    Distinguished guests, Ladies and Gentleman

    In accordance with Article 155(1) of the 1995 Constitution of the Republic of Uganda and Section 13(13) of the Public Finance Management Act 2015, I presented the Budget proposals for Financial Year 2019/20 to Parliament on 28th March 2019. I applaud Honorable Members of Parliament for their dedication in the reviewing the proposals and the approval of the budget on 24th May 2019.

    My statement today therefore presents the economic and development context under which the FY 2019/20 Budget was prepared and highlight the priority actions that underpin the allocations that have been appropriated by Parliament.

    Introduction

    Development Progress

    Madam Speaker, in the Financial Year 2018/19, Budget Statement, I reaffirm the NRM Government’s commitment to attain our cherished goal of a middle-income status for the country through interventions, targeted at inclusive growth and socio-economic transformation. Uganda has made substantial progress towards this goal as demonstrated by these few examples;

    • Uganda’s economy has recovered and picked momentum, growing at over 6% per annum over the last two years
    • With the progress in economic growth, average incomes of Ugandans have increased to US$825 per person in Financial Year 2018/19, compared to US$800 in 2017/18, notwithstanding increase in population size to 39 million Ugandans.
    • The quality of Uganda’s labor force has dramatically improved, with the proportion of labor force with tertiary education increasing from 7.5% in 2013 to 13.6% in 2017. In addition, the annual growth in formal employment has averaged 9.8% between 2010 and 2017, higher than the average growth of the economy in the same period.
    • The structure of the economy has changed. The share of the industry in the economy is now 21% compared to 11.3% in 1986. Services have increased to 48,7% from 32% over the same period. In contrast, the share of agriculture has reduced from over 50% in 1986 to 22% in Financial Year 2018/19.
    • Export performance has been excellent, with diversification leading to non-tradition cash crops earning Uganda US$2.84 billion last financial year, compared to the traditional cash crops which earned US$0.79 billion.
    • Trade with our East African Community partners has significantly improved generating a surplus of US$557 million last year. The composition of exports has also changed positively with exports of light manufacturing products exceeding traditional merchandise.
    • National grid electricity connections have increased to 1.3 million customers, and the rural electrification access rate rising from 1% in 2001 to over 13% in 2019.
    • Many new factories have been opened in the course of Financial Year 2018/19 with the result that the proportion of Ugandan products in supermarkets has increased from 15% to 45%. Our target is to reach 50% by the year 2020.

    Madam Speaker, the few examples I have mentioned are a direct outcome of the NRM Government’s deliberate policies over the years to promote socio-economic transformation.

    Development Challenges

    Madam Speaker, despite these positive milestones, we however, are still faced with some major development challenges. Let me single out three; (i) Unemployment, (ii) Income Inequality, (iii) Malnutrition and Unhealthy Lifestyles.

    Unemployment

    There are now approximately 600,000 entrants into the job market every year, as a result of the universalization of health and education. This has created the need for new jobs to meet this demand. Currently, 4 out of 10 young Ugandans are out of work.

    Furthermore, the quality of jobs is of concern. The 2016 Labor force survey indicates that 50% of Ugandans work in the service sector, 35.6% in Agriculture, and 14.4% in industry. The informality of the Agriculture and Services sectors implies that about 80% of our labor force is in the informal sector., and therefore not optimally employed. With most Ugandans engaged in rural economy, it is of paramount importance to increase productivity in agriculture and aggressively promote agro-processing which in the end will be the basis for Uganda’s industrialization and further job creation.

    Income Inequality

    Secondly, income inequality has widened the gap between rural and urban areas, as wealth has not been created faster in rural communities in comparison to urban areas. This is despite the country’s progress in narrowing regional inequality, for example, in Northern and Eastern Uganda following government’s affirmative action programmes. As a consequence, rural-urban migration has increased with high urbanization rates causing challenges of congestion, housing shortage and population pressure on urban social services. These challenges have compromised the potential of Uganda’s urban areas to serve as engines of growth and structural transformation. World Bank studies estimate traffic congestion is costing Uganda over US$800 million in lost National Output.

    Malnutrition and Unhealthy Lifestyles

    Thirdly, malnutrition adversely affects the quality of life children and mothers, despite the variety and quality of foods that Uganda can produce. 53% of children under five years are malnourished and hence anemic, and 29% of them are stunted or wasted. Many women of reproductive age are also malnourished, with 32% of them being anemic.

    In addition, appropriate feeding especially among the more affluent, is also a major cause of a surge in chronic non-communicable diseases including coronary heart disease, cancer, diabetes, high blood pressure, and obesity. These maladies are largely attributable to unhealthy lifestyles. Consequently, Uganda has been spending on average US$500 million on treatment of preventable diseases. Improving the nutrition status of Ugandans accordingly requires (i) coordinated actions (ii) mass sensitization and education, and (iii) lifestyle awareness.

    Madam Speaker, the financial year 2019/20 Budget, therefore, focusses on interventions aimed at increasing the wealth and improving the livelihoods of all Ugandans. The NRM government will continue to pursue a growth strategy that aims to create jobs and ensure that growth benefits every Ugandan. I will elaborate this strategy later in my statement.

    So, the theme for the Financial Year 2019/20 Berget, accordingly, remains ‘Industrialization for job creation and shared prosperity’.

    Madam Speaker, the Budget Statement today will cover the following;

    • Economic performance in Financial Year 2018/19
    • Economic growth strategy for Financial Year 2019/20 and the Medium Term
    • Financial Year 2018/19 Sector Performance and Priorities for Financial Year 2019/20; and,
    • Financing Strategy for Financial Year 2019/20.

    ECONOMIC PERFORMANCE IN FINANCIAL YEAR 2018/19

    Global and Regional Economy

    Madam Speaker, on the global scene, Africa’s economic performance continues to recover. The EAC region is the fastest growing economic bloc in Africa, with growth projected at 6.2% in 2019, increasing from 5.9% in 2018. This performance is mainly accounted for by the growth in the services and agricultural sectors as well as increased consumption and investment. Rising incomes in Africa increases demand for exports within African countries themselves.

    Uganda’s trade with other African countries is increasing, and amounted to 59% of total goods exported in 2018. During the same year, the East African (EAC) continued to be the largest destination.

    For Uganda’s exports, total goods exported to the EAC amounted to US$1,469 million compared to imports of US$911 million, thus registering a trade surplus of US$557 million.

    The Domestic Economy

    Economic Growth

     Madam Speak, the economy has sustained the remarkably recovery witnessed in Financial Year 2017/18. The economy is estimated to have grown by 6.1% in the Financial Year 2018/19. The size of the economy is now Shs. 109 trillion, equivalent to US$ 29.5 billion. The significant revival in economic growth was a consequence of increased private and public sector activity, improved weather conditions and a relatively stable global economy.

    The Agriculture sector maintained its recovery sustaining a 3.8% growth rate in financial year 2018/19. Among other contributing factors let mention two; (i) the strengthened enforcement of fishing activity has resulted in recovery of fish captures (ii) provision of extension services and control of pests and diseases has also led to a bumper harvest in crops such as maize, beans, fruits, vegetables, and sim sim. I must say though that the growth in the agriculture sector is still sub-optimal, given the natural resources that we have.

