THE REPUBLIC OF UGANDA
NATIONAL
BUDGET FRAMEWORK PAPER
FY 2016/17 – FY 2020/21
MINISTRY OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT
DECEMBER 2015
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TABLE OF CONTENTS
Introduction.....................................................................................................................................................4
Part 1: Medium Term Macroeconomic Outlook and Indicative Revenue Framework
1.1 MEDIUM TERM MACROECONOMIC FORECAST ................................................................... 6
1.1.1. Macroeconomic Policy Framework ............................................................................................... 6
1.1.2. Key Macroeconomic Assumptions ................................................................................................. 7
Real GDP Growth ......................................................................................................................................... 8
Annual Inflation ................................................................................................................................................. 8
Employment ....................................................................................................................................................... 9
Exchange Rate ................................................................................................................................................... 9
Balance of Payments ....................................................................................................................................... 10
1.2 MEDIUM TERM FISCAL FRAMEWORK .................................................................................. 10
1.3 MEDIUM TERM FISCAL FORECAST ........................................................................................ 12
Domestic Revenue ........................................................................................................................................... 12
External Resource Commitments..................................................................................................................... 13
Overall Balance ............................................................................................................................................... 14
1.4 COMPLIANCE WITH THE CHARTER FOR FISCAL RESPONSIBILITY ........................... 14
1.5 STATEMENT OF THE RESOURCE FOR THE ANNUAL BUDGET FOR NEXT YEAR .... 14
1.6 STATEMENT OF POLICY MEASURES ...................................................................................... 16
1.6.1 Revenue Measures ............................................................................................................................ 16
1.6.2 Expenditure measures ...................................................................................................................... 17
Financing Strategy For The FY 2016/17 Budget ...................................................................................... 17
Sectoral Priorities For FY 2016/17 ............................................................................................................ 18
Key Policy Measures ................................................................................................................................... 29
1.7 FISCAL RISKS STATEMENT ....................................................................................................... 32
Structure of Detailed Medium Term Sector Plans and Expenditures .................................................. 35
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Part 2: Details of Proposed Sector Plans and Expenditure
Agriculture........................................................................................................................................................43
Lands and Housing......................................................................................................................................... ..63
Energy and Mineral Development....................................................................................................................69
Works and Transport.........................................................................................................................................79
Information Communication Technology ........................................................................................................90
Tourism, Trade and Industry.............................................................................................................................97
Education.........................................................................................................................................................122
Health..............................................................................................................................................................142
Water, Sanitation and Environment................................................................................................................169
Social Development........................................................................................................................................185
Security...........................................................................................................................................................207
Justice, Law and Order...................................................................................................................................213
Public Sector Management.............................................................................................................................237
Accountability.................................................................................................................................................278
Legislature.......................................................................................................................................................301
Public Administration.....................................................................................................................................305
Annexes
Annex 1. Medium Term Expenditure Framework by Vote FY2015/16 – FY2020/21..................................316
Annex 2. Approved Budget and Quarter One Outturns FY 2016/17 by Vote Function.................................320
Annex 3. Allocations to Central Government Votes by Major Economic/Output Classification
FY2015/16– FY2018/19.................................................................................................................................330
Annex 4. Poverty Action Fund Allocations by Programme and Project FY2015/16 and FY2016/17...........332
Annex 5. Overall Allocations to Service Delivery by Sector FY2015/16– FY2018/19.................................348
Annex 6. External Financing over the Medium Term FY2015/16– FY2018/19...........................................350
Annex 7. Off Budget Donor Projects over the Medium Term FY2015/16 - FY2018/19..............................355
Annex 8. Central Government Transfers to Local Governments FY2016/17................................................360
Annex 9. Allocation Criteria for Transfers to Local Governments FY 2016/17..........................................377
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Introduction
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INTRODUCTION
The National Budget is the key instrument through which Government implements its policies. The National
Budget Framework Paper (BFP) provides the link between Government’s overall policies and the Annual Budget.
It lays out the fiscal policy framework and strategy for the budget year and sets out how the Government intends
to achieve its policy objectives over the medium term through the budget. The macroeconomic framework
presented in the BFP forms the basis for resource projections and indicative expenditure allocations. It also forms
the basis for the detailed estimates of revenue and expenditure which will be laid before Parliament.
The National Budget Framework Paper (BFP) outlines Government interventions for Social and Economic
Development in FY 2016/17 and the medium term in line with Government’s Macroeconomic Plan and Fiscal
strategy and the National Development Plan (NDP). The NDP II lays out the Government strategic five-year plan
from FY2015/16 to FY2019/20. The purpose of this document is to set out how the Government intends to
achieve its policy objectives over the medium term through the Budget. In doing so, the macroeconomic
framework presented in the BFP forms the basis for resource projections and indicative expenditure allocations.
Section 13 (2) of the Public Finance Management (PFM) Act 2015 requires that the national budget is prepared
in consultation with the relevant stakeholders. The National Budget Framework Paper has been done in line with
this section. These consultations included consultations with Local Governments, Sector Ministries, Departments
and Agencies, National Development Authority, Development Partners, representatives of the Private Sector and
finally discussed and approved by Cabinet.
To improve service delivery, Government has also strengthened collaboration with Civil Society Organisations
(CSOs) such as the Civil Society Budget Advisory Group (CSBAG) through enhanced collaboration and
partnership in budget monitoring and overall implementation of Government programs. Therefore, to enhance
Citizens voice in public finance management the Budget Strategy for the FY 2016/17 has taken into account the
recommendations of the CSOs.
The national BFP has two sections:
1. Part 1 sets out the Government’s Medium Term macroeconomic forecast, Medium Term Fiscal
Framework and Forecast, Charter of Fiscal Responsibility , the Resource Envelope and Annual Budget
for FY 2016/17, Policy measures, indicative expenditure framework in FY 2016/17 and the medium term
and Fiscal Risks;
2. Part 2 provides details of proposed sector plans and expenditures.
Part 1:Government’s Medium Term Macroeconomic Plan, Medium Term Fiscal Framework, Policy
Measures and Indicative Revenue Framework.
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Introduction
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This section provides an overview of Government’s macroeconomic policies, recent macroeconomic
performance, and future plans. This section includes plans for domestic tax and non-tax revenue; external
resources from Uganda’s development partners; and the management of domestic and external debt consistent
with the Government’s macroeconomic policy. Finally, it indicates the resources available to Government for the
implementation of its programmes for social and economic development.
Part 2: Details of proposed sector plans and expenditures.
