I. PRELIMINARIES
Your Excellency the President,
Mr. Speaker Sir,
Honourable Members of Parliament,
1. I beg to move that Parliament resolves itself into a Committee of Supply
for the consideration and approval of:
a) The Revised Revenue and Expenditure Estimates for the financial
year 2006/2007; and
b) The Proposals for the Estimates of Revenue and Expenditure for
the financial year 2007/2008.
2. Mr. Speaker Sir, Article 155(1) of the Constitution provides that the
President shall cause the preparation and lay before Parliament estimates of
revenue and expenditure for each financial year. I am accordingly performing
this duty on behalf of the President.
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II. INTRODUCTION
3. Mr Speaker Sir, the budget I am presenting today is a statement of the
revenues that Government expects to collect in the financial year 2007/08 and
how it plans to allocate these revenues as it pursues its vision for the economic
and social transformation of Uganda.
4. The theme for this year's budget is ‘Re-orienting Government
Expenditure Towards Prosperity For All'. This theme represents the NRM
Government's desire and determination to transform Uganda into a country of
opportunity and prosperity for all Ugandans. It also represents our strategy of
public-private partnership in the quest for prosperity. Expenditure will
therefore be focused on areas that will increase production of marketable
products that bring high returns, and on critical infrastructure that is necessary
to transform households, businesses and communities in Uganda.
III. STRUCTURE OF THE BUDGET STATEMENT
5. Mr Speaker Sir, the Structure of the Budget speech today is as follows:
a) I will first present Highlights of Economic and Fiscal Performance in
2006/07 and the Outlook for Financial Year 2007/08.
b) I will then outline some of the Emerging trends in the domestic,
regional and international economy.
c) Thirdly, I will present the Program for FY2007/08 including
Prosperity for All.
d) Finally, I will announce the Proposed Taxation Measures
e) And then state the Conclusions.
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IV. ECONOMIC PERFORMANCE AND FORECAST
Developments in the Real Economy
6. Mr Speaker Sir, real GDP growth in FY 2006/07 is estimated at 6.5
percent this year, up from 5.1 percent last financial year. Although this is
lower than our targeted rate of growth of 7 percent, it still represents a
remarkable performance of our economy, and is higher than the average growth
achieved by the non-oil producing countries in Africa, estimated at 5.2 percent
in 2006.
7. Next fiscal year, real GDP growth is also projected to grow by 6.5
percent. We are expecting stronger growth in cash crop production,
manufacturing, construction, transport and communications. The medium term
objective is to achieve GDP growth rates of 7 percent per annum. This is the
level of growth required to meet our poverty reduction targets. Achieving this
objective calls for continued vigilance in our macroeconomic policies,
acceleration of the critical supply side reforms, and removal of bottlenecks to
private sector development and competitiveness.
Savings, Investment and Exports
Savings
8. The money which the people save is the main source of the capital that
drives every economy. Uganda's domestic savings ratio currently stands at
about 10% of GDP. This is far too low compared to some of the fastest
growing economies which have sustained a savings rate in excess of 30% of
GDP for many decades.
9. It is for this reason that the Government has embarked on the policy of
creating a financial infrastructure throughout the country so that all our people
can have access to safe financial institutions in which they can save their
money. I call upon all Ugandans to save a part of their income, no matter how
small. Research all over the world has shown conclusively that poor people
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can, and do save. Savings is the proven route to get out of poverty. Countries
which were once very poor, but which adopted a culture of saving, have now
become super economic powers. If Uganda is to become a great nation, we
must, together, increase the proportion of our income we save from the current
10% to at least 20%.
Investment
10. Investment is perhaps the most strategic activity of the economy.
Government has always been committed to creating an attractive and enabling
environment for the private sector as an engine of growth. Private investment
has grown strongly for each of the last five years at an average growth rate of
16% in real terms. As a percentage of GDP, private investment has risen from
12.4% in FY 2002/03 to 17.9% in FY 2006/07. Public investment, investment
by our Government, also grew very strongly at 23.5% in real terms compared
to a growth rate of 11.8% in FY 2005/06.
Competitiveness
11. Mr Speaker Sir, it is our intention to make Uganda a leader in Sub-
Saharan Africa in terms of cost competitiveness and ease of doing business. For
the year ahead the priorities for easing the regulatory burden on doing business
will be to reduce the costs of registering and transferring property; to improve
access to credit; and to reduce the cost of trading across borders.
12. The Government is also committed to reducing the time to export and
import in Uganda from the current 42 days to under 30 days in the medium
term. Improved transport and energy infrastructure will also contribute to this
improvement.
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Exports
13. Mr. Speaker, the growth of our export sector is truly remarkable. Total
export earnings for both goods and services are projected to increase by 22
percent to US$ 1,714 million this financial year, from US$ 1,403 million last
year. Exports of goods are projected to increase by 36 percent to US$ 1,205
million, while exports of services are projected at US$ 509 million. Earnings
from coffee exports are projected to increase by 29 percent to US$ 224 million
this year. Coffee export volumes have grown by 15.2 percent and coffee prices
rose by 11.6 percent.
14. The improved overall export performance is mainly due to higher world
commodity prices, especially for non-traditional exports. The earnings from
non-coffee export goods are projected to increase by 31 percent to US$ 923
million, largely due to increased export earnings from cotton, tobacco, tea,
soap, fish and other products especially locally manufactured goods. Our
earnings from fish exports are projected to increase by 23 percent to US$ 238
million this fiscal year.
Developments in the Monetary Sector
Inflation
15. Mr. Speaker, it has been a fundamental policy of this government to
maintain stable prices for all good and services without interfering in the
operations of free markets. This year was no exception. Despite difficulties
arising from high prices of fuel on the international market, domestic escalation
in sugar prices in December 2006 and other inflationary pressures that built up
during this fiscal year, the government maintained economic stability through
macroeconomic measures that did not interfere with the markets.
16. These upward pressures on prices were compounded by the upward
revision in utility prices particularly electricity. This in turn led to increases in
the prices of manufactured goods and transport fares.
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17. Additionally, there has been a remarkable increase in not only domestic,
but also in the regional demand for goods and services. The combined effect of
these pressures is that annual underlying inflation will average 8.1 percent this
financial year. In the coming months, we expect inflation to fall back towards
the target of 5% per year as the impact of these one-off price shocks is reduced.
18. Maintaining low inflation at an average of 5 percent will continue to be
the cornerstone of Government's macroeconomic policy, because low inflation
is essential to a stable economic climate, in which the private sector can make
long-term investment plans and the purchasing power of the poor is protected.
The Exchange Rate
19. Over the year, the exchange rate has faced appreciation pressures, with
the Uganda Shilling appreciating by 8 percent against the US Dollar during this
fiscal year. This means that people who want dollars can buy them more
cheaply while sellers of dollars have been getting fewer and fewer shillings for
each dollar they sell. The strengthening of the Shilling has largely been on
account of more dollars coming to Uganda as exports have increased. This is
proof of the success of our policy of increasing Uganda's exports. Another
cause of the appreciation of the shilling has been increases in investment
inflows and high levels of donor aid, particularly project support and transfers
to NGOs. This was in addition to the persistent weakness of the US dollar on
the global financial markets.