    During financial year 2018/19, the service sector grew at 7.2%, the highest of all sectors. This good performance was largely driven by tourism and hospitality.

    The industry sector grew at 5.8% this year, continuing the rebound which started in financial year 2016/17. Manufacturing is beginning to pick up. It grew at 2.8% this year compared to 1.7% the previous year. This is partly because of the newly commissioned factories, as I will later demonstrate.  

    Domestic Prices

    Madam Speaker, domestic prices remain stable. Average inflation was 3.4%, well within the policy target of 5% per annum. This is because of increased food supplies in the markets, relatively stable exchange rate and effective co-ordination of monetary and fiscal policies. Stable prices, we all know, allow investment planning, improve investor confidence and preserve the value of savings.

    Exchange Rate

    The Uganda Shilling has also largely been stable against major currencies. It strengthened against the US dollar by an average of 0.6% for the period between July 2018 and April 2019. The strengthening of the Shilling against the US dollar was a result of higher export performance, improved disbursement of external support for government programs, continued Foreign Direct Investment (FDI) inflows, and roust remittances from Ugandans abroad.

    Financial Sector and Private Sector Credit

    Madam Speaker, the financial sector has continued to strengthen. Non-performing loans reduced to 3.4% at the end of December 2018 compared to 5.6% in December 2017. Private sector credit grew by 6.1% between July and December 2018 with trade and construction sectors receiving the largest share of credit at 20.1% and 19.8% respectively. Credit to Agriculture has registered the highest growth, though it still remains low, at only 12.9% of total credit extended as at December 2018.

    Public Finance

    Madam Speaker, domestic revenue collection too, has increased significantly. It is projected at Shs. 16, 711.66 billion in the financial year 2018/19, of which Shs. 16, 181.66 billion is tax and Shs. 530 billion is non-tax revenue. The surplus is Shs. 352.66 billion over the target of Shs. 16, 359 billion.

    The ratio of domestic revenue to GDP is at 15.2% this financial year, compared to 14.6% achieved last year. This is an increment of 0.6% of GDP in one financial year.

    Madam Speaker, government spending excluding domestic debt refinancing this financial year is projected to be Shs. 24,297.85 billion, which is equivalent to 22.1% of GDP.

    ECONOMIC GROWTH STRATEGY FOR FINANCIAL YEAR 2019/20

    Madam Speaker, the Economic Growth Strategy that underpins the Financial Year 2019/20 Budget seeks to consolidate made interventions towards the attainment of shared prosperity. Engineering Shared Prosperity requires that the benefits of economic growth reach all Ugandans. Our must be provided with opportunities to create wealth and earn higher incomes. This strategy is built on the rapid industrialization of our economy linked to high productivity and production in agriculture; while nurturing the potential of the key growth sectors of tourism, minerals, oil and gas. The growth of these sectors is what will provide gainful employment to the majority of Ugandans. Entrepreneurs who strong links with the production households, are the key to unlocking the potential of these key sectors, leading to prosperity for us all.

    The Economic Growth Strategy consists of three interlinked parts;

    1. Expanding the industrial base of the economy
    1. Expanding Natural Resource Endowments with Environmental protection in mind, and
    1. Providing affordable financing for production and business.  

    Expanding the industrial base of the economy

    Madam Speaker, the NRM government has already successfully laid the foundation for Uganda’s industrialization. The key bottlenecks such as inadequate electricity and transportation infrastructure, the lack of basic education and health, have, to a large extent, been addressed. Consequently, the manufacturing sector is now able to meet domestic demand for basic products like cement, tiles, light steel products and consumables such as sugar and soap. The next phase of manufacturing in Uganda will be to produce goods for exports and also replace Uganda’s imports.

    Uganda’s industrialization in the future has accordingly been designed based on two strategic pillars. The first strategic pillar provides developed and serviced areas, where industrial production for several enterprises take place. The plan involves building fully planned and serviced industrial parks in 22 locations across the country. industrial parks will house medium and large scale industries.

    The second strategic pillar supports the development of product value chains which link nucleus entrepreneurs to out-grower farmers. These product value chains permit marketing of agricultural products, agro-processing for value addition, as well as the efficient provision of finance and other inputs of production. It will ensure that majority of Ugandans are productively engaged. We have already successfully established a few product value chains in agro-industry in citrus fruit, vegetable oil and dairy industries. The next move is to expand product value chains to other commodities across the country.

    Exploiting natural resources endowments with environmental protection in mind

    Madam Speaker, exploiting Uganda’s natural resource endowments provides opportunities for growth, and the provision of incomes and a descent livelihood to the majority of Ugandans. The three natural resource endowments Uganda has include vast arable land and fresh water resources, abundant wildlife and diverse environment, and plentiful minerals, oil and gas deposits. Appropriately exploiting these natural endowments requires being mindful of the adverse impact of over-extraction, over-utilization, and wasteful use of benefits they provide. Addressing climate change aggressively is therefore key to appropriately exploiting our natural resource endowments.

    Commercializing Agriculture

    Appropriate exploitation of Uganda’s arable land and freshwater resources, requires climate-smart commercialization of agriculture. Because the majority of Ugandans are part of the rural households, achieving inclusive growth requires that we use modern farming practices, advanced agricultural inputs and technology, post-harvest storage, and improve product market access. This will positively change the livelihoods of over 68% of Uganda’s households who are currently engaged in subsistence agriculture.

    Commercializing agriculture has the greatest potential for increasing household productivity and incomes, while addressing unemployment in the rural communities. The use of product value chains based on the National Agricultural Zoning Strategy will also facilitate agricultural commercialization. Successful agro-processors will be engaged to serve a nucleus linked to farmers who sell their produce to the processor. In addition, product value chains permit inputs such as extension services and finance to be delivered. This approach will lead to an in increase in sustainable production at the farmer household level, while increasing productivity and incomes. In addition, the approach will nurture agro-based industries across the country, employing labor that will have been released from primary agriculture.

    Addressing Climate Change

    Madam Speaker, deforestation and destruction of wetlands adversely impacts the welfare of our people in the following way;

    1. Water shortage or no water at all, for domestic use and production
    1. Increased temperatures and several long droughts
    1. Over-flooding and/ or increasing landslides in highland, and
    1. Destructive winds due to lack of windbreakers

    Re-afforestation and restoration and restoration of wetlands must be undertaken as a matter of urgency, and the destruction of wetlands and forest cover will be penalized through the enforcement of environmental laws and regulations. Local governments must enact and enforce ordinances on tree planting, efficient waste management and wetland conservation. The ban on use of harmful materials such as environmentally destructive polythene bags, among others, will also be unequivocally enforced. I appeal to the private sector to adopt climate-smart technologies.