This section provides details of proposed sector plans and expenditures for the 16 sectors of Government:
Agriculture; Lands, Housing and Urban Development; Energy and Mineral Development; Works and Transport;
Information and Communications Technology; Tourism, Trade and Industry; Education; Health; Water and
Environment; Social Development; Security; Justice, Law and Order; Public Sector Management; Accountability;
Legislature and Public Administration. Each Sector section is structured by the three sector outcomes that public
expenditures are targeted towards improving. Each sector summary comprises of four subsections; S1 – S4.
S1 provides an overview of Sector Expenditures and sets out the Sector's contribution to the NDP, its
policy objectives, and key performance issues.
S2 describes past performance and plans to improve each sector outcome. For each outcome it sets out
outcome indicators, key sector outputs and actions to improve sector performance. It then sets out
analysis of the efficiency of sector allocations and major capital investments.
S3 sets out the proposed sector budget allocations for next financial year and the medium term, including
major areas of expenditures and any notable changes in allocations.
S4 sets out the highest priority outputs for next financial year and the medium term which the sector has
been unable to fund in its spending plans.
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1.1 MEDIUM TERM MACROECONOMIC FORECAST
National Development Plan
The National Development Plan (NDP) II came into force on 11th June 2015 and is the second in a series of
six five-year development plans. It constitutes the main policy framework underpinning Government’s
macroeconomic and development policy agenda over the FY2015/16 to FY2019/20 period. The plan
prioritizes 3 of the 9 opportunities identified in the Vision 2040 - agriculture; tourism; and mining, oil and
gas - and identifies infrastructure and human capital as two fundamental areas of development in order to
achieve the priorities.
The Ministry worked closely with the National Planning Authority (NPA) to ensure that the plan
incorporates the required infrastructure projects contained in Uganda’s Medium Term Macroeconomic
Framework. Effective implementation of these projects is critical for enhancing regional trade and
integration, preparing for oil production and improving the business environment. Projects are to be executed
in a manner consistent with the maintenance of macroeconomic stability, the absorptive implementation
capacity of the economy, and achievement of the East African Community Monetary Union (EAMU)
convergence criteria.
The plan will bring to completion a number of unfinished NDP I interventions, but also introduces a set of
new strategic interventions such as the standard-gauge railway; the oil refinery; infrastructure serving the
Albertine region; and a number of new road and electricity transmission projects. Given constrained
domestic resources and the limited availability of concessional financing for large infrastructure projects,
these projects will be financed largely by external loans on non-concessional but favourable terms and
through Public Private Partnerships (PPPs).
1.1.1. Macroeconomic Policy Framework
The overarching macroeconomic goal remains to deliver macroeconomic stability to support inclusive and
sustainable economic growth and socio- economic transformation.
Over the medium term, the specific macroeconomic objectives are to:
i. Achieve and maintain a rate of real economic growth of at least 6% per annum;
ii. Maintain annual core inflation close to the Bank of Uganda’s 5% target and annual headline inflation
within single digits;
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iii. Gradually build up foreign exchange reserve cover of at least the equivalent of 4.5 months of imports
of goods and services;
iv. Maintain a market determined real exchange rate, with foreign exchange interventions limited to
smoothing excess volatility.
v. Attain a high degree of monetary and economic convergence and compatibility within the EAC.
The macroeconomic policy framework for FY2016/17 prioritises infrastructure investment projects which
are necessary to facilitate private sector development and enhance the productive capacity of the economy.
Key projects programmed for the financial year include the Karuma and Isimba Hydropower projects; the
Standard Gauge Railway; Kampala-Jinja Highway; Kampala-Entebbe Express Highway; and Entebbe
Airport Rehabilitation.
The framework is consistent with maintaining macroeconomic stability and sustainable public finances. In
order to ensure infrastructure investment remains within the absorptive capacity of the economy,
Government plans to phase projects over a long time period.
The specific macroeconomic objectives underpinning the macroeconomic policy framework are also
consistent with achieving the EAMU Performance Convergence Criteria by 2021as required by the EAMU
Protocol.
1.1.2. Key Macroeconomic Assumptions
Table 1 details the key macroeconomic assumptions underlying the macroeconomic policy framework for
FY2016/17 and the medium term.
Table 1: Key Macroeconomic Assumptions
2013/14
Outturn
2014/15
Outturn
2015/16
Proj.
2016/17
Proj.
2017/18
Proj.
2018/19
Proj.
2019/20
Proj.
2020/21
Proj.
Real GDP growth 4.6% 5.0% 5.0% 5.8% 6.1% 6.3% 6.5% 6.5%
Annual Headline
Inflation (average) 6.7% 2.7% 7.7% 6.3% 5.0% 5.0% 5.0% 5.0%
Annual Core
Inflation (average) 5.2% 3.3% 7.9% 6.6% 5.0% 5.0% 5.0% 5.0%
Source: MoFPED
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Real GDP Growth
The economy expanded by 5.0% in FY2014/15, less than the 5.3% projected, but more than the 4.6%
recorded in FY2013/14. Drivers of growth include strong performance of the food crops sub-sector;
increased production in the manufacturing sector; enhanced value addition in the financial and insurance
subsectors; the scale up of public investments which provide a boost to the construction and mining and
quarrying sectors; and a continued recovery of the private sector supported by stronger credit growth.
Growth is expected to remain at 5.0% in FY 2015/16, constrained by the higher commercial bank rates
which are expected to hamper the private sector and a less-than-programmed fiscal expansion. Growth is
however expected to pick up to 5.8% in FY2016/17, mainly driven by a scale up in public infrastructure
spending and a rebound in private sector activity following the general election. Private sector investment is
expected to receive a boost as the monetary policy stance normalizes and FDI inflows linked to the planned
issuance of oil production licenses come on board.
In the medium term, growth is expected to average 6.2% per annum owing to the impact of public
investment projects. The stimulatory impact of new public investment projects will begin to have a large
impact on growth from FY2017/18, when the economy is expected to surpass its medium-term objective of
at least 6% real growth per annum
Annual Inflation
During the first quarter of the financial year 2015/16, both annual headline and core inflation increased to an
average of 5.8% and 5.9% respectively compared to 4.5% and 4.8% in the last quarter of FY2014/15. This
increase was driven by the recent depreciation of the Ugandan Shilling which contributed to higher import
costs and energy tariffs, and reduced food supplies during the end of the harvest season which translated into
increased prices for food crops. The unusually low inflation in the first quarter of FY2014/15 has also
contributed to the increased inflation figures.