Interest Rates and Government Securities
20. The Bank of Uganda has been active in the securities market in an effort
to control money supply growth and inflation. As a result, interest rates on
Government securities have faced upward pressure. The increased sale of
securities during the financial year has led to an increase in interest rates across
all maturities. Government is committed to the achievement of lower interest
rates together with prudent monetary and fiscal policies.
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21. Although high lending rates have become a persistent problem, I wish to
assure Ugandans that Government has taken some decisive measures to solve
the problem. First, Government has increased the capitalization of Uganda
Development Bank by shs 20 billion in the past 2 years. The lending rates at
UDB are lower than those of commercial banks and are intended to assist small
and medium investors to access medium and long term funds. Secondly,
Government has committed itself to support Savings and Credit Cooperative
Societies (SACCOS) with the necessary infrastructure in order to reduce their
cost of establishment so that they can lend at lower interest rates since they
now have lower overhead costs. Finally, Government lifted the ban on entry
into the commercial banking sector in order to increase competition.
22. Government is aware of the difficulties facing Ugandans in accessing
capital and in the high cost of capital. We shall not rest until the cost of capital
comes down to more internationally competitive levels so that the prices of our
exports can be more attractive in the in world market.
Financial Sector Developments
23. The performance of the financial sector is critical to the economic
development of the country. Over the past few years, the sector has benefited
from the strengthening of supervision and regulation of the banking system.
There has been continued public confidence in the sector and increased product
diversification. During this fiscal year, all banks remained well capitalized and
in line with the requirements of the Financial Institutions Act 2004. The
volume of non-performing assets as a percentage of total lending remained low,
at 2.95 percent in December 2006, which is well within the 10 percent
prudential limit. The low ratio of non-performing assets to Bank's total credit
portfolio is due to improved risk management by banks and a strengthened
supervisory framework.
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Anti-Money Laundering
24. To combat money laundering and terrorist financing, the Anti-Money
Laundering Bill will soon be laid before Parliament for discussion and
approval. In the meantime, Bank of Uganda has taken a pro-active approach by
participating in regional efforts aimed at combating money laundering and also
issued anti-money laundering guidelines to all supervised financial institutions
in Uganda.
Capital Markets
25. Capital markets demonstrated strong growth this financial year. The
capital value of the companies traded on the Uganda Securities Exchange
(USE) has grown to over 4 trillion Shillings. The growth of the market for
securities is attributed to two major factors; the general appreciation of share
prices of listed securities and the initial public offer of shares by Stanbic Bank.
In the coming fiscal year, the sale of Government shares in a number of public
enterprises is expected to lead to a further deepening and widening of the
capital market.
Social Security and Pensions Reform
26. Over the past several years there has been a vigorous debate over the
reform of the pensions sector. There is no doubt that Uganda needs and
deserves a good social security and pensions system. Such a system should
provide a secure and adequate income to people who are aged, unemployed
and/or disabled. Mr. Speaker, I want to take this opportunity to assure
Ugandans that this will be done.
27. Mr. Speaker, we have had to resist pressures to move hurriedly before
assuring ourselves of how to avoid the disastrous mistakes which in the not so
distant past wiped out the savings of tens of thousands of our people. We
should not and we will not be stampeded into a repeat of those mistakes. We
shall ensure an adequate regulatory framework to protect the retirement savings
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of all Ugandans. We shall resist pressures to use the pension savings of our
people for speculative gains. I want to assure Ugandans that their pensions
savings will not be allowed to become a game for speculators. Uganda will
establish a system of pensions that takes full advantage of best practices in the
world. It will provide for safe investment of those funds and a fair return to
members. It will also attempt to widen access to the greatest possible number
so that more and more of our people have an increasing measure of income
security.
28. Mr. Speaker, there is also considerable anxiety concerning pensions
arrears. I am pleased to announce that financing has been provided in next
year's budget to clear up Shs280 billion of arrears of which shs200 billion will
be for outstanding pension arrears. Over the medium term, resources will be set
aside to clear the present stock of pension arrears, while at the same time
aiming to convert the present system, to a contributory scheme, to prevent
further accumulation of arrears.
Fiscal Performance and Forecast
Revenue and Expenditure Outturns
29. The projected outturn for URA revenue collections this financial year is
Shs 2,615.2 billion, reflecting a surplus of 59.7 billion. I congratulate the URA
on this outstanding performance. Non-URA domestic revenue collections are
projected at Shs 95 billion this year, compared to the approved budget estimate
of Shs 42 billion.
30. The outturn on Government expenditure, including donor financed
projects, is projected at Shs 4,352.2 billion, representing a 99 percent outturn
compared to the approved budget. This reflects a near perfect overall
performance on expenditure.
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V. OPPORTUNITIES AND CHALLENGES.
31. The Ugandan economy is facing at least four major opportunities and
challenges in both the domestic and international arena. These are as follows:
a) First, we are witnessing the promise of a transition to domestic peace
in Northern Uganda. This will increase both the demand and supply
for goods and services, including infrastructure, and should increase
the growth in the Gross Domestic Product.
b) Second, we are surrounded by an emerging regional peace that has
brought with it an unprecedented increase in the demand for goods
and services. This calls for a supply response which should also spur
acceleration in economic growth.
c) Third, there is a remarkable world wide rise in the prices of raw
materials, including oil, and we ourselves are anticipating the
prospects for participation in trade in these commodities.
d) Fourth, we are witnessing the world wide technological revolution in
information technology that makes international employment
possible without the physical movement of labour.
32. Mr. Speaker Sir, I believe that these are important economic opportunities
that are already having a powerful impact on Uganda's economy. The
challenge we have is to design appropriate policies to take advantage of them. I
wish to request honourable members and all our people to keep these
opportunities and challenges in mind as we debate strategies and solutions to
Uganda's economic problems.
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VI. THE BUDGET STRATEGY FOR FY 2007/08.
The Strategy for Prosperity for All
33. Mr. Speaker, Prosperity for All is the central theme and message of the
NRM Election Manifesto of 2006. Ugandans have overwhelmingly embraced
this drive to transform the country from a poor peasant society into a modern,
industrial, united and prosperous society, in a stable and peaceful environment.
34. In this budget, Government is addressing the entire range of constraints
which often stand in the way of production, marketing, access to financial
services and the cost of capital. In order to attain ‘Prosperity for All', the
budget must address both the private sector concerns, as well as the provision
of public goods and services such as Security, Law and Order, Energy, Roads,
Education, Health and Water.
35. The strategy for increasing household incomes needs to address the
value chain of our products. The value chain concept attempts to identify the
various activities through which a product passes to reach the consumer. The
value chain components include production, processing and marketing.
Financing facilitates the value chain at all points and is therefore a critically
necessary ingredient of the ‘Prosperity for All' programme. This concept
attempts to avoid a haphazard approach that, for example, addresses production
while ignoring marketing and vice versa. When production increases without
prior arrangements for marketing, farmers are frustrated.
36. We should, therefore, encourage the value chain for products that:
a) have a market, especially an export market;
b) have a relatively high value; and
c) can be grown by a large part of the population.
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37. For example, there is enormous room for expansion in the production,
processing and marketing of tea, coffee, cotton, fruits, honey, rice, potatoes,
diary products, vegetable oil, poultry and fish. These products can be produced
in one or more ecological zones throughout Uganda. Our commitment is to
make sure that micro finance is available to facilitate the value chain, as well as
providing the technical advice for production while ensuring that the
processing and marketing infrastructure is in place.