    Tourism

    Madam Speaker, Uganda’s natural and cultural heritage are critical to tourism. Utilizing our natural heritage endowment by realizing its tourism potential will provide Uganda significant benefits. Notwithstanding its current level of development, the tourism sector has made dramatic progress and now ranks as the highest foreign exchange earning sector. In 2018, foreign receipts from tourism reached US$ 1.02 billion, with 1.6 million international tourist arrivals being recorded. Uganda is now a known international touristic destination of choice, which strongly justifies developing its tourism potential for benefits it will provide to Ugandans in particular and the economy in general.

    Sustained growth of Uganda’s tourism, therefore, requires conservation of our natural and cultural heritage. Appropriate legislation will be enacted and vigorously enforced to preserve cultural sites and monuments and deter illicit trafficking of protected wildlife and antiquities. Tourists hubs and circuits will be developed for product development and the marketing of Uganda as touristic destinations of choice based on religious, natural and cultural heritage. Infrastructure, including road and air transport, electricity and hospitality facilities, will be developed to enable efficient access to tourist destinations, and adequate hospitality. World-class skills will be built in hospitality and tourists handling, wildlife conservation, tour and travel management, food and beverage services.  

    Minerals, Oil and Gas

    Madam Speaker, extracting minerals, oil and gas will contribute to building a solid resource base for the economy, while providing jobs to many more Ugandans. The priority minerals to be exploited include; Iron Ore, Limestone, Phosphates, Oil and Gas, Dimension Stones, Gold, and rare earth metals.

    The key strategic actions required to commercialize this sector include minimizing speculation and hoarding of mineral licenses; enforcement of mining regulations; the airborne geo-physical mapping of Karamoja, and provision of key road and energy infrastructure.

     Madam Speaker, in order to avoid wasting and leakage of the benefits from minerals, oil and gas resources, proceeds of extraction will be invested for both the current and future generations. In this regard, a Petroleum Revenue Investment Advisory Committee has been appointed to guide this process in line within a clear and transparent policy. Uganda has also joined the Extractive Industries Transparency Initiative (EITI) to publicly account for all proceeds of minerals, oil and gas sectors.

    Affordable Financing for the Private Sector                    

     Madam Speaker, access to affordable finance is an important catalyst for the growth of viable private sector enterprises. Affordable long term finance from development financing, pensions, and capital markets sources, facilitate Private Sector investment. Commercial bank lending rates remain high. This calls for Government interventions.

    In this regard, the Uganda Development Bank (UDB) will be further capitalized. I have allocated Shs. 103.5 Billion next Financial Year for this purpose. In additions, to support private companies raise equity capital, the Capital Markets Authority will establish a center to facilitate access to long term domestic and foreign capital on the stock exchange. The necessary legal and regulatory framework for the operation of Private Equity funds will also be designed to attract more investment into Uganda’s private sector.

     Madam Speaker, financial sector reforms including agency banking, bancassurance, Islamic banking, and enhanced access to Credit Reference Bureau services, will reduce operational costs of commercial banks. The use of movable assets as collateral for loans has also been facilitated with the enactment of the Security Interest in Movable Property Act, 2019.

    In addition, the Uganda Microfinance Regulatory Authority is now fully operational. This will enhance consumer and investor confidence in the microfinance industry and money lending business. The electronic chattels register will be also be operationalized to ease access to credit. Furthermore, business clinics will be run by the Uganda Registration Services Bureau to enhance registration of informal businesses.

    Madam Speaker, Small and Medium Enterprises require affordable credit. I have provided an additional Shs. 40 Billion to the Microfinance Support Centre for on lending at affordable interest rates, not exceeding 12% per annum. Special programmes to enhance access to credit for youth and women entrepreneurs will also continue to be implemented. The skills programme for Youth and the Uganda Women’s Entrepreneurship Programme have been allocated Shs. 130 billion and Shs 32 billion respectively.

    Madam Speaker, to de-risk lending to agriculture, the Uganda Agriculture Insurance Scheme (UAIS) subsidizes agriculture insurance premiums paid by farmers. Agriculture insurance protects farmers against key agricultural risks, such as those resulting from natural disasters. This ultimately attracts affordable credit to agriculture. By March 2019, 77,000 farmers had accessed Agriculture Insurance, across all regions of Uganda.

    Madam Speaker, in order to develop a sound financial sector that supports sustainable and inclusive economic growth, we recently developed the Medium Term Financial Sector Development Strategy.

    Enablers of the Growth Strategy

    Madam Speaker, effective implementation of the Economic Growth Strategy I have just talked about requires that certain pre-conditions are in place. These pre-conditions include Peace and Security, Good Governance and an efficient judicial system, together with macro- economic stability. Additional enablers required for economic growth include (i) reliable, efficient and affordable electricity supply; (ii) water, transport and communications infrastructure, (iii) a healthy, well-educated and skilled workforce and (iv) an effective government machinery. The NRM Government has since 1986 striven to provide these pre-conditions, which have, to a large extent, been met.

    FINANCIAL YEAR 2018/19 SECTOR PERFORMANCE AND FINANCIAL YEAR 2019/20 PRIORITY INTERVENTIONS

    Madam Speaker, I now turn to the specific priority interventions that will be implemented in the forthcoming year in furtherance of the Economic Growth Strategy, while reporting respective developments that have been recorded during the financial year now ending. These interventions include:-

    i) Enhancing Key Primary Growth Sectors

    ii) Increasing Infrastructure Access and Reliability;

    iii) Human Capital Development; and

    iv) Maintaining Peace and Security, and Good Governance.

    I. Enhancing Key Primary Growth Sectors

    (i) Industrialization

    Madam Speaker, Government has already commenced the establishment of an industrial base. The Iron and Steel industry now has 24 steel industries and its installed capacity has doubled to 1.7 million tons per annum from 866,000 tons five years ago. The Cement industry has expanded to five cement factories more than doubling annual production to 4.43 million tons, from 2 million tons five years ago.

    Agro-processing factories have been commissioned in Teso and Luweero for Citrus fruits, Dairy in Ankole, Vegetable Oil in Kalangala, and Tea in Toro and the Kigezi sub-regions. The Uganda Development Corporation (UDC) has acquired a 32% stake in Atiak Sugar Factory, which will serve as a nucleus facility for an out-grower scheme in Atiak and Lamwo. UDC has also extended ten-year equipment lease financing arrangements to tea factories in Western Uganda, namely:- the Kigezi Highland Tea Company Limited, Kayonza Growers Tea Factory and Mabale Growers Tea Factory Limited.

    Madam Speaker, one private and three public industrial parks are already operational at Kapeeka, Namanve, Luzira and Bweyogerere. The Kampala (Namanve) Industrial Business Park is 40% complete, and will be fully serviced in the medium term. The Park already boasts of 33 operational factories with an estimated 15,000 jobs created. 87 factories are under construction and 120 are at pre-investment stage. During the year, the following strategic factories were commissioned at Namanve Industrial and Business Park:- Orion Transformers and Electric Ltd which manufactures electricity transformers, switch gears, and smart meters; Alfasan Company Ltd which manufactures veterinary and human medicines, and Steel and Tube which produces steel products.

