This paper analyses the Uganda budget for the 2018/19 financial year in the context of poverty and resource availability and use alongside Uganda’s medium-term development framework, the Second National Development Plan (NDPII), and commitments to end poverty. It takes an in-depth look at how the budget is structured in terms of financing and resource allocation to determine whether key decisions on resource investments for 2018/19 are being made towards the goal of addressing poverty.
The overall goal of the NDPII is to achieve a middle-income status by 2020 with a per capita income of US$1,033 and reduction in poverty to 14.2% among five indicators of progress towards the goal. To achieve the NDPII goal, the government laid down nine strategies including expansion of infrastructure investment, industrialisation, skills development, export-oriented growth, and harnessing the demographic dividend by ensuring a healthy, educated, skilled and economically engaged labour force.
The NDPII outlines three national priority growth opportunities – agriculture, tourism, oil and gas – and two development fundamentals – infrastructure and human capital development. These are presented as having the best potential for launching Uganda onto a sustained path of growth and development.
- The government resource envelope is estimated to increase by 26% from Uganda Shillings (UGX) 23.6 trillion in 2017/18 to UGX29.64 trillion in 2018/19. Only UGX12.74 trillion or 43.5% of the national budget will be available for service delivery, excluding debt repayments, domestic refinancing, budget and project support.
- Government revenue mobilisation is estimated to grow by 14% from UGX15.87 trillion in 2017/18 to UGX18.1 trillion in 2018/19.
- High levels of borrowing through non-concessional domestic and external sources will play a major role in financing Uganda’s development budget for 2018/19. While this will help close the financing gap, it also leads to a further rise in debt as the level of non-concessional borrowing has grown from UGX202 billion in 2015/16 to a projected UGX1.53 trillion in 2018/19.
- Interest payments estimated at 11.2% of the 2018/19 budget remain high, constraining fiscal space.
- The works and transport sector remains government’s highest priority in 2018/19 as government continues to scale up infrastructure development.
- The share of budget allocation to education and agriculture will decrease by 0.15% and 0.22% respectively. Health will increase by 1% and social development will stay the same from 2017/18 to 2018/19.
- Some proposals presented for 2018/19 may negatively impact the poorest people. These include a tax on mobile money transactions and an increase in fuel tax. Poor people rely on mobile money transactions as they are largely excluded from mainstream financial institutions. A tax on fuel may further drive basic commodity prices up as it directly or indirectly feeds into transactions costs.
- The balance of budgetary allocations does not reflect all government priorities and commitments under NDPII, as high priority is limited to the works and transport sector.
- Overall, there are a number of options government can pursue to follow up on its commitments to the NDPII and reduce poverty and vulnerability.
- Government’s domestic revenue mobilisation capacity is growing but is still low compared with regional neighbours.
- Government will rely more on borrowing from concessional sources to finance the 2018/19 budget.
You can view Uganda’s latest poverty figures down to the sub-national level through our Spotlight on Uganda platform.