38. Mr Speaker Sir, we know that the production of any commodity requires
the traditional factor inputs of Land, Labour, Capital, and Entrepreneurship.
Each of these factors of production requires careful analysis and management
by our people. The fact that our people do not posses degrees in business
administration does not exempt them from competition in the world market.
However, we believe that Government has the duty and the obligation to step in
to help our people solve the complex problems associated with the management
of each of these inputs.
Land
39. In order to assist people who are landless or whose land holding is too
small to realize an income that is above the poverty line, Government has set
aside a revolving fund to be used as a Land Acquisition Loan Facility. The
facility will be disbursed through Post Bank and participating SACCOs and
will be secured by the land that is acquired. I have allocated Shs. 3 billion for
this program which will initially cover 30 districts with each district getting
shs100 million. The amount per borrower will be kept low in order to enable as
many people as possible to participate. Additional requirements for participants
will be designed and communicated by Post Bank.
Labour and Extension
40. Production requires trained, skilled labour. The NAADS programme
will primarily aim to train farmers in the use of fertilizers, pesticides, farm
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machinery and irrigation. The programme will also be used to disseminate
tested crop varieties and production techniques to farmers to improve their
agricultural yields. This will re-orient agricultural production away from
traditional subsistence farming toward commercial, high return production.
Currently 64 districts are covered by NAADS. In FY 2007/08, I am providing
an additional Shs. 12 billion for the roll out of NAADS to all the districts not
yet covered by the programme. This will bring the expenditure of NAADS to
Shs. 60 billion in FY 2007/08.
Capital (Micro Finance)
41. The micro-finance based accumulation of capital will be done mainly
through cooperatives. The emphasis Government has put on the development
of Savings, Credit and Cooperative Organisations (SACCOS) is particularly
important in mobilizing savings and credit for the people. Out of the 970 subcounties,
only 381 have a SACCO. Government plans to strengthen the 381
SACCOS already in existence and to create new ones in the 589 sub-counties
that do not have them. For FY 2007/08, I have provided Shs 10 billion for
micro finance infrastructure from domestic resources, and additional funding is
also available from ADB and IFAD credits.
42. During FY2007/08, Government will also initiate legislation to improve
and strengthen the regulation and supervision of SACCOS. The working group
charged with this task has submitted its report. We expect to submit the
requisite paper to Cabinet by September 30, 2007.
The Role of Cooperatives in Management
43. Mr Speaker Sir, I beg your indulgence and that of honourable members
to dwell upon the role that cooperatives should be encouraged to play in the
prosperity for all program. I have already noted that it is difficult for a small
individual farmer to solve the problems of financing, production, processing
and marketing entirely on his own and compete successfully in the world
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market. Indeed we know that in many parts of the world, including the most
advanced economies, governments intervene to assist farmers and other
businesses.
44. Cooperatives have considerable potential to strengthen the capacity of
households in marketing and processing. This is especially true because
cooperatives, assisted by Government, can hire professional management.
When management is hired to run the cooperative, a board of directors that is
drawn from members of the cooperative should be selected by the members
and charged with the duty of supervising the management of the cooperative. In
the absence of organized effort in cooperatives, I see grave danger for the effort
to raise the rural poor from their poverty. I therefore beg to take this
opportunity to urge all the Ugandans to join the Savings and Credit
Cooperatives and the Production and Marketing Cooperatives. These
cooperatives offer a genuine opportunity for Ugandans to act together to defeat
the curse of poverty and to eliminate it forever from this country.
45. Consequently, Government proposes to strengthen district cooperatives
and management of cooperative societies by
a) Training the officers to supervise them,
b) Supporting the formation of enterprise-based cooperatives,
c) Carrying out a needs assessment for refurbishing storage facilities at
primary society level,
d) Refurbishing and equip stores,
e) Coordinating NAADS activities with cooperatives, and
f) Amending the Cooperative Societies Act of 1991 to improve the
supervision and regulation of cooperatives.
46. I have allocated shs 2 billion for marketing research and implementation
of the cooperatives activities. Additional funds will be available to cooperatives
which can engage in value addition and agro-processing.
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Processing and Marketing
47. Mr Speaker Sir, a central component of Government's strategy for faster
economic growth is to maximize Industrial Development and to promote
innovations in Science and Technology. Government will provide the
necessary support to innovative scientists to enable them to develop
commercial technologies and prototypes. Specifically, scientists will be
supported for research in banana development, fruit juice processing and
malaria research. This activity has been transferred to the Uganda National
Council of Science and Technology in line with its mandate.
48. Mr Speaker Sir, industrialisation is essential to raise labour productivity,
add value to products, earn higher export revenues and create employment. I
am allocating Shs 8 billion for acquiring land and building infrastructure for
industrial estates.
49. Additionally, we plan to increase capital funds for processing and
marketing through the issue of an Industrialization Bond. We shall support the
Uganda Development Bank and other development banks to raise at least shs50
billion for small and medium enterprises and cooperatives involved in
processing. These funds will be made available to the private sector at
regionally, and if possible internationally, competitive interest rates.
50. The increase in agricultural and industrial output resulting from these
measures should go a long way to respond to both the growing domestic
demand due to the transition to peace at home as well as the growing regional
demand for both foodstuffs and processed products.
51. Mr. Speaker, Honourable Members, these efforts by Government will
complement and not compete with the efforts of the private sector. As these
complementary efforts evolve, we hope to make increasingly vital
improvements in the design and definition of our public-private partnership
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arrangements, which will constitute the corner stone of the emerging Ugandan
economy.
52. Mr Speaker Sir, these interventions in the drive to attain prosperity for
all call for coordination at the centre and change agents who are strategically
situated in the rural areas. At the centre, a PFA Coordination unit in the
President's office will do the coordination of PFA. In the rural areas, the subcounty
Chiefs have been identified and trained to make PFA a reality.
53. Specifically, the sub-county chiefs are responsible for the following:
a) Manage and maintaining an effective Community Information System that
keeps us informed of progress in household incomes as well as in
community infrastructure.
b) Mobilize the people to build, manage and maintain Savings and Credit
Cooperative Organizations in Sub-counties.
c) Mobilize the people to build, manage and maintain functioning marketing
co-operatives and reaching out to the parishes within sub-counties.
Infrastructure Development and Maintenance
54. The needs of a household are not limited to its household income. The
household also requires community infrastructure such as schools, health
centres, water, power, security, law and order and so on. Sectors shall
programme the delivery of essential public goods and services at the subcounty
level in a coordinated approach. In light of this, the different line
ministries responsible for delivering public services at sub-county level are
expected to plan their interventions in order to demonstrate results and impact
in the sub-counties. Mr. Speaker, Ministries must plan and demonstrate impact
accountability. What impact has the ministry had on the ground in each subcounty?
If a certain sub-county has not yet been reached, for example with
clean water, the people in that sub-county should be told when they will be
reached. This is the essence of the sub-county model as a planning tool to
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deliver higher household incomes for all and better infrastructure for all. In a
nutshell, Mr. Speaker, this is the purpose and strategy of Prosperity for All.
55. Under the model sub-country development programme, line ministries
will therefore have to :
a) Set infrastructure and service delivery standards that will be
implemented at every sub-county.
b) Develop medium-term and annual budgets for reaching specific subcounties
in the plan period as well as annual targets.
c) Design a medium to long term action plan for reaching all the subcounties.
