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All You Need To Know About 2019/20 Budget

The Minister of Finance, Planning and Economic Development, Matia Kasaija will tomorrow read the 2019/20 National Budget to Ugandans.

The Shs40.48 trillion budget has a 20% increment compared to last year’s Shs32 trillion.

The budget is huge compared to recent years.

 In 2017/18, the budget stood at Shs22 trillion, up from the Shs20 trillion of 2016/17.

According to the Background to the Budget for Financial Year 2019/20 released by Ministry of Finance, Government’s current revenue target is to achieve revenue to GDP ratio of 16 percent by FY 2019/20 as envisaged in the National Development Plan II (NDPII). 

“The overall net revenue target for FY 2019/20 is Shs20,646.5 billion of which Tax revenue is Shs18,877.30 billion, Non Tax Revenue is projected at Shs1,571.4 billion, of which Shs832.1 billion is Appropriation in Aid. This translates to a Revenue-to-GDP ratio of 17.0 per cent,” the Background to the Budget reads in part.

This means that Uganda Revenue Authority (URA) will have a task of collecting Shs18.87 trillion in tax revenue in 2019/20.

The growth in tax revenue is hinged on increase in the level of economic activity, stable inflation and exchange rate, enhanced tax compliance, new tax policy measures as well as enhanced administrative measures.

A total of Shs10.1 trillion of external resources is projected to support the budget in FY 2019/20. Of this, Shs675.2 billion is Budget support and Shs9.43 trillion is for financing projects.

Budget support in form of grants and loans is projected to be Shs675 billion in FY 2019/20. It is then projected to increase to Shs862.6 billion in FY 2020/21, mainly driven Budget support loans to enhance domestic revenue mobilisation and agricultural productivity.

External project financing in FY 2019/20 is expected to amount to Shs9.43 trillion, and fall to Shs4.71 trillion in FY 2023/24, on assumption that some of the big infrastructure projects will be completed and there will be an increase in domestic resources available for financing expenditure over the medium term.

External Debt Repayments

Amortization of external debt is projected at Shs723.3 billion in FY 2019/20 and will broadly increase over the medium term to a peak of Shs1.58 trillion in FY 2023/24.The increase in amortisation is owed to the fact that repayments of debt acquired to scale up public investments are scheduled over this period.

 Domestic Financing

Borrowing from the domestic market through issuance of securities is projected to amount to Shs2.569 trillion. It will subsequently decline over the medium term to Shs836.9 billion by FY 2023/24 in line with Government’s strategy of maintaining domestic borrowing within one percent of GDP to avoid crowding out the private sector.

Government expenditure is projected to amount to Shs33.1 trillion in FY 2019/20, an increase of 36.2 percent from the previous FY.

Allocations

Works and Transport sector takes the lion’s share with Shs6.46 trillion. This represents 19.8% of the total budget. Last year, the sector received Shs4.78 trillion allocations.

It is followed by security with Shs3.62 trillion representing 11.1% of the total budget. This is an increase from last year’s Shs2.068 trillion allocation.

Education and Sports sector has been allocated Shs3.37 trillion up from Shs2.78 trillion in 2018/19. This represents 10.3% of the total budget, a reduction from last year’s 11.1% allocation.

With oil production date drawing closer, Energy and Mineral Development has been allocated Shs3 trillion representing 9.2% of the total budget.

Health sector has been allocated Shs2.62 trillion in 2019/20 budget, up from Shs2.31 trillion the previous year. This represents 8.0% of the total budget.

Agriculture, Animal Industry and Fisheries sector which is the backbone of Uganda’s economy was allocated Shs1.05 trillion up from Shs892.9 billion the previous year. This represents a paltry 3.2% of the total budget.

Water and environment will get Shs1.09 trillion, down from Shs1.26 trillion in 2018/19. This represents 3.4% of the total budget down from 5.0% the previous year.

Justice/ Law and Order   saw its budget increased to Shs1.73 trillion up from Shs1.29 trillion. This represents 5.3% of the total budget.

The budget for Accountability was also increased to Shs1.54 trillion from Shs1.12 trillion representing 4.7% of the total budget.

Trade and Industry was allocated Shs202.8 billion up from Shs134.1 billion representing 0.6% of the total budget.

Tourism which is now Uganda’s top foreign exchange earner was allocated Shs193.7 billion from Shs32.6 billion the previous year. This represents 0.6% of the total budget.

Lands, Housing and Urban Development was allocated Shs227 billion from Shs202.4 billion the previous year, representing 0.7% of the total budget.

Social Development was allocated Shs219.2 billion while ICT and National Guidance will get Shs146.2 billion down from 149.1 billion the previous year.

Public Sector Management will receive Shs857.8 billion in 2019/20, up from Shs612.8 billion received the previous year.

Local Government Sector will get Shs1.25 trillion representing 3.8% of the total budget while Public Administration will get Shs979.1 billion (3.0%).

Legislature has been allocated Shs687.8 billion (2.1%) up from Shs497.8 billion the previous year.

Science, Technology and Innovation will receive Shs186 billion while Interest Payments will take Shs3.14 trillion representing 9.6% of the total budget.

Debt repayment will constitute Shs10.6 trillion.

Tax Measures

To help URA achieve its revenue collection target, government has come up with several tax measures including widening the scope of the withholding agents across the sectors.

 According to the Background to the Budget, government will provide administrative penalties for employers who fail to comply with their obligations to file PAYE and other withholding tax returns.

 Government also intends to oblige owners of goods vehicles to obtain a Tax Clearance Certificate as a condition for obtaining a license to operate.

Further, government wants withholding of 6 percent tax on sale of a business or business assets by all resident persons other than exempt persons.

Government will also reintroduce withholding VAT at a rate of 6 percent and                                      provide penalties for failure to withhold.

Government will also scrap the VAT exemption of inputs into the production of iron ore, billets and limestone.

It will also review the VAT exemption to strategic investments.

 Final year in NDPII

It is worth noting that Fiscal Year 2019/20 is the fifth and final implementation year of the second National Development Plan (NDP II).

 As in FYs 2017/18 and 2018/19, the Budget for FY 2019/20 has retained the theme “Industrialization for Job Creation and Shared Prosperity.”

This theme has run across the annual budgets of all EAC Partner States over the same period, and is in line with the NDP II theme of ‘‘Strengthening the country’s competitiveness for sustainable wealth creation, employment and inclusive growth.’’

“At the onset of NDPII, it was anticipated that its effective implementation would lead to an average GDP growth rate of 6.3 percent, a per capita income of USD 1,039, and a reduction in the national poverty rate to 14.2 percent by 2020. These targets are in line with the country’s aspirations of becoming a lower middle income country by 2020 and upper middle income country by 2040,” Background to the Budget document reads in part.

 It adds: “Over the first four years of the NDP II period, annual economic growth averaged 5.3 percent with real per capita GDP increasing from US$ 751 at the end of NDP I in FY 2014/15 to US$ 825 in FY 2018/19. These gains have been achieved alongside a population increase of 4 million people, from a mid-year population of 35 million1 people in FY2014/15 to 39 million in FY2018/19.”

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