Inflationary pressures continued to build in the second quarter of FY2015/16, with annual headline and core
inflation recording 9.1% and 6.7% respectively in November 2015. These pressures are expected to continue
during the course of the financial year. The exchange rate depreciation over the last year is yet to feed
through completely to prices and the El-Nino weather conditions are expected to translate into higher food
crop prices in the second and third quarters of the financial year.
However, on average annual headline inflation is projected to remain within single digits and annual core
inflation is expected to return to the Bank of Uganda’s medium term policy target of 5% by FY2017/18.
Inflationary pressures are expected to ease next financial year due to a pick-up in investor confidence
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following the general election; a recovery in the exchange rate; and improved conditions for the growing of
food crops.
Employment
According to the Uganda Bureau of Statistics (UBOS) Uganda National Household Survey (UNHS)
2012/13, Uganda’s total population was 34.1 million people. 16.5 million people, approximately 48 percent
of the total population, were regarded as working age population (between the ages of 14 – 64 years). 84.2
percent of Uganda’s total working population was engaged in economic activity, 43 percent of which were
engaged in subsistence production especially in rural areas where agriculture remains the main source of
economic activity and therefore income.
Unemployment is relatively low but increasing, particularly among those with higher education. Although
the majority of Ugandans lack wage employment, few are classified as unemployed. The unemployment
reported by Uganda Bureau of Statistics (UBOS) was 4.2% in 2009/10, and 9.4% in 2012/13.1 The youth are
slightly more likely to be unemployed compared to older workers.
The most common types of employment are own-account work and unpaid-family work. 80% of the labour
force works primarily for themselves or their families, mainly in the agricultural sector. Although most
individuals mainly work in agriculture, most households have diversified income streams. In rural areas
agriculture remains the most important source of income, on average accounting for slightly over half of
household income, but non-agricultural household enterprises and wage employment have emerged as
important supplementary income sources, accounting for 15% and 14% of average household income
respectively.2 This represents a major welfare-enhancing structural change.
Exchange Rate
The depreciation pressures that started in FY2014/15 continued through to the first quarter of FY2015/16.
The Shilling depreciated 40.0% year-on-year in September 2015, reaching an all-time low of Shs/US$
3,695.25 on September 30th 2015. The depreciation of the currency was largely driven by the global
strengthening of the US Dollar and speculative tendencies in the lead up to the general election.
The Shilling began to stabilize in October 2015. This was on account of an improvement in market sentiment
following the Bank of Uganda and Government’s more cautionary policy stance, and an increase in dollar
1 The way the unemployment rate is computed has changed, meaning that numbers for 2009/10 and 2012/13 are not directly comparable. 2 Uganda National Household Survey 2012/13.
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inflows, particularly from offshore players attracted by high yields on Government securities linked to the
increased CBR. The currency appreciated by 0.9% and 5.7% in October and November 2015 respectively.
The outlook for the Ugandan Shilling for the remainder of the financial year remains uncertain. It will
depend on when and how quickly the Federal Reserve decides to increase the Federal Funds Rate – this
decision will be influenced by whether improvements in the US labour market continue and whether US
inflation moves back towards the Central Bank’s 2% medium term objective. The performance of the
Shilling will also depend on market sentiment and associated speculative behavior in the lead up to the
general election. In FY2016/17 and FY2017/18, however, the currency is expected to rebound owing to a
pick-up in investor confidence and an increase in Foreign Direct Investments particularly in the Oil and Gas
Sector.
Balance of Payments
The current account deficit (including grants) widened to 10.0% (US$ 2,357.8 million) in FY2014/15
compared to 8.6% (US$ 2,266.9 million) in FY2013/14. This was on account of deterioration in the foreign
trade in services, largely due to increased outflows related to other business services. The primary income
balance remained large compared to the years before FY2013/14 – largely due to an increase in repatriated
profits, dividend and interest income on account of strong corporate profits.
The financial account surplus reduced from US$ 1,936.5 million in FY2013/14 to US$ 1,378.7 million in FY
2014/15 at the same time as the current account deficit widened. This was driven by a reduction in direct and
portfolio investment inflows. Surpluses on the capital and financial accounts in FY 2014/15 were not
sufficient to finance the current account deficit which led to a deficit in the Balance of Payments and a US$
354.4 million decline in reserves over the financial year, compared to a US$ 372.0 million accumulation in
reserve assets the previous financial year.
The current account deficit (including grants) is projected to record 9.6% in FY2015/16 and is expected to
temporarily deteriorate in the medium term due to higher imports associated with Governments public
investment programme. Increased deficits will be more than offset by higher external financing inflows so
that reserve cover is expected to remain at adequate levels.
1.2 MEDIUM TERM FISCAL FRAMEWORK
Fiscal policy in FY2016/17 and the medium term will continue to support the maintenance of
macroeconomic stability, at the same time as stimulating economic growth and reducing Uganda’s
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infrastructure deficit. As in previous years, there will be close coordination between fiscal and monetary
policies.
FY2016/17 will be the first financial year Government’s fiscal policy is underpinned by the Charter for
Fiscal Responsibility (CFR), a requirement of the Public Finance Management Act (PFMA) 2015. The
Charter will specify measurable fiscal objectives for the medium term, which shall be based on the following
fiscal principles:
1. Sufficiency in revenue mobilisation to finance Government programmes;
2. Maintenance of prudent and sustainable levels of public debt;
3. Ensuring that the fiscal balance, when calculated without petroleum revenues, is maintained at a
sustainable level over the medium term;
4. Management of revenues from petroleum resources and other finite natural resources for the benefit
of current and future generations;
5. Management of fiscal risks in a prudent manner;
6. Consistency of the Medium Term Expenditure Framework to the National Development Plan; and
7. Efficiency, effectiveness and value for money in expenditure.
On the domestic revenue front, Government will continue to target an annual increase in the tax-to-GDP
ratio of 0.5 percentage points. To achieve this Government will expand the tax base; reduce the size of the
informal sector; reform the structure of taxation and improve efficiency in tax collection and compliance.
The medium term fiscal framework is summarized in Table 2.