56. In order to operationalize the model sub-county programme, I am
allocating Shs.7.5 billion to commence the actual implementation of the model
sub-county programme and a further Shs. 3.5 billion to develop the Community
Information System.
VII. BUDGET PRIORITIES FOR FY 2007/08
57. Mr Speaker Sir, I would now like to highlight the major priorities of the
FY 2007/08 budget. In view of the extensive reporting on sector performance
in the Financial Year 2006/07 that we have in the Background to the Budget, I
will restrict myself to the major priorities for the forthcoming budget.
58. Our budget strategy has been to maintain high rates of economic growth,
low inflation, a sustainable external balance and macroeconomic stability
through fiscal discipline. Budget discipline will continue to be a critical part of
the overall budget strategy.
59. Mr Speaker Sir, The FY 2007/08 budget strategy places emphasis on
aligning our expenditures to the priorities which will support the Vision of the
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Government. These priority areas will have the first call on all new resources
for FY 2007/08. They are:
a) Investments in Energy Infrastructure;
b) Development and Maintenance of Transportation Infrastructure;
c) ICT, Science, Technology and Industrial Development;
d) Rural Development;
e) Human Development;
f) Security and Good Governance
60. The specific Targets of government in these priority sectors are as
follows:
a) To increase thermal power generation to 150 MW and to start on the
construction of both the Bujagali and the Karuma dam in
FY2007/08.
b) To implement the road maintenance program in all the constituencies
of Uganda.
c) To increase public investment in innovation and industrialization by
at least shs60 billion.
d) To introduce NAADS to all districts and start SACCOS and
Marketing Cooperatives in all sub-counties.
e) To reform the Pension Sector by setting up a regulatory framework
and turning NSSF into a pension fund.
f) To extend comprehensive peace and security to all the areas of
Uganda.
Investments in Energy Infrastructure
61. Mr Speaker Sir, Investment in energy development is critical for
improving our competitiveness and output. The current shortfall in energy
supply continues to hurt our economy, as manufacturers and other commercial
enterprises have had to provide their own sources of energy. This increases
operational costs and reduces competitiveness of the country as a whole. The
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FY 2007/08 budget will therefore continue to support emergency thermal
energy supply to mitigate the energy shortfalls in the medium term.
Government will deploy cheaper heavy fuel oil (HFO) thermal generating
plants in the medium term to mitigate use of more expensive diesel plants. I am
providing U. Shs. 92 billion to support thermal power generation.
62. Additional resources will also be set aside in the Energy Investment
Fund created in FY 2006/07, for the construction of the Bujagali and Karuma
hydro power dams. The early commencement of construction of the Bujagali
Hydropower project, was made possible by utilization of the US $75 million
from the Government of Uganda. This loan will be repaid to Government when
financial closure of Bujagali takes place in the near future. The construction of
the Karuma Hydropower station is expected to also start in the near future.
63. These two hydroelectric dams will ensure a cheaper source of electricity
supply in the long term. The Karuma Hydro Power station is to be fast tracked
so that we do not experience any further electricity shortfalls, as it is clear that
demand will outstrip supply soon after the completion of the Bujagaali hydro -
power dam. The necessary transmission and distribution capacity will also need
to be built. I am providing U. Shs. 119 billion in FY 2007/08 for development
of hydro power plants and related infrastructure.
64. Mr. Speaker Sir, Government will also support the development of
alternative renewable energy generating schemes. A total of 40 MW of
electricity will be generated from these schemes over the next five years. The
Kakira co-generation facility from bagasse and Nyagak mini-hydro will be
operational in the next financial year. Construction of renewable energy
schemes at Waki, Bugoye Buseruka and Kikagati will also commence in FY
2007/08. Drilling in the Kibiro/Lake Katwe area to assess geo-thermal potential
for power generation has also been undertaken and the evaluation of results is
on-going.
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65. Mr. Speaker Sir, because energy has become increasingly scarce,
efficiency in its use has to be of paramount importance. To this end, loss
reduction in the distribution system from 34 percent of power generated to 25
percent in the short to medium term is being targeted. This reduction of losses
requires the aggressive implementation of a loss reduction plan and its
associated investment by the electricity distributor beyond levels that we have
witnessed recently. Efficiency in energy use will also be enhanced through
undertaking energy efficiency audits in public buildings including universities,
schools and industrial and commercial buildings, including hotels. Government
will expand its ongoing energy audit program, and finance high-impact
investments identified by the audits, especially in the public sector.
Development and Maintenance of Transportation Infrastructure
66. Mr Speaker Sir, allow me to turn to road infrastructure development and
maintenance. Road transport is the dominant mode of transport in Uganda,
accounting for over 82 percent of the volume of freight and human movement.
However, the road infrastructure has developed a huge backlog in road
maintenance with approximately 20 percent of the entire road network
currently classified as in poor or bad condition; and over 60 percent in a
warning condition and about to deteriorate to poor condition. For FY 2007/08, I
have allocated an additional Shs 35 billion for clearing the backlog on road
maintenance, and an additional Shs 15 billion for the completion of road
construction projects that have stalled on account of lack of adequate
Government of Uganda counterpart funding.
67. In the long term, however, the sizeable amount of resources needed to
maintain the road network can not be fully provided for within the Government
budget given other emerging priorities such as Energy, and Universal
Secondary Education. In order to address the growing problem of road
maintenance backlogs, Government has established a Road Fund to allow a
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direct link between payment of road user charges and provision of road
maintenance services, thereby increasing the overall operational efficiency of
the road sector. The Road Fund is expected to improve the financing for
routine and periodic road maintenance and reduce the backlog in road
maintenance. We shall make every effort to ensure that the Road Fund is
equitably utilized to reach all constituencies of Uganda so that access to
markets and tourist centres is significantly improved. While other qualifying
expenditures for a Road Fund could include rehabilitation and new works, road
maintenance will have the first call on resources from the Fund.
Science, Technology and Industrial Development
68. Mr. Speaker, in recent times, the need for information to process and
manage land, labour and capital in a highly technological age was recognised.
The exponentially increasing technological economic environment required
information as a basis for its survival. The advancements in data and voice
communications is now apparent the world over. Phones, Internet and email are
seen as key factors involved in the success of running any operation in today's
global market. The exchange of information is crucial to sustain the current
growth of the world economy.
69. The ability to exchange information is vital to spur both foreign and
local investments. The penetration of the Internet and data connectivity
provides the added value to an investor in a foreign market. The access and
exchange of information allows local enterprises to compete with growing
foreign investment and to build home-grown businesses.
70. However, there is a 'north - south' Digital Divide within which there is
an imbalance in the presence, utilisation and access to the technologies between
the developed and developing worlds. In order to bridge this Divide, efforts
should be aimed at the use of digital tools and telecommunications to overcome
the natural physical barrier of Uganda being 'land-locked' to having digital
22
access to the whole globe, thus, also avoiding being 'e-locked'.
71. The Government has recognised the role of ICT in national development
and transformation programmes. The new Ministry of Information and
Communications Technology (ICT)'s new measures include the full
liberalisation of the telecommunications sector. This has lead to more investors
in the sector and to more products and services at lowered costs and wider
coverage. In addition, Government has embarked on a National Data
Transmission Backbone which shall link districts using fibre optic cable to high
speed connectivity for both voice and data exchange. The project also includes
the linking of all Government Ministries and agencies using fibre optic
technology.
