KAMPALA – The government has listed priority areas to energise the economy in the financial year 2020/2021 against the backdrop of widening trade deficits and local revenue gaps. In its report on the Budget Framework Paper presented by the Committee on Budget, MPs warned of a growing trade deficit.
The report blames the decline in trade wars with Kenya and the closure of Uganda’s border with Rwanda which has frustrated commercial activities.
Tanzania, which has always shown cold shoulders to East African Community economic integration projects, has also been singled out.
“…[T]he trade surplus with EAC slowed down in the FY 2018/2019 compared to FY 2017/2018 mainly on account of the existence of non-tariff barriers in some of the partner states – most especially in Tanzania,” partly reads the report.
It continues: “the temporary closure of Uganda-Rwanda border and the decline in agricultural exports such as beans and maize to the region has also affected trade.”
In figures, Uganda’s trade deficit has shot from $2.4 trillion to $3.7 trillion, an increase of $1.2 trillion (about UGX4.4 trillion).
In recent months, Kenya has banned Uganda’s milk from its market and levied prohibitive taxes on poultry products from Uganda, a protectionist response to demands from local farmers to bar Ugandan products from their market.
Rwanda, on the other hand, has maintained a closed border with Uganda, and an expected rise in global oil prices, noted the Committee, will worsen the economic situation, as government largely relies on petroleum imports to fuel the economy.
To address these challenges, the government is holding tightly to the script of increased investment in infrastructure as well as skilling the youth to increase local production for import substitution.
“The economic growth strategy for FY 2020/21 will be premised on accelerating the pace of industrialization for viable agricultural and mineral commodities for exports, import-substitution, and jobs,” noted the report.
It added: “[also there will be an] investment in productive infrastructure and speeding up the pace of demographic transition through continued investment in human capital development, most especially skilling the youthful population.”
The 2020/2021 budget is now projected to be Shs39.6 trillion, a decline from UGX.40.4 trillion in the current Financial Year.
The projection was met with resistance from MP Muhammad Kivumbi (DP, Butambala) who accused the government of violating provisions of the Public Finance Management Act.
Kivumbi is opposed to plans to recapitalise Bank of Uganda with Shs400 billion in the coming financial year.
“Bank of Uganda has been recapitalised to the tune of over UGX.1.2 trillion in the last five financial years. In the next financial year, we are going to capitalise Bank of Uganda with over Shs400 billion,” said Kivumbi.
He also read a minority report on behalf of the Opposition saying the government should stay to the Shs39.6 trillion budget ceiling.
Deputy Speaker Jacob Oulanyah, however, diffused the situation guiding that government can revise the ceiling upwards subject to approval by Parliament.
The Public Finance Management Act places timelines on government and Parliament with regards to the annual budget, whose draft is supposed to be tabled by April 1st of every year.