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Table 2: Medium Term Fiscal Framework
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
Total revenue and grants 13.0% 14.8% 15.8% 15.9% 15.8% 16.1% 16.5% 16.6%
Revenue 11.9% 13.5% 13.9% 14.4% 14.8% 15.3% 15.8% 16.3%
Tax revenue 11.7% 13.0% 13.3% 13.9% 14.4% 14.9% 15.3% 15.8%
Infrastructure levy 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
Non-tax revenue 0.2% 0.3% 0.3% 0.3% 0.3% 0.4% 0.4% 0.4%
Oil revenues 0.0% 0.2% 0.2% 0.1% 0.0% 0.0% 0.0% 0.0%
Grants 1.0% 1.2% 1.9% 1.5% 1.0% 0.7% 0.6% 0.2%
Budget support 0.3% 0.3% 0.5% 0.3% 0.2% 0.2% 0.2% 0.2%
Project grants 0.7% 0.9% 1.5% 1.2% 0.7% 0.5% 0.4% 0.0%
Expenditures and net lending 17.1% 19.2% 22.2% 22.4% 22.0% 22.4% 21.6% 19.9%
Current expenditures 9.8% 10.3% 10.3% 10.2% 10.4% 10.8% 10.9% 10.7%
Development expenditures 7.2% 7.0% 8.6% 9.8% 9.6% 10.2% 9.9% 7.8%
Net lending and investment 0.0% 1.7% 3.1% 2.0% 1.8% 1.1% 0.5% 1.2%
Other spending (clearance of arrears, etc.) 0.0% 0.3% 0.1% 0.2% 0.2% 0.2% 0.1% 0.1%
Overall balance -4.1% -4.5% -6.4% -6.4% -6.2% -6.4% -5.2% -3.4%
Primary balance -2.7% -2.8% -4.2% -4.2% -3.9% -3.9% -2.7% -0.9%
Financing 4.1% 4.6% 6.4% 6.4% 6.2% 6.4% 5.2% 3.4%
External financing (net) 1.3% 1.2% 5.2% 5.1% 5.7% 5.6% 4.5% 2.6%
Disbursement 1.7% 1.6% 5.7% 5.5% 6.1% 6.1% 5.0% 3.1%
Budget support 0.0% 0.0% 0.0% 0.3% 0.0% 0.0% 0.0% 0.0%
Concessional project loans 1.7% 1.6% 1.7% 2.3% 1.4% 2.0% 1.6% 1.8%
Amortisation (-) -0.3% -0.3% -0.5% -0.4% -0.4% -0.4% -0.5% -0.6%
Domestic financing (net) 2.4% 3.3% 1.1% 1.3% 0.5% 0.7% 0.6% 0.8%
Bank financing 0.9% 1.7% 0.8% 0.8% 0.3% 0.4% 0.3% 0.4%
Bank of Uganda -0.3% 1.4% -5.1% 0.3% 0.1% 0.1% 0.0% 0.0%
Commercial banks 1.2% 0.3% 5.9% 0.5% 0.2% 0.3% 0.3% 0.4%
Non-Bank financing 1.5% 1.6% 0.3% 0.5% 0.2% 0.3% 0.3% 0.4%
Source: MFPED
1.3 MEDIUM TERM FISCAL FORECAST
Domestic Revenue
Domestic revenues are expected to increase from 13.9% of GDP in FY2015/16 to 16.3% of GDP in
FY2020/21. Tax revenue is projected to reach 15.8% of GDP by FY2020/21, whereas Non Tax Revenue
(NTR) is projected to reach 0.4% of GDP. The increase in domestic revenue will help to offset the projected
decline in external grants, both in the form of budget and project support.
Government’s comprehensive tax policy package and Uganda Revenue Authority’s compliance programme
for FY2014/15 yielded significant gains. In the medium term, tax administration will be a key driver for
domestic revenue enhancement. In particular, measures will be introduced targeting sectors that currently
contribute a large amount to GDP but little to tax effort (e.g. agriculture, construction, hotels, real estate and
education). This will include sensitisation; comprehensive audits; tapping into the informal sector through
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collaboration with key stakeholders such as Kampala Capital City Authority (KCCA), Local Governments,
Uganda Registration Services Bureau (URSB); and use of the National Identification Project.
External Resource Commitments
During FY2016/17, a total of US$ 1,238.8 million of external assistance is projected to support the budget.
Of this, US$ 330.8 million (26.7%) will be in the form of grants, while the remainder will take the form of
concessional loans. 79% will be loan financing to be source from multilateral lending institutions. Table 3
summarizes the external resource envelope for the medium term.
Table 3: External Resource envelope for the Medium Term (US$ Million)
Outturn Outturn Proj. Proj. Proj.
2013/14 2014/15 2015/16 2016/17 2017/18
Grants 225.3 275.7 376.8 330.8 227.2
Budget Support 24.0 37.8 40.7 15.0 9.2
Project Support 201.3 237.9 336.1 315.7 218.0
Concessional Loans 737.1 683.6 720.8 908.0 619.3
Budget Support 0.0 0.0 0.0 7.5 0.0
Project Support 444.5 416.3 384.7 592.2 401.4
Other 292.5 267.3 336.1 315.7 218.0
Total 962.4 959.3 1097.6 1238.8 846.5
Source: MFPED
In the next FY2016/17 external assistance is projected to increase reflecting a US$ 187.2 million increase in
the value of concessional loans. External financing is projected to decline in the FY2017/18 on account of
both lower grants and concessional financing. It is difficult to project external financing beyond this date.
A key important aspect of external assistance in recent years is the low disbursement for the various projects
and programmes funded by different multilateral agencies, which are an indication of absorptive capacity
challenges and a lack of preparedness on behalf of the implementing agencies. Moving forward, Government
reforms in public finance management, the new PFM Act and planned public investment management
guidelines are expected to help ensure the effective use of available resources for committed purposes and
reduce delays in procurement and the execution of projects.
Expenditure and Net Lending
Total government expenditure and net lending is projected to rise to about 22.4% of GDP in FY2016/17.
The bulk of the increase in spending will largely be driven by development spending, as Government scales
up spending on infrastructure projects. Development related spending is projected to rise by 20% during
FY2016/17 and will continue to increase steadily over the medium term. Recurrent expenditures as a
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percentage of GDP are projected to remain fairly stable over the next two fiscal years. Net lending is
projected to decline as a percentage of GDP and mainly represents Government spending on Karuma and
Isimba hydropower projects.
Overall Balance
The planned scale up in public investment is expected to contribute to a temporary increase in the overall
fiscal deficit, peaking at 6.4% in FY2015/16 and FY2016/17. Higher fiscal deficits will enable investment to
increase the economy’s long-term productive capacity. When excluding one-off expenditures and interest
payments that will have limited impact on domestic liquidity, the primary deficit is projected to contract
significantly. The fiscal deficit is projected to return to 3.4% of GDP by FY2020/21.
1.4 COMPLIANCE WITH THE CHARTER FOR FISCAL RESPONSIBILITY
The Public Finance Management Act 2015 requires the Minister to submit to Parliament, not later than three
months after the first sitting of Parliament following a general election, a Charter for Fiscal Responsibility
(CFR) relating to the formulation and implementation of fiscal policy.