    At the Luzira Industrial and Business Park, 9 industrial plants are operational with 7,000 employees. The Bweyogerere Industrial Park has 4 operational industrial plants in agro-processing and other manufacturing with 5,000 employees. At the Soroti Industrial Park, the Soroti Fruit Factory was commissioned during the year.

    In addition to the above public industrial parks, Lio Shen Industrial Park at Kapeeka where Government is providing infrastructure, 5 factories out of the targeted 10 are operational now. These include Ho and Mu Food Technology (U) Ltd which dries fruits for exports and Goodwill Ceramics (U) Co. Ltd which manufactures tiles using more than 90% of local inputs.

    Development of the Mbale, Soroti, Iganga, Mbarara and Jinja Industrial Parks is on-going. Other industrial parks will also be developed by providing basic infrastructure including roads, electricity, water and information technology and communications infrastructure. 14 Free Zones to promote exports have also been licensed in Arua, Jinja; Kalungu, Mpigi, Mukono, Wakiso, Tororo, Kampala, and Buikwe.

    Madam Speaker, in order to speed up industrial growth, the budget for FY 2019/20 will undertake the following priority actions:-

    i) Fast-track feasibility studies, including engineering designs, for all the

    proposed industrial parks;

    ii) Develop serviced industrial parks and workspaces;

    iii) Reform Technical and Vocational Education and Training (TVET) to

    provide the skills required in the job market;

    iv) Establish the Industrial Skills Production Center at Kampala Industrial

    Area (Namanve) to provide skills development, innovation and knowledge transfer critical for researchers, industrialists, innovators and youth in particular. The Center will also address technology gaps in Uganda while boosting value addition.

    v) Promote and expand the Uganda Industrial Research Institute’s (UIRI) Industrial and Technological Incubation Center. In addition UIRI will establish Regional and Model Value Addition Centers

    vi) Provide an additional Shs.10 billion to the Soroti Fruit Factory for working Capital requirements to purchase required raw materials

    vii) Support applied research, innovation and industrial development at the Presidential Initiative on Banana Industrial Development (PIBID), the Presidential Initiative on Science and Technology (PIST), and the Kiira Electric Vehicle Project among others. In addition, preparatory work to establish Regional Science and Technology Parks, Municipal Innovation Hubs, Value Addition and Technology Transfer Centers, Material Science program and Petrochemical Industry will be commenced.

    viii) Reduce the minimum investment threshold that allows developers of free zones and industrial parks to be eligible for tax incentive from US$ 100 million to US$ 50 million

    ix) Reduce the minimum investment threshold that allows operators within industrial parks to be eligible for tax incentives to US$ 10 million for foreigners and US$ 1million for local investors.

    Madam Speaker, I have provided Shs. 428.68 Billion next financial year for:- (i) electrification of industrial parks (Shs. 147 Billion), (ii) the development of supportive export infrastructure in export processing zones and industrial parks (Shs. 103 Billion) and (iii) science technology and innovation (Shs. 178 billion).

    (ii) Commercializing Agriculture

    Madam Speaker, Government’s efforts to modernize and commercialize Agriculture, are bearing positive outcomes. For instance, the volumes and value of export of strategic commodities has registered notable improvements.

    Coffee export volumes in 2018 increased by 6% to 4.5 million bags valued at US$ 492 million compared to 4.2 million valued at US$ 490 million exported in 2017. Oil palm production in Kalangala in 2018 increased by 55% to 37,800 Tons valued at Shs. 21.4 billion compared to the 2016 production of 24,300 Tons valued at Shs. 13.4 Billion. Milk production in 2018 increased by 19% from 2.1 billion litres in 2015 to 2.5 billion litres in 2018. The volume of fish exports has also increased by 27%. The support to fisheries enforcement interventions by the UPDF has led to the opening of four (4) fish factories – Gomba in Jinja, Iftra in Kampala, Marine and Agro in Jinja and Ngege in Kampala. The established production capacity of all these factories is 330 tons per day.

    The actions that Government has taken to support the significant outcomes I have illustrated include the following:-
    i) Distribution of key planting, breeding and stocking materials including

    the establishment of almost 110,000 acres of citrus orange and about

    144,000 acres of mango; 22,000 acres of tea in Kigezi, Ankole, Rwenzori, Mubende, West Nile and Bunyoro sub zones; and 16,500 acres of cocoa. Breeding and genetic development continued with the multiplication of beef and dairy cattle, goats, pigs and poultry.

    ii) Construction of four (04) medium sized irrigation schemes have been completed at Agoro (650ha) in Lamwo, Doho I (1000ha) in Butaleja, Mubuku I (516ha) in Kasese and Olweny (600ha) in Lira district. Construction of the major irrigation schemes have progressed and are at different stages of completion- Doho II in Butaleja (48.6%); Mubuku II in Kasese (22.5%); Wadelai in Nebbi District (18.2%); Torchi in Oyam District (57%); Ngenge in Kween District (54.1%); and Rwengaaju in Kabarole district (50%).

    iii) Completed construction of ten (10) Small scale Irrigation systems at Zonal Agricultural Research and Development Institutes (ZARDIs) at Pallisa, Bukedea, Katakwi, Tororo, Kamuli, Bugiri, Soroti, Abim, Kaabong and Mayuge Districts. The demonstration will benefit 300 registered farmer groups.

    iv) Construction of solar-powered irrigation systems at seven (7) more Zonal Agricultural Research and Development Institutes (ZARDIs) at Bulindi, Rwebitaba, Abi, Buginyanya, Nabiun, Mukono and Ngetta are being finalised. In addition, 15 solar water pump systems for small scale irrigation were established in 13 districts of Katakwi, Kamuli, Bukedea, Buikwe, Kayunga, Mpigi, Lyantonde, Kiruhura, Mbarara, Kamwenge, Rubirizi and Mukono.

    v) Regional mechanization centers were opened in South Western Region, at Buwama, and North Eastern Region, at Agwata. In addition, several valley tanks were constructed/rehabilitated in the drought-prone and cattle corridor districts countrywide. The number of valley tanks increased by 83 from 155 in December 2017 to 238 in December 2018, with total holding capacity increasing from 8 million,

    to 9 million cubic meters during the same period. This has improved the number of farmers accessing and utilizing water for irrigation, aquaculture and livestock from 5% to 8%. Two hundred and eighty (280) tractors were distributed to farmers to further boost mechanization.

    vi) The Agriculture Credit Facility cumulatively disbursed Shs. 332 billion by 31st March, 2019, to finance 551 eligible projects. This enabled borrowers to establish large capacity agro-processing facilities, expand grain trade and investment in warehousing and expanding farm infrastructure.