72. The FY 2007/08 budget includes Shs. 5 billion to fund the construction
of a National Data Transmission Back Bone to enhance Uganda's domestic
fibre-optic network and wireless capability. This counterpart funding will
supplement a US$ 30 million loan from the Peoples' Republic of China.
Rural Development
73. Mr Speaker Sir, as I noted earlier, the plan to achieve Prosperity for All
aims to raise the incomes of households through increasing access to land,
labour productivity, access to capital and improving economic organisation of
farmers. Over the short to medium term, households will be facilitated to
access basic production inputs such as planting materials, breeding stock and
extension services, marketing infrastructure and rural financial services. The
linkage between farmers and processors as well as processing capabilities will
be enhanced with the industrial development interventions I have just spelt out.
74. At the community level, Government is already building an effective
supportive community infrastructure in the form of roads, water, and education
and health facilities. This will be complemented by a community information
23
system to enable the communities themselves to generate information for use in
planning and service delivery.
Human Development
75. Mr Speaker Sir, with respect to interventions for Human Development,
Government will continue to implement the Universal Secondary Education
initiative that commenced in January 2007. Since then, a marked increase in
enrolment rates in secondary schools has occurred, thereby increasing
transition rates of pupils from primary education into secondary education.
USE has been broadly embraced and will enable the country to reap greater
benefits from a more knowledgeable and disciplined population. This is a
major achievement which will make a crucial contribution to the socioeconomic
transformation of Uganda.
76. For FY 2007/08, I have provided additional resources amounting to Shs
24 billion for the recruitment of teachers, construction of classrooms and
capitation in support of the Universal Secondary Education Programme for
participating schools. Universal Secondary Education requires additional
funding over and above the current projections for the FY 2007/08 budget,
hence it is necessary to ensure that the available budgetary resources are used
more efficiently by the sector.
77. Whereas, the programme is generating unprecedented increases in the
level of enrolment in secondary education, we should guard against a number
of quality related concerns which have already emerged as constraints to the
success of UPE. Government intends to critically review these constraints and
address them to ensure greater efficiency in the delivery of these two crucial
programmes.
78. Mr. Speaker Sir, in the Health Sector, the major priority remains the
implementation of the Uganda National Minimum Health Care Package. The
24
top priorities that need to be emphasised in the delivery of the Uganda National
Minimum Health Care Package include the enhancement of Sexual and
Reproductive Health and Rights with a focus on improving maternal and child
health, Malaria control, Immunization, Sanitation, Community Mobilization
and HIV/AIDS.
79. Priority interventions to improve maternal and child health will entail a
focus on the provision of emergency obstetric care at all maternity centers at
Health Centers III and IVs and at hospitals; and increasing access to family
planning services. Emphasis will be placed on programmes promoting child
survival including the Integrated Management of Childhood Illness, the
Expanded Programme on Immunization, Nutrition, and the Newborn Health
and Survival. The sector will intensify immunization services through
intensified social mobilization, making the appropriate vaccines available at all
health centers and expanding and strengthening outreach centers and active
surveillance. Malaria Control programmes will focus on strengthening
preventive measures including the preventive treatment of malaria during
pregnancy, vector control measures, and prompt and effective malaria case
management at all health facilities, communities and households.
80. Mr. Speaker Sir, under the infrastructure development programme, the
Health Sector will concentrate on equipping the existing health infrastructure.
This will entail equipping Health Centre II's, III's and IVs. I have allocated
Shs. 11 billion specifically for recruitment and provision of drugs at Health
Center III's. I have also provided Shs 8 billion for the rehabilitation of Referral
Hospitals.
81. To respond to the challenge of alternative and sustainable health care
financing, Government will evaluate the costs and benefits of setting up a
National Social Health Insurance Scheme.
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82. Mr. Speaker Sir, with respect to HIV/AIDS, Government shall continue
to promote the ABC strategy as a measure to prevent the spread of HIV/AIDS.
The finalisation of the revised framework of the National HIV/AIDS Strategic
Plan will guide Government's national intervention against the HIV/AIDS
pandemic.
83. Mr. Speaker Sir, with respect to water sector, in FY 2007/08, efforts will
be made to increase the number of functional water points in rural areas and
piped water systems in rural growth centres. This activity is aimed at increasing
district rural water supply coverage from 61 percent to 63 percent. Government
also intends to increase coverage of piped water systems and sewerage systems
in urban areas with efficient management. Water supply coverage in small
towns will be increased from 65 percent to 69 percent.
84. Emphasis will be placed on educating and sensitising communities and
households on harvesting and storage of water from their roofs especially those
who have modern roofs. We shall encourage SACCOS to lend for water
harvesting equipment and government will seek funds to subsidize this activity.
I have allocated an additional Shs. 20 billion to the Water Sector for water for
production and provision of rural water supply.
Security and Good Governance
85. Mr Speaker Sir, the focus for the security sector in FY 2007/08 will be
on combating Local and International Terrorism. Government will transform
the Uganda People's Defence Forces into an efficient, effective and
professional modern force. The welfare of soldier's will be enhanced through
an increase in salaries from Shs 140,000 to Shs 180,000 per month for infantry
soldiers.
86. Additionally, Government will also pay duties on a specific quantity of
roofing iron sheets and cement to enable soldiers build homes for themselves at
26
subsidized prices. The specific quantities will be worked out with the Ministry
of Defence. This measure will address the complaint that members of the
armed forces in other countries in the region have access to duty free shops
while ours do not.
87. Government will also intensify efforts at improving access to justice for
all, especially the marginalized and the poor. We have urged the Ministry of
Justice and Constitutional Affairs to design and implement a plan to increase
the number of magistrates in rural areas so that the time and distance taken to
access justice can be substantially shortened.
88. Mr Speaker Sir, in the commercial arena, Government is committed to
providing and ensuring a sustainable conducive legal environment for both
local and foreign investment. This will be done through the harmonization of
all related local laws and agreements or Acts at national, regional and
international levels.
Commonwealth Heads of Government Meeting
89. Mr Speaker Sir, the Commonwealth Heads of Government meeting is
scheduled to take place in Uganda this year. To facilitate this meeting,
Government in FY 2006/07 paid for a 25 percent shareholding in Munyonyo
Commonwealth Resort. Infrastructure projects including road repairs in
Kampala and the provision of street lighting in Kampala and Entebbe were also
carried out. In addition, works were carried out on the improvement and
expansion of the radar facility at Entebbe Airport. In FY 2007/08, I am
providing additional resources for completion of the activities related to hosting
the meeting in the country.
Pay Reform
90. Mr Speaker Sir, Government has approved a pay policy for public
service institutions and Government agencies. The policy includes principles
27
for setting pay levels across the service, approval of the salary structure for the
public service institutions and government agencies including cadres in high
demand and short supply and those who are critical to the social transformation
of the country. Government has now embarked on costing the structure of the
entire Public Service based on the proposed salary levels within the pay policy.
This will provide the basis for ascertaining the resource requirements and draw
strategies for phased implementation of the policy within the resource
constraints. I have provided Shs. 30.2 billion to cater for salary shortfalls
experienced this year as well enhancement of salaries for public servants.
