Eighty seven percent of the 2012/13 Uganda budget will be financed by domestic resources.

Finance minister Maria Kiwanuka.

Presenting the budget speech to Parliament Thursday afternoon, finance minister Maria Kiwanuka said only 24.5% will be provided by development partners.This represents a rise in domestic financing of teh national budget.

Tax collections for next financial year are projected at sh6,956.7 billion.  Interest payments and domestic arrears repayments are also expected to amount to sh817bn in financial year 2012/13. This means that sh7,318bn will be available to support economic and social development programmes.

The theme for 2012/13 budget: “Priorities for Renewed Economic Growth and Development”.

Economic Performance
Fiscal policy will support monetary policy to maintain macroeconomic stability, while at the same time increase resources available to address the binding constraints to growth.

Economic Growth
Uganda has faced both global and domestic economic challenges over the past year. Real GDP growth is estimated at 3.2% this financial year.

The slowdown in growth this financial year was due to drought, weaker demand of our exports, high international fuel prices, and imported inflation coupled with the weak shilling due to a strong dollar globally.

Growth in the services sector slowed to 3.1%, with trade, financial, education and health services sector registering negative annual growth rates. The growth in industrial production slowed to 1.1% during the year.  The hardest hit industrial sub-sector was formal manufacturing sub sector, where growth contracted by 4.4%.

Agricultural sector has performed much better, recording annual growth of 3.0%.

The hotel and restaurant sub sector also rebounded, coupled with positive growth rates in transport and telecommunications, real estate activities and other business activities.

External Sector Developments
Uganda Shilling depreciated against major international currencies earlier in the financial year now ending.  The Uganda Shilling has recently been more stable.

The overall balance of payments was however positive on account of increased inflows of remittances amounting to US$ 2 billion, foreign direct investments amounting US$ 834 billion, and portfolio flows amounting to US$ 274 billion.

Inflation and Interest Rates
The economy has faced high inflation with prices rising over the early part of the financial year now ending. However, inflation is now on a declining trend. Annual inflation peaked at 30.5% in October 2011 but has declined to 18.6 in May 2012. Food crop inflation that was 42.2% in May 2011 has declined to 8 in n May 2012.

Financial Sector Developments
New technology is driving our efforts to improve financial inclusion, especially in the area of electronic money transfer and agency banking.

The Bank of Uganda has licensed four Mobile Money network operators to offer mobile money services, as a means of bringing about greater financial inclusion with the move towards branchless banking.

Annual inflation peaked at 30.5% in October 2011 but has declined to 18.6 in May 2012. The Central Bank Rate will be eased as conditions improve. Tight monetary policy has succeeded in bringing down the price level and has restored macroeconomic stability.

Strategies to lower the costs of doing business
The four main strategies to lower the costs of doing business and marshal private sector investment in Uganda are:-

Rehabilitation and expansion of road and electricity infrastructure to reduce transport costs and improve access to affordable energy to support the private sector as an engine of growth.

Research and Development to improve productivity, such as developing improved seeds and other inputs, provision of extension services in the field, and skilling our workforce to operate agro-processing industries e.g mechanics, electricians, machine operators, carpenters, plumbers, e.t.c.

Financing Strategy
Increased Revenue Collections from Domestic Sources

The four main strategies to lower the costs of doing business and marshal private sector investment in Uganda are:-

Rehabilitation and expansion of road and electricity infrastructure to reduce transport costs and improve access to affordable energy to support the private sector as an engine of growth.

Research and Development to improve productivity, such as developing improved seeds and other inputs, provision of extension services in the field, and skilling our workforce to operate agro-processing industries.

By Apollo Mubiru, The New Vision