    Madam Speaker, in order to further support commercialization of Agriculture, the following key priority actions will be implemented in the forthcoming budget:-

    i) Provision of storage facilities and linking farmers to agro-processing

    facilities to support agro-industrialisation. Post-harvest facilities will be built in Bunyangabu, Kibuku, Kumi, Kyenjojo, Ntoroko and Nakaseke districts.

    ii) Delivery of quality inputs and services including seed and planting materials, mechanization, fertilizer, agricultural credit and extension services.

    iii) Provision of irrigation infrastructure, both at large scale such as the Wadelai, Torchi, Mobuku ll, Doho ll and Ngenge projects;

    iv) Providing small-scale solar powered irrigation systems for last mile irrigation.

    v) Construct five micro irrigation schemes in Alebtong, Kabarole, Katakwi, Ntoroko and Gomba, under the Local Economic Growth Support (LEGS) project.

    vi) Strengthen inputs and product standards certification to improve production and enhance the quality of products to enable market access both regionally and internationally.

    vii) Continue enforcement of rules and regulations on major water bodies to prevent overfishing and promote sustainable capture fishing and aquaculture.

    viii) Enhance agricultural research and development in new crop varieties for national strategic commodities including coffee, maize, beans, cassava, rice, cotton, oilseed and cocoa.

    ix) Undertake research in pest and disease control, including efficacy trials for three new acaricides namely Vectoclor, Bantick, and Eprinometim.

    Madam Speaker, I have provided Shs. 1,054.6 Billon to the Agriculture Sector next financial year.

    (iii)Tourism Development and Promotion

    Madam Speaker, during the financial year now ending, the key interventions that the sector has implemented include the following :-

    i) Two domestic tourism promotion drives (Tulambule) were conducted

    in Western and Eastern Uganda with enhanced focus on popularising tourism sites and encouraging Ugandans to visit and experience Uganda’s beauty.

    ii) Museums at Kabale, Wedelai, Soroti, Fort Lugard, Bweyogerere, Nyero, Kapir, Mukongoro and Moroto have been maintained.

    iii) Uganda Tourism Board participated in 8 expos and 14 events in the international, regional and domestic markets.

    iv) Breeding programmes for various bird species such as the shoebill and peafowl were conducted.

    Madam Speaker, next financial year the following actions will be prioritized in the sector:-

    i) Aggressive marketing of Uganda’s tourism in key markets, e.g. South Asia and Europe.

    ii) Tourist product development, e.g. religious, historical, cultural, natural heritage and agro-tourism including farm visits, etc.

    iii) Destination marketing to identify and sell key tourist circuits such as Kidepo, Bwindi, Kibale and products including Historical sites like Fort

    Patiko, and Bigo Byamugenyi.

    iv) Reduce the minimum investment threshold that allows investors in hotels and tourist facilities operators to be eligible for tax incentives

    from US$ 15 million to US$ 10 million.

    v) Upgrade and renovate key tourism infrastructure including airfields and priority roads to improve accessibility; electricity and internet infrastructure, and highway stopovers along the tourism routes.

    Madam Speaker, I have allocated Shs. 193.7 Billion to the Tourism sector next financial year.

    (iv) Development and Commercialization of Minerals, Oil and Gas

    Madam Speaker, in the Minerals, Oil and Gas sector, preparations for the commercialization of Oil and Gas resources continued during the year. The Lead Investor for the Oil Refinery commenced detailed designs that will inform the Final Investment Decision (FID) to be taken in September 2019. The detailed designs for the East African Crude Oil Pipeline (EACOP) were completed and First Investment Decision is due to be taken after negotiations of final agreements.

    With respect to Mineral Development substantial progress has been recorded. Three gold refineries have been set up to refine gold to 99.9%. These are the African, Simba and Bullion Gold Refineries. The Sukulu Phosphate and Steel Project first phase to process fertilizers was commissioned in October 2018. The Sukulu Project’s steel, glass sheet, brick and cement plants are due for commissioning in July 2019.

    Several new cement factories were built during the year while others have been expanded, including Simba, Tororo, Hima and Kampala cement plants. Total production capacity of cement now stands at 6.8 million tons compared to only 2.3 million tons in 2015 and 1.6 million tons in 2011. This has resulted in increased jobs, lowered cement prices, reduced construction costs, and consequently reduced cement imports.

    Madam Speaker, during next financial year, the following interventions will be undertaken:-

    i) The airborne geophysical survey of Karamoja region.

    ii) The divestiture of Kilembe Mines on a fast-track basis with an emphasis

    on prospective investors with capacity to carry out further exploration, following repossession by Government from the previous Investor.

    iii) The exploration of the 18 priority mineral target areas for rare earth, and metallic minerals to a level of certified mineral resource

    iv) The review of the licensing rules and regulations to eliminate speculative and non-performing licenses and allow opening up the sector for reputable exploration and mining companies.

    v) The establishment of a certified mineral assy laboratory to test samples for exploration and mining companies affordably and in a timely manner; and

    vi) The development of a Mineral Sector strategy emphasizing the marketing of Uganda’s mineral potential to prospective investors.

    II. Increasing Infrastructure Access and Reliability

    Madam Speaker, His Excellency the President extensively elaborated during the State of the Nation Address, the progress we have made and the way forward in the transport and energy infrastructure, and I will therefore present highlights in this area.

    (i) Transport Infrastructure:

    The paved road network now is 5,111 kilometers equivalent to 25% of the national road network, exceeding the NDP II target of 5,000km. 97% of the national paved road network and 83% of unpaved roads were reported to be in fair to good condition. This was above the NDP II target of 85% for paved roads and 70% for unpaved roads.

    Madam Speaker, next financial year, the target for completed national paved roads is 6,000 km. Rural roads connectivity and low-cost sealing of district roads will be prioritized. Road maintenance and rehabilitation of District, Urban and Community Access Roads (DUCAR) and National roads will be undertaken using the Force Account approach to cut on costs. The rehabilitation of the national airport, the meter gauge railway in the short-term and the revamping of water transport facilities, including the navigational capacity on Lake Victoria, will also be undertaken. The construction of the Kabaale International Airport in Hoima District, and the operationalization of the Uganda National Airline, and the acquisition of two more Bombardier regional aircrafts, have been prioritized next Financial Year.

    Land acquisition and counterpart funding has also been given priority in the budget, particularly for the new Kampala Port at Bukasa, the completion of Katuna One Stop Border Post (OSBP) and development of upcountry aerodromes. Land acquisition for three Oil Roads namely Hoima – Butiaba – Wanseko; Masindi – Biiso, Masindi – Bugungu and Buhimba –

    Kakumiro – Mubende has been fully provided for in the Budget, while loan negotiations for the Construction Works are being soon concluded.

    Madam Speaker, to enhance access to tourism sites, an additional Shs. 57.8 billion has been provided to UNRA to embark on the South-West tourism circuit. The other tourism roads will be sequenced over the short and medium term. In addition, support will be provided for rehabilitation of aerodromes to facilitate domestic flights.

    Madam Speaker, Shs. 6.4 Trillion has been provided to the works and transport sector next financial year.

    (ii) Energy Infrastructure:

    Madam Speaker, total installed electricity generation capacity is now 1,200MW, with the completion of several hydropower generation projects including Isimba Hydropower dam. High Voltage Electricity transmission grid infrastructure now totals 2,258km. Detailed progress of specific energy infrastructure projects was well-elaborated in His Excellency, the President’s State of the Nation Address.

