Ugandan govt targets higher revenue collection in 2018

Ugandan govt targets higher revenue collection in 2018
Ugandans are to pay more taxes in 2018/2019 FY

Government has set a higher revenue collection target in the 2018/2019 financial year, according to the budget framework paper that’s before parliament.

The state minister for Finance, David Bahati, tabled the budget framework before parliament last week. According to the budget framework, government estimates to collect Shs 15.547 trillion in the 2018/2019 financial year from domestic sources. Shs 15.1 trillion is expected to come from tax revenue while Shs 418 billion is expected from non-tax revenue.

The domestic revenue target is an increase from Shs 15.062 trillion in the current 2017/2018 financial year budget. Out of this, Shs 14.6 trillion is tax revenue while Shs 376 billion is non-tax revenue.

“Government will propose modest adjustments to the current tax regime to ensure revenue productivity of the tax system, close loopholes in the tax laws, index specific tax rates for inflation, enhance tax administration efficiency and facilitate tax payer compliance,” reads part of the budget framework paper.

The paper also shows that in the medium to long term, revenue mobilization effort will focus on strengthening tax administration and compliance of tax payers.

It is anticipated that growth in tax revenue during the 2018/2019 financial year will come from improvement in compliance of taxpayers and strengthening of tax administration through expansion of the scope of withholding tax agents, strengthening the business intelligence function of Uganda Revenue Authority (URA) to detect non-compliance and implementing valuation controls among others.

Meanwhile, the proposed budget focuses on improving productivity in the primary growth sectors like agriculture, manufacturing or industry, tourism and minerals – to drive faster growth of the economy, addressing infrastructure deficits and other private sector constraints.

The other sector priorities are health, information and communication technology, energy and minerals among others.

Proposed sector allocations

According to the proposed allocations, the works and transport sector will get the lion’s share, taking Shs 4.7 trillion – an increase from the current Shs 4.5 trillion. Government will also spend Shs 2.7 trillion to repay interest, up from Shs 2.6 trillion in the current financial year.

The energy and mineral development will come third with Shs 2.5 trillion up from Shs 2.3 trillion. The education sector will bag Shs 2.4 trillion from Shs 2.5 trillion in the current financial year. The health sector will also suffer a budget cut from Shs 1.8 trillion this financial year to Shs 1.6 trillion in the next financial year.

According to the budget frame work paper, there will not be any increase from the public sector management, which stands at Shs 1.4 trillion. The security budget is proposed to reduce to Shs 1.3 trillion from Shs 1.4 trillion while the justice, law and order sector will receive the same allocation of Shs 1.1 trillion.

Ugandan govt targets higher revenue collection in 2018
The education sector is expected to suffer budget cuts

Accountability will receive Shs 866.4 billion, agriculture Shs 831.7 billion, water and environment Shs 713.7 billion, public administration Shs 566.2 billion, legislature Shs 483.8 billion, social development Shs 175.1 billion.

Lands, housing and urban development Shs 147.7 billion, tourism, trade and industry Shs 119.4 billion, ICT Shs 109.1 billion and science, technology and innovation Shs 71.8 billion.

External resource envelop

The budget framework paper projects external budget support at $40 million and project support $1.7 billion in the 2017/2018 financial year. However, government notes that project support is projected to decline in the following three years after 2018/2019 and is estimated at $786.4 million in the 2021/2022 financial year.

The decline in project support over the medium term is in response to the planned completion of some of the huge infrastructure projects like Karuma and Isimba dam, which are expected to be completed in December 2018.

“In addition it is due to unpredictability of this mode of budget financing and the difficulty in securing long term commitments from project financiers,” reads the framework paper.

Domestic borrowing

Government expects to raise Shs 940 billion in the 2018/2019 financial year from the domestic market through issuance of securities.

“This domestic borrowing is in line with government’s strategy of maintaining borrowing within one percent of GDP over the medium term in order to support private sector development. Domestic borrowing is projected to decline further to Shs 611 billion in financial year 2019/2020 and reach Shs 409 billion by financial year 2022/2023,” notes the budget frame work paper.

Debt repayment

Repayment of external debt in the 2018/2019 financial year is projected at $236.5 million, equivalent to Shs 894 billion. External debt repayment is projected to reduce to $131.8 million in the 2019/2020 financial year.

“External debt constitutes 66 per cent of total public debt of $10.74 billion projected for FY 2017/18. This reflects a higher exposure of failure to meet external debt obligations arising from exchange rate volatility and slow growth in exports,” reads the paper.

Interest payments

Government’s interest payments are projected at Shs 2,701 billion in the 2018/2019 financial year. Of this, Shs 2,279 billion is interest on domestic securities (treasury bills and bonds) and the rest is interest on external debt. Interest payments constitute 9.8 per cent of total resources available for spending next financial year.

Government expenditure

Government expenditure (excluding domestic debt refinancing) is projected to amount to Shs 22,579 billion in the 2018/2019 financial year. This is equivalent to 21.2 per cent of GDP.

“The bulk of the increase in spending will largely be driven by development spending, as government continues to invest in infrastructure projects,” reads the paper.

The Shs 21.9 trillion proposed 2018/2019 financial year budget is subject to approval once the different House sectoral committees adopt policy statements from ministries, departments and agencies. The policy statements spell out areas of focus in the ministries, unfunded priorities and the total budgets.