EY sees Uganda spending plan as feasible

June 15, 2019 in Business, Finance, Financial Services, Policy by Editor

In  sharp contrast to the pessimism that has defined the tone of most analysts of Uganda’s 2019/20 budget, global accounting and tax advisory firm Ernst and Young says discounting unforeseen disruption, Finance Minister Matia Kasaija’s plan stands a fair chance of success.

“We would like to highlight that, barring any hiccups, if the budget strategy and attendant proposals are implemented as laid down by the Finance Minister in his budget speech, they will go a long way in helping the country to achieve the desired inclusive development through industrialization, job creation and shared prosperity,” Ernst and Young said in their analysis of Uganda’s spending plan.

Kasaija unveiled an UGX 40.4 trillion budget (USD10.81 billion) June 13, with industrialisation and shared prosperity as the overarching theme. That rhymed with similar objectives pursued by Kenya, Rwanda and Tanzania which also focused on inclusive growth.

But analysts were particularly critical of the ballooning debt whose servicing and repayments will this year eat a quarter of the budget and spending on security which increased from 8.2pc in 2018/19 to 11.1pc in the financial year that starts July 1. They were also irked by the paltry allocation to agriculture, yet it is the occupation of more than two thirds of the population.

The works and transport sector will take 19.8pc of the resource envelope as the government ramps up key infrastructure ahead of oil production while Education and sports will account for 10.3pc pf total allocation. The other big expenditure heads are interest payments-9.6pc, energy and minerals- 9.2pc and health which will see a reduction from 9.2pc during the current financial year, down to 8pc.

Agriculture which employs 70pc of the population will receive 3.2pc while tourism, the top foreign exchange earn was allocated only 1.2pc of the budget.

During a post-budget panel discussion that was hosted by Ernest and Young on June 14, panelists argued that without reform of the agricultural value chain, growth in the sector is not inclusive because the profits largely go to middlemen. They observed that while the economy grew 6.1pc during fiscal 2018/19, there was minimal trickle-down effect because the expansion was public investment driven with infrastructure taking the bigger chunk.

Among other strategies, Matia Kasaija is betting on harnessing the potential of agribusiness, boosting private sector growth to drive exports and improving public investment management to achieve better returns, to achieve his objectives.

“The expansion of the industrial base is expected to create jobs, thereby addressing the challenges of unemployment and income inequality, leading to inclusive growth, says Ernst and Young.