    With respect to electricity infrastructure in industrial parks, substations in Iganga, Luzira, Mukono and Namanve have been completed, which will enable increased consumption of electricity. With respect to power distribution, the Distribution Concession with Umeme Limited will be re- negotiated and extended to ensure further investment, and also lower electricity tariffs.

    With the rate at which we are industrializing including the increase in demand for power by the population for various uses, we plan to have more power production to avoid entering into a shortage. The Ayago (840MW), the Oriang (392MW), the Kiba (330MW) and the Uhuru (600MW)

    hydropower projects will be developed in the medium to long term, in partnership with the Private Sector.

    In line with our strategy to ensure power access, the Electricity Connection Policy will continue to subsidize the cost of electricity connections. Over 300,000 connections are targeted annually. This initiative will realize growth in access to electricity to 30% by end of 2020, and 60% by 2026. Furthermore, the use of renewable energy such as solar system for lighting rural homes and for the national grid is being implemented. Currently, 40MW of solar power has been installed nationwide, and feeds into the national fgid.

    Madam Speaker, Shs. 3 Trillion has been provided to the energy sector next financial year.

    (iii)Information and Communication Technology

    Madam Speaker, in the Information and Communications Technology sector, the total optical fibre network covers 49% of all districts and 24% of sub counties; and all the border points. The number of internet users has increased from 13 million in 2015 to 18.8 million in 2017 translating to a penetration rate of 45.4%. 297 Government services have been automated, 71 of these being provided online. The automation of Government services has led to a reduction in processing times and an improvement in service delivery.

    Madam Speaker, the National Backbone Infrastructure for ICT will be eventually extended to cover all districts. In addition, internet costs will be reduced through the implementation of the new national broad band policy. The policy will compel Telecommunication Companies to provide services to people countrywide. This will enhance improved service delivery both in Government and the Private Sector.

    Madam Speaker, Shs. 146.2 Billion has been provided next financial year to the ICT sector.

    III. HUMAN CAPITAL DEVELOPMENT

    (i) Education, Skills Training and Sports

    Madam Speaker, the provision of universal primary and post primary education has led to 92% of all parishes and 71% of all sub-countries having a Government aided primary and secondary school respectively. All major regions of the country have a public university. Consequently, the literacy rate of persons aged 10 years and above currently stands at 74%.

    85. During financial year 2018/19, scholastic materials were distributed to all public primary schools, improving pupil to book ratio from 14:1 to 2:1. Traditional secondary schools of Kyenjojo, St. Balikudembe Mitala Maria, Kigezi College, Sir Samuel Baker and Ntare School were extensively rehabilitated. Teacher absenteeism at UPE Schools in 20 pilot districts has reduced from about 15% in 2015 to 4% in 2019 with the use of biometric finger print readers.

    In terms of skills training, critical infrastructure for technical and vocational training has been built. Currently, 55% of all districts have technical and vocational institutions. Consequently, enrolment into Business, Technical and Vocational Training (BTVET) institutions now stands at 129,000. Centers of excellence have also been built at Uganda Technical Colleges at Elgon – for civil works and building technology; Lira – for drainage, bridges and road construction; Bushenyi – for food manufacturing and food processing; and Bukalasa Agricultural College – for crop and animal husbandry. Technology incubation centers where fresh graduates can translate business ideas into viable business enterprises, have been established at Mbarara, Gulu and Makerere public universities

    In Sports, the construction of the national high altitude centre in Kapchorwa is 68% complete and the Nakivubu stadium is undergoing re- construction. I congratulate the Uganda Cranes for qualifying to the African Cup of Nations for the second time running.

    During the next year the following interventions in formal education will be undertaken:-

    i) Improve instructional practice, especially for early grades, in the use

    of reading materials, to enhance early grade numeracy and literacy;

    ii) Improve teacher monitoring and inspection by rolling out biometric finger print readers to improve school teacher attendance and

    eliminate absenteeism;

    iii) Enhance school management, accountability and learning

    conditions including school classrooms, offices, water and sanitation

    facilities, and teacher housing;

    iv) Establish and enforce minimum standards on teacher numbers, instructional materials, classrooms and sanitary facilities across schools.

    v) Operationalize seed secondary schools currently under construction with adequate staffing and other necessities.

    vi) Provide Technical institutions with adequate instructors and instructional materials and guided curriculum to meet market demands.

    Madam Speaker, Shs. 3.4 Trillion has been provided to the Education sector next financial year.

    (ii) Health

    Madam Speaker, in the Health sector continued progress has been registered in disease prevention and treatment; provision of essential medical supplies and the development of critical health infrastructure.

    For instance, malaria prevalence among children under five has reduced significantly from 30% in 2015 to 17% in 2018, majorly as a result of the distribution of 26.5 million Long Lasting Insecticide Nets and indoor residual spraying undertaken in 26 districts in east and northern regions. Antiretroviral Therapy coverage has improved from 73% in 2016/17 to 86% this year, contributing significantly to treatment of HIV and reduced mother to child transmission. Preventive interventions including immunizations have improved, with measles immunization coverage, for example, increasing to 88%.

    Madam Speaker, as a result of equipping and improved staffing at health facilities, health service provision has improved at all levels. For instance, 81 Health Center IVs offer Caesarean Section and blood transfusion out of a total 186 centers. In addition, the number of maternal deaths recorded at health facilities has also reduced by 30% from 148 per 100,000 in financial year 2016/17, to 104 per 100,000 deliveries this year. Health worker staff attendance has improved from 51% in June 2016 to 93% in February 2019 in 20 pilot districts where biometric finger print readers are used to monitor staff attendance.

    In terms of regional and national health infrastructure, the construction, expansion, rehabilitation and equipping of Mulago National Referral Hospital and its transition into a super- specialized facility is at 97% completion and will be commissioned in December, 2019. The construction of a 320-bed Specialized Women and Neonatal Hospital at Mulago National Referral Hospital was completed and commissioned in November, 2018. It is functional and offers first class services to Women and new borns. The specialized Regional Centre for Pediatric Surgery Hospital is under construction in Entebbe and will be commissioned by December, 2019. Kawolo General Hospital has been rehabilitated and will be commissioned in July, 2019, while the rehabilitation of Busolwe Hospital will commence

    next financial year. These projects will also address reproductive health, in addition to provision of Emergency care.

    Madam Speaker, in the next financial year, the following interventions will be prioritized:-

    i) Improve the functionality of Lower level health facilities by providing

    additional resources for operations and upgrading 124 Health Centre Twos (HC IIs) to Health Centre Three (HCIIIs) in 99 Local Governments. This is in line with the NRM Manifesto of having a Health Centre III in all the sub-counties.

    ii) Streamline the health referral system to reduce pressure on super- specialized Mulago National Referral Hospital.

    iii) Construct staff houses and maternity wards in 81 health centers supported by the World Bank Reproductive Maternal Child Health Services Improvement programme.

    iv) Improve supply of medicines and health supplies and strengthen controls for more efficient Drug Management across the country.

    v) Improve human resources for health by training local health professionals, and strengthening Village Health Teams (VHT).