While this should go a long way in reducing the need for wage supplementary
schedules, there remains room for improvement in hiring and management of
practices before the wage supplementary can be eliminated completely.
Local Government Financing
91. Mr Speaker Sir, the financing of local governments today is
characterised by their inability to collect sufficient revenue to support the
effective delivery of services to the population. Over the last eight years, there
has been a steep decline in revenue collection by local governments. While
Graduated Tax was the main source of revenue for local governments, it was
regressive to the poor and so Government abolished it in July 2005. In order to
mitigate the impact of declining local government financing on service
delivery, Government has approved new revenue sources for local governments
to broaden their revenue base. Mr Speaker Sir, I am proposing that the new
taxes for Local governments take effect on 1st July 2007. The new taxes have
been carefully selected because unlike Graduated Tax, they are productive,
equitable, easy to collect and are levied on wealth and incomes, not individuals.
With these taxes in place, there should be less pressure for Graduated Tax
compensation. However, as an additional measure to augment Local
Government revenue, I have provided Shs 33 billion to enhance the
Unconditional grants for FY 2007/08.
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92. Mr. Speaker Sir, I will announce the specific tax measures relating to
local governments when I discuss taxation and revenue measures later.
93. Local governments have in the past expressed concern over the
management of royalties. Government has now opened an account with Bank
of Uganda under the Ministry of Energy and Mineral Development. The
royalties paid on this account will periodically be transferred to the respective
local governments on submission of claims through the Ministry of Local
Government. Local governments are increasingly burdened by the inability to
pay pensions leading to the accumulation of pension arrears. For FY 2007/08, I
have provided Shs. 17.5billion for the settlement of verified Local Government
pension arrears.
Peace Recovery and Development of Northern Uganda
94. Mr. Speaker Sir, Northern Uganda including the Karamoja region
urgently requires interventions to effect post-conflict reconstruction and
recovery. Continuing the pacification and development of Northern Uganda
and the Karamoja region is a priority in the Financial Year 2007/08 Budget.
95. The resettlement of persons now residing in Internally Displaced
Persons camps that began last financial year will be completed in FY 2007/08.
Government will also support the people of Northern Uganda to engage in
productive ventures. Engaging resettled persons in productive activity will
require rationalisation of the implementation of the Northern Uganda Peace,
Recovery and Development Plan with current initiatives such as the National
Agricultural Advisory Services and existing Sector Investment Plans. In
addition to maintaining the U. Shs 18.6 billion provision to support
resettlement, I am allocating a further U. Shs. 5 billion specifically for the
provision of water in Northern Uganda. The full assessment of the
interventions required for the Recovery and Development of Northern Uganda
29
is currently underway, and further support to implement the programme will be
made available.
Accountability
96. Mr Speaker Sir, I will now highlight Government efforts to ensure
adequate accountability for public funds.
Tackling Corruption
97. With regard to the fight against corruption, I am happy to announce that
Government has received a grant of US $10.2 million from the Government of
the United States of America to strengthen the investigation, documentation
and prosecution of corruption cases. Moreover, the Government will safeguard
the independence of the judicial process and promote efficient, transparent and
timely enforcement of the judicial decisions in a professional manner with zero
tolerance on corruption. Let all of us stand warned.
98. Mr. Speaker Sir, Government will continue to support the institution of
the Inspector General of Government as well as strengthen the Office of the
Auditor General. Strategic partnerships between the Inspectorate of
Government and other relevant organisations such as the Directorate of Ethics
and Integrity, the Police, the CID, the Directorate of Public Prosecutions, the
Attorney General, the Office of the Auditor General, NGOs and community
based organisations will be strengthened. This approach will lead to strong
coordination and cooperation in the fight against corruption. The US$ 10
million, which I referred to earlier, which Government has also received from
the United States Millennium Challenge Account will be used to strengthen
anti-corruption agencies.
Efficiency and Effectiveness of Public Expenditure
99. Mr Speaker Sir, in order for us to achieve our goal of Prosperity for All,
Government needs to identify and implement efficiency gains in service
30
delivery. To achieve this, the various proposed programmes relating to the
PEAP, the Rural Development Strategy, the Prosperity For All Programme and
other initiatives will be harmonised and rationalised. Mr Speaker Sir, other
efficiency measures are currently being undertaken at the sector level. For
example, we are addressing quality concerns in education by putting in place a
thematic curriculum and vernacular teaching to improve literacy, community
participation to reduce dropout rates and performance contracts to minimize
absenteeism.
VIII. RESOURCE ENVELOPE FOR FY2007/08
100. The total Resource Envelope for FY 2007/08 amounts to Shs. 5,025
billion. This is composed of the following components.
Domestic Revenue
101. Domestic revenue in the next fiscal year is projected to increase by 15.5
percent from the current fiscal year's projected outturn to Shs 3,190 billion,
which is equivalent to 14.4 percent of market price GDP. This is an increase of
15 percent over this fiscal years projected outturn of shs 2711 billion. In
FY2007/08 URA revenue collections are projected to increase by 16 percent
from shs2615.2 billion to Shs 3,076 billion, while non-URA non - tax revenues
are projected at Shs 114 billion.
Budget and Project Support
102. External resource inflows to support the budget consist of budget
support loans and grants, as well as loans and grants to support development
projects. Budget support is projected to decline to Shs 711 billion in the next
fiscal year from a projected outturn of Shs 1,086 billion this year. Project
support loans and grants will amount to Shs 1,201 billion next financial year.
In total, budget and project support from outside Uganda will finance 38.7
percent of the Budget for FY2007/08.
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103. Several loans contracted continue to disburse slowly for various reasons,
including lack of counterpart funding and weak procurement planning. From
next financial, I will place significant emphasis on requiring sector ministries to
provide for faster utilisation of project funds and improve their institutional
capacity in management.
Loan Repayments by Parastatals
104. Loan repayments by parastatal organizations will contribute Shs. 35
billion to the budget Resource envelope.
External Debt Repayment
105. A sum of Shs. 157 billion is required for servicing external debt.
Domestic Financing
106. Domestic financing will contribute Shs. 38 billion to the resource
envelope in FY 2007/08.
Domestic Arrears
107. Funding for domestic arrears will require Shs. 280 billion.
Constitutional Self - Accounting Bodies
108. Mr Speaker Sir, the budgetary proposals of the following Self
Accounting Bodies have been submitted in compliance with Article 155(2) of
the Constitution.
I. Courts of Judicature
II. Electoral Commission
III. Inspectorate of Government
IV. Parliamentary Commission
V. Uganda Law Reform Commission
VI. Uganda Human Rights Commission
VII. Uganda Aids Commission
VIII. National Planning Authority
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109. In accordance with Article 155(3) of the Constitution, Government has
made recommendations on these proposals. I hereby lay both the budgetary
proposals and the recommendations of Government before this August House,
as required by the Constitution.
110. In order for me to submit a fully financed National Budget for your
consideration in accordance with Article 155(1) of the Constitution, the budget
provisions of these Self Accounting bodies are in accordance with the resource
envelope conveyed to them in the course of budget preparation, including the
presentation of the National Budget Framework Paper to Parliament, in
accordance with the Budget Act 2001.