The Ministry of Finance has developed the draft Charter for Fiscal Responsibility FY2016/17-FY2020/21.
The Draft Charter includes a statement of measurable fiscal objectives subject to Parliamentary oversight,
fiscal policy operation guidelines and fiscal reporting requirements. From FY2016/17, fiscal policy will be
underpinned by the five-year CFR, which will help to strengthen the accountability, transparency and
stability of Government’s fiscal policy framework.
1.5 STATEMENT OF THE RESOURCE FOR THE ANNUAL BUDGET FOR NEXT YEAR
Resources available for budget expenditure are obtained from domestic tax and non-tax revenue, donor
grants and external borrowing, excluding external and domestic debt repayments and the change in
Government’s position with the domestic banking system that is consistent with monetary policy objectives.
Government’s objectives are to limit expenditure to the resources available in order to meet its inflation
objective, which is key to maintaining macroeconomic stability.
Table 4 below provides a summary of the FY2016/17 Budget Framework. The total resources available for
spending (excl. debt repayments and arrears) is projected to rise from Shs. 12,713.7 billion in FY2015/16 to
Shs. 13,425.5 billion during FY2016/17. The largest component of the resource envelope is domestic
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resources (comprising of domestic revenue and net domestic financing), which comprises close to 70% of
next year’s projected resources.
Table 4: Showing the Summary of the Resource Envelope for the FY 2015/16 and FY 2016/17 (Ushs. Billion)
S/N Source FY 2015/16
Budget
FY 2016/17
Projections Variance
1 Domestic Revenues 11,333.00 12,417.53 1,084.53
O/w URA Revenue 11,061.50 12,056.70 995.20
O/w Non-Tax Revenue 271.50 286.53 15.03
0/w infrastructure levy 0.00 74.31 74.31
2 Budget Support 51.30 322.29 270.99
3 Net Domestic Financing 1,581.45 943.82 -637.63
4 Project Support 5,597.50 6,046.36 448.86
Total Resource Inflow (1+2+3+4) 18,563.25 19,730.01 1,166.76
5 External Debt Repayments -172.04 -178.19 -6.15
6 GoU Resource Envelope Less External Debt Repayments 18,391.21 19,551.82 1,160.61
7 Domestic Arrears Payment 80.00 80.00 0.00
8 GoU Resource Envelope Less External Debt Payment
and Arrears 18,311.21 19,471.82 1,160.61
9 GoU Resource Envelope Less External Debt Payment,
Arrears and Projects 12,713.71 13,425.46 711.75
Interest payments 1,656.19 2,014.01 357.82
10 GoU Resource Envelope Less Projects, Interest
Payments and Arrears 11,057.52 11,411.45 353.93
Note: The Resource Envelope for the FY 2015/16 and FY 16/17 exclude Treasury Debt Redemptions and AIA.
Source: MoFPED
From Table 4 above, the total inflows are projected to increase from Ushs 18,563.2 billion in FY 2015/16 to
Ushs.19,730.01 billion in FY 2016/17. This will comprise of UShs 12,417.53 billion from domestic
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revenues, UShs.322.29 billion of budget support, UShs.6,046.36 billion from project support and
UShs.943.82 billion is domestic financing on a net basis from the banking system.
Excluding debt repayments, projected at UShs.178.19 billion, payments for domestic arrears (Ushs 80
billion), External Financing ( Ushs. 6,046.36 billion) and interest payments (UShs.2,014.01 billion), the
preliminary discretionary resources available for Government expenditure in FY 2016/17 will amount to
Shs.11,411.51 billion. This translates into an additional resource of Ushs 353.9 billion over and above the
FY 2015/16 budget as shown in Table 4 above.
Whereas there is a projected increase in domestic revenue for FY 2016/17 by Ushs 1,084.53 billion as
indicated in Table 2 above, this has been offset by the projected reduction in domestic borrowing by Ushs
637.63 billion, increase in external debt repayments by Ushs 6.15 billion and the increase in interest
payments by Ushs 357.82 billion) owing to exchange rate depreciation.
Therefore, the overall increase in the resource envelope for the FY 2016/17 over the FY 2015/16 budget is
Ushs 353.93 billion. In addition, there is Ushs 381.89 billion from the one-off expenditures in the FY
2015/16. This translates into an additional resource available for Government expenditure in the FY 2016/17
to UShs 735.8 billion.
1.6 STATEMENT OF POLICY MEASURES 1.6.1 Revenue Measures
The focus of increasing tax revenues for FY2016/17 is based on a strategy that will improve compliance by
further improving tax administration efforts and allowing for implementation of policies put in place over the
years.
Efforts to ease tax administration will include measures to eliminate ambiguities within the tax laws so that
compliance can be enforced by Uganda Revenue Authority (URA).
It is projected that total revenues collected will be about Shs 12,418 billion, The details are shown in table 5.
Table 5: Summary of expected Tax collections for FY2016/17
No. Items Amount estimated
(Shs bn) 1. URA Revenue 12,031.6 3. Non Tax Revenue 386.4
Total 12,418.0
Source: MOFPED
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1.6.2 Expenditure measures
Financing Strategy For The FY 2016/17 Budget
Under the National Development (NDP2), Government committed to raise the revenue to GDP ratio from the
current 13% to 15% by the end of FY 2015/16. However, this target will obviously not be achieved given that our
tax/GDP ratio remains between 12 and 13 percent years despite the various tax measure put in place mainly due to
the big informal sector.
Based on the above scenario, the financing strategy for the FY 2016/17 budget will continue to be driven by the
Government objective of mobilizing more domestic revenue to reduce the risks associated with external
financing.
As indicated above, the largest component of the total resource envelope is domestic resources (comprising of
domestic revenue and net domestic financing), which comprises close to 70% of next year’s projected resources.
The main focus in the medium term is to ensure continued stability of the tax system and improve the collections
through tax administration compliance, especially non tax revenues. Given the limited options on increasing tax
rates, revenue mobilisation will largely hinge on revenue administration measures and enhancing efficiency
measures. The projected tax revenue in the medium-term assumes stability of the tax system. This implies that
any pressures to de-stabilise the tax system must be resisted.
In the past, Government has increased revenues through modest adjustments of tax rates or introduction of new
policy options. However, within the current economic context, this avenue seems to have been constrained,
particularly by high inflation and costs of production as evidenced by increasing pressures to reduce the same
rates and removal of taxes on some goods and services.