    Madam Speaker, Shs. 2.6 Trillion has been provided to the Health sector next financial year.

    (iii)Nutrition

    Madam Speaker, to address malnutrition and the significant prevalence of stunting in children and anemia among expectant mothers, the Education, Health, Agriculture, Gender and Social Development ministries will be jointly tasked to implement the following measures starting next financial year:

    i) Ensure industrial food fortification with vital nutrients for major staples and cooking oils consumed in public institutions such as schools, hospitals and the country’s security forces.

    ii) Require all schools to establish and maintain vegetable gardens for both educational purposes and as a source of vital nutrients in school diets.

    iii) Revitalize nutritional education conducted by Village Health Teams; Community Development Workers and the public and private media.

    iv) Train and support small-scale millers with appropriate technologies to enable food fortification; as well as enforce regulatory food fortification standards

    These interventions will require the revision of the Uganda Nutrition Action Plan, and the prioritization of Food and Nutrition Security in the NDP III.

    (iv) Safe Water and Sanitation:

    Madam Speaker, the following progress was registered in safe water provision and sanitation during the financial year now ending:-

    i) Rural water coverage is now at 71%, while the urban water coverage stands at 80%.

    ii) 38,200 villages representing 66% of the total villages in the country have been served with clean water

    iii) Rural sanitation coverage stands at 79%, while sanitation coverage in urban areas is at 87.4 %.

    Madam Speaker, during next financial year, the following interventions will be undertaken in safe water provision and access to sanitation:
    i) Extending piped water systems and environmentally friendly

    waterborne toilet facilities.

    ii) Construct sewerage treatment plants and ecofriendly toilet facilities in rural growth centers.

    iii) Undertake countrywide rehabilitation of water facilities including wells, valley tanks/dams, shallow wells and boreholes, and

    iv) Strengthen the operation and maintenance of water facilities in collaboration with water user committees.

    Madam Speaker, Shs. 1.1 Trillion has been provided to the Water and Environment sector next financial year. The allocation will be spent mainly on:- (i) provision of water for production (Shs. 218.5 Billion); (ii) Access to safe water in rural communities (Shs.100.9 Billion), and (iii) Access to safe water in urban areas (Shs. 463.1 Billion).

    IV. Maintaining Peace Security and Improving Governance

    100. Madam Speaker, the maintenance of Peace, Security, law and order has laid a strong foundation for economic growth and development in Uganda over several decades. Improved Governance and Public Administration Management has been registered, notwithstanding challenges such as regional global threats including terrorism, money laundering and corruption particularly in the public service; and constrained effectiveness of our judicial system that faces case backlog.

    In order to maintain Peace and Security, and Good Governance, the following interventions will be implemented by Government over next financial year and the medium term:-

    i) Continue to professionalize the UPDF through equipment and training. To this effect, security has been allocated an additional Shs.1,500 Billion to enhance its capacity.

    ii) Commence the implementation of the Electoral Roadmap for the 2021 General Elections in pursuit of democracy and good governance for which Shs.223 billion has been allocated through the responsible institutions.

    iii) Continue to strengthen anti-corruption institutions, policies and systems in order to crackdown on corruption in public service, minimize fraud and money laundering and financing of terrorism in the country.

    iv) Enhance efficiency in justice system by addressing case backlog by, among others, through: automation of case management, roll-out plea-bargaining, mediation, and small claim procedures. I have provided the Judiciary with an additional Shs. 53 billion.

    v) Commence construction of the Supreme Court, for which Shs. 20 billion has been provided, as a start.

    vi) Enhance pay for judicial officers, state attorneys and prosecutors for which Shs. 22 billion has been provided.

    vii) Fast track implementation of Safe City infrastructure by rolling out installation of CCTV to municipalities and urban centers.

    viii) Reduce Prison congestion by operationalizing Kitalya mini-max prison; and 5 other reception centers. The National Community service programme will also serve as an alternative to incarceration, and

    ix) Install electronic gates and kiosks at major border points, including Malaba, Busia, Katuna, Mutukula, Atiak and Mirama Hills.

    Improving Public Investment Management and Public Sector Effectiveness

    Madam Speaker, in order to strengthen the Public Investment Management System (PIMS) in the country, Government has adopted the following measures:-
    i) Require all projects under preparation to adhere to the Public

    Investment Management System (PIMS) framework, to ensure alignment to the National Development Plan and are socially and economically viable.

    ii) Fully roll out implementation of the online Integrated Bank of Projects (IBP) system, and
    Prioritize allocation to ongoing projects to ensure their completion on time, within budget and scope on all ongoing projects with development partners and civil society to assess project implementation. These reviews enable identification of reasons for slow implementation, and development of remedial actions.

     Madam Speaker, the following measures to enhance the effectiveness of public sector will also be implemented:-

    i) Introduce the Electronic Government Procurement (e-GP) System to

    improve efficiency, transparency and accountability in public

    procurement.

    ii) Launch the Resource Enhancement and Accountability Programme

    (REAP) which requires strengthening of transparency and

    accountability in Public Finance, among others.

    iii) Complete the rollout of the Integrated Financial Management

    System (IFMS), Treasury Single Account Framework and the e-cash solution to all Government departments, at Local Government levels, to enhance efficiency, transparency and accountability.

    iv) Enhance asset management in Government for greater economy and efficiency.

    FINANCING STRATEGY FOR FINANCIAL YEAR 2019/20 AND THE MEDIUM TERM

    105. Madam Speaker, the Financing Strategy for the next financial year and the medium term, is underpinned by the recently developed Domestic Revenue Mobilization Strategy that seeks to enhance Uganda’s revenue. The Financing Strategy is also anchored on a prudent Debt Financing Strategy consistent with a sound fiscal and monetary policy framework.

    Madam Speaker, we will continue to undertake joint portfolio reviews

    Domestic Revenue Mobilization Strategy

    Madam Speaker, the Domestic Revenue Mobilization Strategy will strengthen tax administration and restore public confidence in the tax system. The strategy aims to raise the ratio of revenue to GDP ratio to 18% over a five year period. Therefore, the following interventions will be implemented over the next five fiscal years:-

    i) Review tax policies for greater simplicity, efficiency and sustainable revenues, taking into account citizens welfare and regional integration, bilateral and multilateral commitments.

    ii) Involve taxpayers more fully into the tax policy formulation process, to restore public confidence in the tax system.

    iii) Promote an attractive business environment to potential investors, including the provision of a business-friendly tax environment, and eliminating distortions to private sector investment decisions

    iv) Support investment in human capital by granting incentives to businesses which provide apprenticeship in priority sectors, accredited training and education based at the workplace

    v) Eliminate revenue leakages and enforce tax obligations by re- examining rules and restricting tax exemptions to those that have significant public good.

    vi) Enhance Uganda Revenue Authority’s administrative efficiency

    through additional staff recruitment, better training, and modernization and expansion of ICT capacity.

    vii) Enhance compliance through registration, improved taxpayer services and education.

    viii) Develop a simplified tax regime for small and medium enterprises, including informal sector businesses to encourage tax compliance, while preserving Uganda’s entrepreneurial spirit; and

    ix) Strengthen the revenue-raising capacity of Local Governments by broadening the range of revenue instruments available to them, and make them less dependent on Central Government transfers.