X. REVENUE AND TAX MEASURES FOR FY 2007/08
Revenue and Tax Measures for FY 2007/08
111. The theme of tax policy in the medium to long term is simplicity,
fairness and growth. Government has over the years undertaken major reforms
to the tax system in pursuit of these objectives. Value Added Tax was
introduced in 1996 as part of the measures to modernize domestic indirect taxes
and the income tax law was reformed in 1997. Since then, no major review of
the tax system has taken place to assess whether it still meets its objectives
especially in today's changing environment. In this regard, Government will
review the tax system to make it more appropriate in meeting national
objectives.
Investment Incentives
112. Mr Speaker Sir, in order to enhance investments, employment,
competitiveness and growth, I am proposing to enhance tax incentives for
investors. The tax incentives will be limited to persons engaged in the
exportation of finished consumer and capital goods.
33
113. The incentives which are in line with the practice in the other Partner
States in the East African Community will include the following:
(a) 10 year tax holiday to companies engaged in value added exports.
(b) Withholding tax exemption on interests, raw materials and plant &
machinery
(c) Stamp duty exemption on increase in share capital and mortgages.
(d) Duty and tax exemption on raw materials and plant & machinery
114. The details are contained in the various tax Bills that Government is
proposing to bring before Parliament.
115. Mr. Speaker Sir, the revenue loss out of this measure is estimated at
about Ushs. 22 bn.
VAT on Residential Properties
116. Mr Speaker Sir, in order to encourage development of large scale, wellplanned
residential areas so that Ugandans acquire and live in decent houses
and environment, it is proposed that VAT on sale of residential properties be
reduced from 18 percent to 5 percent. The revenue loss out of this measure is
estimated at about Shs. 2 billion.
Abolition of Road Licenses under the Traffic Act
117. Mr. Speaker Sir, license fees are a major revenue category projected to
bring in about Shs.80billion this Financial Year. However, it is undermined by
the high rate of default, rampant forgery of license stickers and requires a lot of
administrative resources to ensure compliance. This state of affairs is
untenable.
118. Mr Speaker Sir, I am therefore proposing to abolish the Road License
Fees, except charges on first registration.
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Excise Duty on Fuel
119. Investment in infrastructure is critical for increasing our competitiveness
and for poverty eradication. To maintain Uganda's infrastructure it is critical to
raise sufficient resources for road maintenance. Mr. Speaker Sir, for this reason
the excise duty on diesel and petrol will be increased from Ushs. 450 and Ushs
720 per litre to Ushs. 530 and Ushs. 850 per litre respectively. This measure
will generate Ushs 76 bn.
VAT on Hotels Inputs
120. Mr Speaker Sir, as an incentive to support hoteliers to upgrade their
facilities and to increase room availability in preparation for CHOGM,
Government intervened with effect from Financial Year 2005/06 by paying
import duties and taxes on construction materials for hotels. Taxes paid so far
amount to 8 billion. The policy has achieved its objective as evidenced by the
relatively large number of hotels that have been constructed.
121. Mr Speaker Sir, this policy will be terminated with effect from 1st July
2007; but we shall allow a transition period of up to December 31st, 2007 for
Hoteliers who were granted this incentive to clear their goods.
Taxation of Airlines
122. Mr Speaker Sir, the airline industry faces a lot of costs in international
transport of goods and services. Airlines consolidate their worldwide income to
arrive at their profit or loss. Taxing an airline on income it derives from
Uganda, without taking into account its overall income may discourage
international carriers from flying the Uganda route. As a landlocked country
Uganda needs policies that encourage international carriers to fly to Entebbe.
123. Mr. Speaker Sir, I am proposing that international carriers be exempted
from tax on the income derived from Uganda in respect of international traffic.
The details are contained in the Income Tax (Amendment) Bill 2007.
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Tax Amnesty
124. Mr Speaker Sir, a number of taxpayers would want to come out and pay
their outstanding obligations but are wary of the penalties that they face which
sometimes surpass the principal tax. A few have approached Government for
clemency.
125. Mr. Speaker Sir, to encourage voluntary compliance I am proposing an
amnesty on penalties and interest to all taxpayers who voluntarily disclose and
pay their principal tax liability. The amnesty will cease on 31st December 2007.
The details are contained in the Finance Bill 2007.
Agricultural Loans
126. Mr Speaker Sir, in the 2005/06 Budget Speech, Government announced
that interest earned by financial institutions on loans granted to persons
engaged in agriculture be exempt from tax. The purpose was to encourage
banks to extend credit to the Agricultural Sector.
127. However, this has been hampered by the costs incurred by financial
institutions and the bad debts that they register which have not been deductible
as expenses. This therefore keeps the interest rates still high.
128. Mr. Speaker Sir, in order further encourage banks and to reduce the
costs of lending to the Agricultural Sector, I am proposing that expenditures
and losses and bad debts incurred in lending to the agricultural sector be
deductible for tax purposes.
Levy on Hides and Skins
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129. Mr Speaker Sir, in the budget speech of 2001/02 Government introduced
a 15% levy on the value of all exported raw hides and skins. The rate was later
increased to 20%. The levy was intended to support and encourage value
addition. Since the levy is based on value, exporters are now declaring that the
bulk of the hides and skins are rejects thereby underpaying the levy. As an
alternative measure, I am proposing to introduce a fixed levy of US 0.25 per
kg.
Environmental Levy on Used motor vehicle Spare parts
130. In line with Government policy to deter the importation and use of
environmentally hazardous used goods, a 10% levy was introduced in the
2006/2007 Budget Speech, on used motor cars over 8 years old. However, used
motorcycles, bicycles and spares for motor vehicles were not included.
131. Mr Speaker Sir, I am proposing that a 10% levy be introduced on used
motor vehicle spare parts. This measure is consistent with the practice in the
East African Community and the region.
Transit Parking Areas
132. Mr Speaker Sir, in 2002 we introduced Transit Parking Yards to help in
the control of Transit Vehicles, provide adequate security and to minimize
revenue leakage. However, URA has since modernized and automated the
processes for controlling cargo in transit. Therefore to reduce transport costs
and to increase the movement of cargo across the country, I am abolishing
transit parking yards with immediate effect.
East African Community Common External Tariff ( CET)
133. Under the Protocol on the Establishment of the East African Customs
Union, prior to reading their national budgets, the Ministers of Finance have to
hold joint budget consultations with regard to the implementation of the
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Common External Tariff. The Ministers agreed on a number of measures to be
implemented in the coming Financial Year 2007/2008. One of the major
decisions taken by the Ministers was the alignment of the EAC CET
Harmonized System Nomenclature (HS) with the latest HS Version adopted by
the World Customs Organisation (WCO). The details of the Ministers'
decisions will be contained in the gazette and in a new EAC CET handbook to
be published by the East African Community Secretariat.
134. Mr Speaker Sir, in view of their significance to our economy, I wish to
highlight the following decisions that made by the Ministers:
Polythene Bags and Plastic Containers
135. In the Budget Speech of June 2002, Government announced that due to
the serious environmental concerns and the difficulties in the disposal of
polythene bags and plastic containers, material action was required in order to
encourage producers and consumers to minimize the use of these bags and
containers, and to develop more environmentally friendly alternatives. This
being a common problem in the region, the Ministers agreed to ban plastic bags
(commonly known as "buveera") of less than 30 microns and to impose an
excise duty of 120% on the rest. Importation and production of these items is
banned with effect from 1st July 2007. However, there will be a transitional
period of up to 30th September to allow for clearance of the products in stock.