In terms of external financing, external assistance is projected to broadly remain at the FY2015/16 levels and fall
by about 32% the following year. A key important aspect of external assistance in recent years is the low
disbursement for the various projects and programmes funded by different multilateral agencies, which are an
indication of capacity challenges and a lack of preparedness on behalf of the implementing agencies.
Continued poor performance may make it difficult for Government to access soft loans, since commitment and
disbursement decisions are based on recipient’s abilities to meet project objectives during planned timelines.
The budget for the FY 2016/17 will therefore aim at refocusing the revenue enhancement strategy to enforce the
current tax regime by URA. The main focus will be on expansion of the tax base by gradually formalizing the
large informal sector, improving efficiency in tax collection and compliance and efficiency in allocation of the
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available resources to facilitate faster growth and developments for purposes of generating more domestic revenue
to achieve the policy target of 0.5 percentage point of GDP through:
i. Improving taxpayer compliance through enforcement and tax payer awareness campaigns;
ii. Strengthening multi-institutional collaboration by URA, KCCA, URSB and Local Governments for
revenue generation and management;
iii. Continue to strengthen the capacity of URA to raise and tap into the informal sector, building the
audit capacity under tax administration as well as strengthening the current system for collection and
administration of tax and Non-tax Revenue.
Prioritization of Government Expenditure
Provisional projections show that there will be no major increase in the overall resource envelope in the FY
2016/17. There is therefore, need to re-orient Government expenditure towards promotion of investment,
production and value addition. However, we must at the same time sustain financing of the projects especially in
infrastructure (Transport and Energy) while improving access to critical services like health, education and water,
among others.
Implementation of the Second National Development Plan requires us to bring to completion a number of
unfinished NDP I interventions, but also introduce new projects critical for enhancing economic growth and
development with emphasis on regional trade and integration, preparing for oil production, and improving the
business environment.
These projects include the standard-gauge railway, the oil refinery, oil-related infrastructure serving the Albertine
region, and a number of new roads and electricity transmission projects. These are consistent with Uganda’s
vision 2040, the medium term macroeconomic framework and the EAC Monetary Union Convergence criteria.
However, it is also evident that we must identify additional interventions that will spur faster growth and
development especially strategic investment in production and value in the strategic areas of the economy. Given
the absence of additional resources, the only option we have is to prioritize the financing and implementation of
these projects within the available resources.
Sectoral Priorities For FY 2016/17
The FY 2016/17 Budget strategy will be guided by the Vision 2040, the Second National Development Plan
(NDP2) and the Sustainable Development Goals (SDGs). Vision 2040 aims at socio-economic transformation and
propelling Uganda into a lower middle income country by the year 2020 as enshrined in the Second National
Development Plan (NDP2).
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Through the SDGs, Uganda signed to the international commitment of building on the achievements under the
Millennium Development Goals (MDGs) with the major objective of eradicating poverty as well as achieving
sustainable development in its three dimensions –economic, social and environmental –in a balanced and
integrated manner by the year 2030.
Hence, through the budget for the FY 2016/17, we must ensure that the Government policy framework, budget
priorities and programmes are properly aligned towards achieving the commitments under the SDGs within the
overall framework of the NDP2 but paying adequate attention to the above underlying challenges to economic
growth and development.
Accordingly, the budget for the FY 2016/17 will focus on the following areas:
i. Maintaining and sustaining National Security and Defense as a fundamental condition for economic
growth and development;
ii. Promotion of Production, Productivity, Investment and Export of Goods and Services through Value
addition to Strategic Commodities;
iii. Sustaining the Development and Maintenance of Strategic Infrastructure with emphasis on Energy
and Transport to Accelerate the country's competitiveness;
iv. Enhancing Human Capital Development by improving Access to Quality Critical Social Services
and Skills Development;
v. Enhancing Domestic Revenue Mobilization; and
vi. Strengthening the Quality of Public Service Delivery to Facilitate Private Sector Investment.
Through the above strategic objectives, the budget for the FY 2016/17 will give priority to enhancement of
national security, promotion of production and productivity through support to NAADS and value addition in the
key growth sectors of the economy, scientific research and innovation, infrastructure development, supporting
wealth creation with special focus on the Youth and Women Entrepreneurship Programme, Microfinance, as well
as raising the quality of social services to improve the general welfare of Ugandans.
National Defense and Security
The Government strategy for strengthening and sustaining national security and defence has been and will
continue to facilitate the process of professionalizing and modernizing of the defence and security forces. Specific
interventions will include further acquisition and maintenance of modern equipment, welfare improvement and
human capital development to enable the security agencies to maintain peace and stability, participation in
community service and implementation of national development projects. Accordingly, the budget for the FY
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2016/17 will sustain the current level of financing for the security sector to facilitate implementation of these
interventions.
Promotion of Production, Productivity, Investment and Export of Goods and Services through Value Addition to
Strategic Commodities
Evidence from various studies indicates that the economy continues to suffer from the low productivity of the key
growth sectors. For instance, most of the growth in Agricultural income is being driven by increases in area under
cultivation, good weather, and high prices as well improved access to markets in neighboring countries but only
marginally because of an increase in the use of modern production technologies.
Low productivity is largely due to limited access to and use of productivity-enhancing factors such as technology,
training, water, land management and farm-to-market infrastructure, especially for agriculture. All these render
the agriculture sector highly vulnerable to exogenous shocks such as climatic changes and price falls that reduce
the welfare of households.
Agricultural productivity has also been greatly reduced by loss of soil fertility due to poor farming practices
especially over-cultivation and slow progress in adoption of improved appropriate farming methods including use
of fertilizers and improved high yield crop and animal species.
In line with the strategic objective of the Second National Development Plan (NDP2), the strategy for increasing
sustainable production, productivity and value addition will focus on facilitating value addition to the strategic
commodity enterprises identified in the NDPII and the draft National Export Development Strategy (NEDS).
These are: Cotton, Coffee, Tea, Maize, Rice, Cassava, Beans, Fish, Beef, Milk, Citrus and Bananas. Minerals, oil
and gas, tourism and ICT services have also been identified based on their contribution to household food security
and contribution to export revenue.
In the FY 2016/17, priority will be given to 1) Coffee and Coffee products, 2)Tea and Tea Products, 3) Fish and
Fish Products, 4) Livestock and livestock products (dairy and beef), 5) Grains (maize and beans), 6) Horticultural
crops, 7) Cotton and cotton products, 8) Minerals and mineral Products (iron ore and dimension stones) as well as
9) Oil and Gas (accelerators of the industry).