    Revenue Projections

    Madam Speaker, domestic revenue projections for next financial year amount to Shs. 20,449 billion. Of this, tax revenues amount to Shs. 18,877 Billion, while Non-Tax revenues (NTR) to Shs. 1,571 Billion.

    Madam Speaker, next financial year, URA will collect all Government revenues including Appropriation in Aid (AIA). For Government departments that have been collecting Appropriation in Aid, appropriate budget should be undertaken and resources shall be dully allocated. The revenue target for next financial year, including AIA, therefore translates into a revenue effort of 16.8% of GDP, in the NDPII target of 16% for financial year 2019/2020.

    Madam Speaker, Parliament approved tax measures for financial year 2019/20 which will come into effect from 1st July 2019. Modest adjustments to tax legislation have been made to streamline incentives and protect viable and competitive sectors. Tax laws have also been amended to support compliance, enhance competitiveness in the region, while closing loopholes that may lead to revenue leakage. The details of these measures are contained in the respective Tax Amendment Acts.

     Madam Speaker, the following are some of the highlights of the tax measures:-
    i) The Excise Duty Act was amended to provide for registration of

    manufacturers, importers and providers of excisable goods and services. This will also reinforce other tax reforms like digital tax stamps.

    ii) Income derived from leasing or letting facilities in industrial parks has been exempted from income tax for 10 years from the date of commencement of construction.

    iii) Withholding tax on long term bonds has been reduced from 20% to 10% to encourage investment in long term Government securities but at the same time reduce financing costs to Government.

    iv) The Stamp Duty Act was amended to provide for a uniform stamp duty payable on bank guarantees, insurance performance bonds, indemnity bonds and similar debt instruments in order to reduce the cost of debt financing and ease tax compliance and administration.

    v) In addition to VAT exemption on agro-processing, rice mills and agricultural sprayers have also been exempted from VAT.

    vi) Introduction of a 6% withholding rate for VAT.

    vii) To promote investment and industrialization, import tariffs on products

    which are locally manufactured have been increased.

    Tax Administrative Reforms

    Madam Speaker, effective tax administration is necessary for sustainable revenue collection. The Uganda Revenue Authority will therefore strengthen its capacity to effectively collect taxes. This will involve recruitment of additional staff, skills development in specialized areas such as audit, investigations and risk analysis; and the modernization and expansion of ICT capability.

    Madam Speaker, the following interventions in tax administration will be implemented next financial year:-

    i) Use of Electronic Fiscal Devices (EFDs) to improve compliance in VAT;

    ii) Use of a digital tax stamps solution to avert under-declaration of

    excise and customs duties;

    iii) Enhance rental income tax collection;

    iv) Purchase and deploy Scanners at major ports of entry into Uganda, to facilitate faster clearance of goods and curb mis-declaration;

    v) Expand deployment of the Electronic Cargo Tracking system to eliminate dumping of imports in the Ugandan market.

    Resource Envelope for FY2019/20

     Madam Speaker, the Resource Envelope of Financial year 2019/20 totals Shs.40,487.9 Billion of which Tax and Non-Tax revenue amounts to Shs.20,895.6 Billion. Domestic Financing amounts to Shs 2,829.8 Billion; while External Financing consists of Project Support of Shs. 9,433.6 Billion and General Budget Support Shs. 675.2 Billion. Domestic re-financing amounts to Shs. 6,452.6 Billion and Appropriation in Aid is Shs. 201.1 Billion.

    Budget Deficit and its Financing

    Rt. Hon Speaker, next financial year, the budget deficit as a ratio of GDP is projected at 8.7% compared to 5.8% this year. This is a result of increased in spending on infrastructure projects such as oil and tourism roads, the National Airline and power transmission lines. This deficit, as usual, will be financed largely through external borrowing, and to a lesser extent through domestic borrowing.

    Public Debt


    Madam Speaker, the stock of Government debt rose to Shs. 42,760 Billion (equivalent to US$ 11.5 Billion) as at end-December 2018. At end- December 2017, it was Shs. 37,208 Billion (equivalent to US$ 10.2 billion). External debt constitutes is 66.5% of the total debt and this amounts to Shs. 28,427 billion (equivalent to US$ 7.7 Billion). Domestic debt constitutes the balance.

    Debt Sustainability

    116. Madam Speaker, I would like to assure the country that our debt remains sustainable in the medium to long term. As of December 2018, debt was at 41.8% of GDP in nominal terms and 31.7% of GDP in present value terms, well below the threshold of 50% Debt to GDP ratio contained in the Charter for Fiscal Responsibility and the East African Community (EAC) Monetary Union Protocol. Uganda compares very favourably with its peers, because most of our debt has been contracted on concessional terms. Our debt has financed priority and productive sectors which will generate positive economic returns.

     Government will continue to exercise caution while taking on new debt. The rate of debt accumulation is expected to reduce in the medium term, as flagship infrastructure projects are completed. To ensure Debt Sustainability in the short, medium and long term, Government will:

    i) Continue to prioritize borrowing for mainly infrastructure development projects to address the existing infrastructure gaps for industrial enhancement, power transmission and distribution, transport, and water for production;

    ii) Improve loan absorption as well as effective utilization of the borrowed resources; including investing in export-oriented areas to boost exports which also increase our capacity to service external debt;

    iii) Apply more stringent vetting of projects to be financed by loans, including prioritizing only projects that enhance the productive capacity of the economy, demonstrate high economic returns, and help generate future growth.

    iv) Minimize the financing risks arising from commercial loans and associated volatility in exchange rates and interest rates.

    v) Enhance domestic revenue mobilization to reduce the levels of Government borrowing.

     Madam Speaker, while debt financing is used to finance critical public projects, some non-patriotic members of the society unfortunately continue vandalizing project assets, mainly in the electricity and transport sectors. This does not only undermine the generosity of the tax payers from the countries of our development partners but also curtails effective utilization of the assets when the projects are completed. I therefore appeal to the public and citizens of this country to respect these assets and desist from acts of vandalism.

    CONCLUSION

    119. Madam Speaker, the Financial Year 2019/20 Budget seeks to deliver inclusive growth and development for the vast majority of our people. It seeks to further build on the significant gains we have achieved in socio- economic transformation, by ensuring gainful jobs, increased incomes and greater wealth for Ugandan households.

     Madam Speaker, the NRM Government has built a firm foundation for all to seize boundless opportunities. I implore the youth and women of Uganda to seize opportunities that will build their skills, permit them engage in productive work and also establish business enterprises, where they can. I call upon farmers to cooperate and participate in the process of agro- industrialization in order to fully benefit from higher rewards to their efforts. This will enable households to improve production and productivity. As a consequence, incomes will rise, and new jobs will be created. This will lead to sustained growth and development of this beautiful Uganda.

    I beg to submit