Buses for the transport of more than 25 persons
136. In recognition of the need to provide quality transport services for the
CHOGM guests, the Ministers granted Uganda the authority to import buses
for the transport of more than 25 persons at a reduced Common External Rate
of 10% instead of 25%.
Harmonisation of Visa Fees
38
137. In line with our efforts to harmonise foreign policy among East African
Community Member States, we are revising our visa fees to match those
charged by the Partners States. Accordingly, the following rates will be
applicable next financial year:
a) US$ 50 for single entry
b) US$ 100 for six months
c) US$ 200 for twelve months
138. Mr. Speaker Sir, for countries charging higher than the above rates, the
principle of reciprocity will apply.
Excise Duties
139. The excise duty law is very old and outmoded. Since it was enacted in
the 1950s, several amendments have been made piecemeal. Therefore, there is
need to overhaul this law in terms of its relevancy to the times and to make it
more user friendly.
140. Mr. Speaker Sir, I am proposing to undertake a review of this law in
conjunction with the Uganda Law Reform Commission. A Bill on a new excise
law will be brought before Parliament in the course of the coming Financial
Year.
Tax Expenditures
141. Mr. Speaker Sir, Article 152 Clause (2) of the Constitution obliges me to
report to Parliament periodically on the exercise of the powers conferred upon
me by any law to waive or vary a tax imposed by that law. I wish to report that
from July 1, 2006 to date I have exercised the powers conferred by the Income
Tax Act and the Value Added Tax Act and waived tax arrears amounting to
Shs.4,835,294,750 due from the business community in the war ravaged
Northern Uganda. I also wrote off the penal tax amounting to Shs.71,266,251
39
owed by Monitor Publications Limited and Income tax (Pay as You Earn) of U.
Shs. 15,481,021 due from Comboni Hospital in Bushenyi District..
142. Additionally, Government has paid Shs 6,289,481,424 for NGOs and
Shs 14,444,025,714 for private enterprises involved in the hotel sub-sector.
143. Mr. Speaker Sir, I now lay before you the Schedule of the waivers and
payments.
Financing Strategies for Local Governments
144. Mr Speaker Sir, as I stated earlier, Government has so far identified
sources of taxes for local governments to replace graduated tax and broaden
their revenue base. Mr. Speaker Sir, allow me now to highlight the proposed
new taxes.
Local Service Tax
145. The Local Service Tax shall be levied on wealth and incomes of the
following:
a) People in gainful employment;
b) Self employed and practising professionals;
c) Self employed artisans;
d) Businessmen and women; and
e) Commercial farmers;
146. The following persons shall be exempted from the payment of Local
service Tax:
a) Members of the Uganda Peoples' Defence Force;
b) Members of the Uganda Police Force;
c) Members of the Uganda Prisons Force;
d) Members of the local defence forces; and
40
e) Unemployed persons, peasants and people living in poverty who are
unable to earn minimum income to access basic necessities of life.
Local Hotels Tax
147. Mr Speaker sir, this tax shall be levied on all hotel and lodge room
occupants.
148. Mr. Speaker Sir, my colleague the Minister of Local Government will be
laying before this august House the details of the local Government finances.
Ratification of the Revised Cotonou Agreement
149. Mr. Speaker Sir, the Cotonou Agreement which sets out the
development, trade and political cooperation framework between the European
Union, African, Carribbean and Pacific States was concluded on 23rd June,
2002 in Cotonou - Benin. The Agreement provides the framework for the
European Commission's development funding to Uganda. The Government of
Uganda is required under the Ratification of Treaties Act, to table before
Cabinet for approval and lay the Revised Agreement before Parliament. I am
therefore laying before you, the Revised Agreement for ratification in
accordance with the Act.
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XI. SCHEDULE OF INDEBTEDNESS
150. Mr. Speaker Sir, in accordance with the provision of Section 13 (1) and
(2) of the Budget Act 2001, I hereby lay before the House the Statement on:
(i) Government's total external indebtedness as at 31st March, 2007;
and
(ii) the grants that Government received during financial year
2006/07.
151. With respect to Section 13 (3) of the Budget Act, Government has
provided two guarantees during financial year 2006/07. These are the partial
risk guarantee for the private commercial lenders to the Bujagali Power
Generation Project worth US $115 million, the partial risk guarantee for the
Uganda Railways Concession worth US $ 15 million.
152. On utilisation of loans and grants, I have attempted to point out some
implementation issues on a loan by loan and grant by grant basis. However, the
implementing agencies are better placed to provide detailed information on
implementation. I hope that the details of the utilisation and the performance
of each loan and grant, including the extent of the achievement of the
objectives and targets, will be provided in the policy statements of the
ministries and departments which received the loans and grants as well as in
our poverty monitoring and assessment reports.
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XII. CONCLUSION.
153. Mr. Speaker, I have now come to the end of this year's budget speech in
which I have shown that Uganda's record of economic growth in FY2006/07
was remarkably high in spite of a steep rise in oil prices and a severe shortage
of electricity. The growth in exports was even more remarkable with double
digit increases in both value and volumes.
154. I have attempted, Mr. Speaker, Honourable members, to clarify the
Government's strategy to expand opportunities for all our people, in every subcounty,
without discrimination, to access savings and credit institutions,
agricultural inputs, production and marketing cooperatives so that they can
increase their incomes. I have provided for value addition and for the expansion
of the industrial parks and their infrastructure. I have urged all ministries to
plan for impact accountability at the sub-county level where the great majority
of our people are. Mr. Speaker I have provided the ministries the resources,
however limited, to use to implement more and better infrastructure in the form
of schools, health centres, water, telecommunications, roads, justice, security
and other services. I have attempted to provide resources to all sectors of
Government at a greater level than last year in almost all cases. Mr. Speaker I
have attempted to do all that with modest increases in the taxation levels.
155. Mr. Speaker Sir, in this great partnership among the households, the
private sector, the development partners, the Parliament, the Judiciary, the
Executive and so many others, there must be room for patience, tolerance and
even love and sacrifice if the organic body we call Uganda is to survive and
increase in strength. Surely, no family can survive without these sacrifices.
Uganda is our home, we have no other home. We must therefore treat one
another as members of one family, called Uganda, and not as enemies to be
extinguished and exterminated.
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156. Mr. Speaker, I wish to end on an optimistic note. I want to be optimistic
that a people who have been able to grow at a rate of about 6% per annum for
20 years while at war and while without oil, can grow even faster when we are
without war and when we have oil. I want to pray that with the infinite
expansion in educational opportunities which we have put in place and are
continuing to expand for our people and with the advent of technological
backbones all over the country, these same people who have been so eager to
venture thousands of miles abroad to do ‘kyeyo' and other menial labours, will
now seize the opportunity to earn these dollars without having to leave home
and without sacrificing home and family. Mr. Speaker, I would like to hope
that the incentives provided in this budget to expand agricultural and industrial
production and to reduce the cost of doing business and to increase economic
freedom will consolidate the image, and the reality, that Uganda is the spiritual
and commercial centre not only of the great Lakes Region, but of Africa. Mr.
Speaker, I want to be prophetic, Churchill notwithstanding, in saying that
Uganda is marching on and will soon actually become, the real Pearl of Africa.
FOR GOD AND MY COUNTRY
I beg to move.