The strategy will involve addressing constraints in the entire value chain process right from research to provision
of inputs, extension services, access to finance, post-harvest handling and storage, agro-processing, quality
control and marketing.
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Priority will also be put on strengthening the institutions responsible for Investment and Export Promotion such as
Uganda Investment Authority, Export Promotion Board, and Uganda Registration Services Bureau, among others.
This will also include further development of the Industrial Parks and Free Trade Zones.
Key specific priorities and measures will include:
i) Commodity based research for the strategic commodities;
ii) Enhancing the National Agricultural Advisory Services (NAADS) through Operation Wealth
Creation through enhanced provision of improved inputs like seedlings and breeding materials,
promotion of fertilizer use, pests and disease control;
iii) Strengthening extension services through the Single Spine Extension Scheme,
iv) Improving post-harvest handling by supporting construction of storage facilities through a PPP
arrangement;
v) Supporting agricultural financing and value addition through increased funding to the Agricultural
Credit Facility;
vi) Work with the private sector to introduce a more affordable Agriculture Insurance Scheme to hedge
against risk under a Public Private Partnership Arrangement.
vii) Strengthening the regulation and enforcement of standards for quality control, fishing and
environmental protection;
viii) Continued development of agricultural infrastructure such as rural feeder roads and markets and
rural electrification to support agro-processing; and;
The interventions for promotion and development of Tourism and tourism products will include:
i). Development of new products including community and faith-based tourism. This will include
redesigning of strategic facilities such as the source of the Nile at Jinja to international standards and
redeveloping Namugongo Martyrs shrine to equip it with necessary amenities,
ii). Aggressive marketing and promotion of tourism products including strengthening the institutions
responsible for tourism promotion such as Uganda Tourism Board and Ugandan Missions Abroad;
iii). Skills development mainly through continued revamping of the Hotel and Tourism Training Institute
(HTTI),
iv). Improving strategic tourism infrastructure like tourist roads, rural electrification, hotel and tour services,
among others; and
v). Sustaining national peace and security in all parts of the country to further enhance international
confidence in Uganda as a final tourist destination
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In order to increase Uganda’s competitiveness and economic diversification, the budget will continue to facilitate
the private sector as an engine of growth and development through the following interventions;
i). Increasing access to low cost finance for firms, including long-term finance by addressing the
challenges in the finance sector such as commercial bank interest rates, supporting the development
of micro-finance institutions including SACCOS and capitalisation of Uganda Development Bank to
provide long-term investment capital;
ii). Reducing administrative costs associated with business licensing and registration, lands, building
plans, construction permits, boarder crossings and basic infrastructure through the One-Stop Centre;
iii). Improving land markets by reducing the cost of transferring land including further improvements in
the land registry system.
Sustaining the Development and Maintenance of Strategic Infrastructure in Energy and Transport to Accelerate
the Country’s Competitiveness
As part of the Government programme for increasing the stock and quality of physical infrastructure, the budget
for the FY 2016/17 will maintain financing of the ongoing construction of major infrastructure projects with
special focus on those which will directly benefit the urgent need to boost value addition and export. These
projects will need to be completed in time while providing the necessary resources for proper maintenance of
completed ones.
In the roads sub-sector, emphasis has been on upgrading of numerous gravel national roads to bitumen standard,
and the rehabilitation and reconstruction as well as maintenance of national, district, urban and community access
roads. While resources will continue to be provided to facilitate the completion of the ongoing projects, priority
will also be put on proper maintenance and sustainability of the completed projects.
To complement the road infrastructure, reduce damage to the roads network, lower cost of freight especially for
bulky commodities and increase competitiveness of the economy, resources will be provided to fast track the
process for construction of the Standard Gauge Railway (SGR) starting with the Eastern Route from Malaba to
Kampala.
Government will also work with the private sector to improve the existing marine infrastructure so as to reduce
the cost of transportation and increase connectivity in order to increase the volume of passenger and cargo traffic
by marine transport.
Under air transport, emphasis will continue to be on:
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i). Upgrade and improve the quality of operation and maintenance at Entebbe International Airport. The
scope of works upgrade includes, among others, construction of a new cargo center, new passenger
terminal, strengthening runways, and the replacement of navigation aids; and
ii). Further improvement of regional aerodromes and an airport at Kabale (Hoima) to ease the
development of the oil refinery will be fast-tracked.
Under the electricity sub-sector, emphasis will be on;
i). Accelerating the construction of the major projects such as Karuma, Isimba and Ayago hydropower
projects, mini-hydro power projects such as Muzizi and Nyagak HEPl as well as Power Sub-stations;
and;
ii). Construction of transmission lines under the Rural Electrification Programme with specific focus on
transmission of energy infrastructure to the prioritized activities to accelerate value addition for
export.
Under the Oil and Gas sub-sector, the budget for the FY 2016/17 will continue to facilitate the following
programmes:
i). Further exploration and production of oil and other valuable minerals such as Iron Ore and
Phosphates through issuance of Production Licenses;
ii). Streamlining petroleum supply and distribution, development of the petroleum refining and pipeline
transportation infrastructure by concretizing the development of the Oil Refinery, Crude Oil Pipeline
to the Indian Ocean and petroleum products pipelines.
iii). Strengthening the institutional framework by operationalizing the National Petroleum Authority and
establishment of the National Oil Company;
iv). Acquisition of land for the airport in Kabaale, for the products pipeline and for the utility service line;
v). Implementation of the Local Content Policy and the Workforce Skills Development Strategy and Plan
and;
vi). Exploitation and value addition to other strategic minerals by reviewing the mineral rights and
streamlining award of licenses, fast tracking the establishment of the mineral analysis lab and mining
equipment and provision of electricity to mineral rich areas.
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Under ICT, focus will be on improving access to efficient and affordable ICT services and also lower the cost of
doing business. Specific interventions will include construction of the ICT Park, finalization of the analogue to
digital migration and completion of the third phase of the National Backbone Infrastructure.
Enhancing Human Capital Development by Improving the Quality and Access to Critical Social Services and
Skills Development
The Government strategy for improving Human Capital Development has been on improving the state of facilities
in the key service sectors like Education and Training, and Health. This has greatly improved access to services in
these sectors.
Under the Health sector, Uganda has registered improvement in key health sector indicators. For instance, under-
five mortality rate has fallen from 169.5 per 1,000 live births to 54.5 in the last two decades.
There are also significant improvements in other indicators such as maternal mortality rates, HIV/AIDS
prevalence, availability of essential drugs and medicines, malaria incidence and immunization against the major
killer diseases, among other indicators.
However, it is also evident that Uganda is unlikely to meet many of the Millennium Development Goal (MDGs)
targets for the various health indicators. Therefore the FY 2016/17, focus will be placed on improving Health
Service delivery in the following key areas:
i). Continue with the provision of adequate essential drugs in all health centres;
ii). Health infrastructure development with specific attention on continued rehabilitation, equipping and
functionalization of health facilities including district Hospitals and HCIIIs in all Sub counties;
iii). Strengthening Human resources for Health, including community extension workers and development
of specialised care in heart and cancer;
iv). Strengthening the national referral system, including establishment of regional offices and operational
structures and a fleet of ambulance vehicles, equipment and supplies;
v). Enhancing preventive health care, with particular focus on mass malaria screening, testing, treatment
and larviciding as well as investing in sanitation at household, community and institutional levels;
vi). Address the challenge of health financing, by fast tracking establishment of the National Health
Insurance Scheme and provision of a Medical Credit Fund for private health sector players; and
vii). Provision of family planning services to address the challenge of high fertility rates and its
implications on other health indicators such as infant and maternal mortality rates.
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Under Education and skills development, we have made great advances in increasing access to Primary and
Secondary education and thus towards achieving the millennium development Goal of ensuring that by 2015 all
school going children will be able to complete primary schooling. However, reports such as the MDG report
2015 have indicated that the target on primary school completion is likely not to be achieved despite the increase
from 46% in 2002 to 72% in 2014/15.
Among the key challenges faced under the education sector include the slow progress in improving the education
outcomes such as completion rates, proficiency, numeracy, literacy and skills development, at various levels of
the education system.
The medium to long-term development of human capital calls not only for immediate, but also concerted and
coordinated investment in skills development. Government’s priority will be in consolidation of the investments
and gains made in the education sector by extending access to secondary education through the universal
secondary education (USE) programme, while maintaining the already high enrolment at primary level; and
improving quality in both primary and secondary education to improve learner performance and reduce system
wastages such as drop-out and repetition.
Accordingly, the budget for the FY 2016/17 will prioritise the following:
i. Continue with the ongoing development and maintenance of education infrastructure at primary, post
primary and tertiary levels;
ii. Equipping of facilities like science and computer laboratories and libraries and completion of secondary
school structures already started;
iii. Improving staff motivation through provision of staff houses, salary enhancements and implementation
of the scheme of service to provide for career growth for teachers;
iv. Strengthening monitoring and supervision to address staff absenteeism;
v. Support to early childhood development (ECD) as the indispensable foundation of the country’s future
workforce. This will include ECD components in education, health and community development; and
vi. Continue with curriculum reviews to make the education system more focused on skills development
and responsive to developments in the labour market.
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The strategy for skills development will focus on:
i) Curriculum development in key skills to focus on producing relevant and skilled workforce as well as
operationalization of a training levy in an effort to involve employers/industries in the training of the
country’s human resource;
ii) Enhancing the already ongoing interventions for skills development such the Presidential Initiative for
Science and Technology Innovation Programme, Youth Venture Capital Fund and Youth Livelihood
Programme, among others;
iii) Building the capacity of key training and vocational institutions in particular the already existing skills
training institutions, proposed centers of excellence and trainers to improve response to market demands;
and
iv) Institute mechanisms for international standardization and certification of skills to make Ugandan labour
force competitive.
To enhance Social Development and inclusive growth, the budget will focus on improving the capacity of the
youth to harness their potential and increase self-employment, productivity and competitiveness, with specific
investment in:
i) Enhancing the current programmes for supporting and promoting economic empowerment of various
interest groups. These include the Youth Livelihood Programme, Women Entrepreneurship Fund with
specific emphasis on capacity building for innovation, investment and entrepreneurship;
ii) Improving resilience and productive capacity of other vulnerable groups, with specific investment in the
expansion of social protection interventions such as SAGE.
The strategy for employment creation will involve the development and prioritization of the following
interventions:
i) Value addition in the sectors with high multiplier effect to increase productivity, output and absorption of
excess labour;
ii) Establishment of a labour market information system to link labour market demands to labour supply
requirements, support data collection on labour and employment statistics;
iii) Development of a national content policy to promote local capacity in terms of labour, business and
products;
iv) Enhance competences through making apprenticeship and internship mandatory, and support mind set
change programmes.
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In order to improve access to safe water and sanitation, Government priority has been on improving key
infrastructure through construction and expansion of piped water schemes, urban sanitation facilities, rural water
facilities like boreholes, protected wells and gravity flow schemes among others. These have significantly
contributed to access to improved water and sanitation facilities across the country.
Recent studies by the World Bank shows that nearly 65 percent of the Ugandan population has access to safe
water but about 35 percent of the Ugandan population does not have access to safe water which includes over 10
million people in rural areas and 1.7million people in urban areas. The principle inequality lies in service delivery
to rural versus urban households primarily because of infrastructure related costs of providing water in remote and
rural areas.
Therefore, the budget for 2016/17 will aim to address these challenges by sustaining the on-going programme for
improving access to water and sanitation facilities in both urban and rural areas with emphasis on underserved
areas of the country.
Strengthening the Quality of Public Service Delivery
In order to facilitate the process of improving the quality of services offered by Government Ministries,
Departments and Agencies (MDAs), Government has been and will continue to implement various efficiency
measures at both national and local government levels. One of the major challenges has been in project
implementation in form of poor project preparation, cost over runs, delay in implementation, duplication of
projects, poor contract management, and deviation from intended outputs, among others.
In order to address the above challenges, Government has introduced new reforms to ensure efficient and effective
Public Investment Management System (PIMS). These include (i) revision and establishment of the Public
Investment Management System (PIMS) by developing a general manual for project preparation and appraisal,
developing of Specific Project Evaluation Methodologies, (ii) Guidelines and Norms given sectoral variations and
complexities in projects, (iii) Development of National Parameters such as Shadow Prices and a National
Discount rate to support financial and economic analysis of proposed projects (iv) Establishment of an IT based
Integrated Bank of Projects (IBP) and (v) Establishing a capacity building program to help create a critical mass
of PIM experts. Therefore, in order to realize an effective and efficient Public Investment Management System
(PIMS), all Ministries Departments and Agencies (MDAs) are now required to adhere to the following;
i. The revised Public Investment Management Manual.
ii. Issued guidelines for approval and review of the Public Investment Plan (PIP).
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iii. Establish an Asset Management Strategy in compliance with the Public Finance Management Act,
2015.
iv. Producing project completion reports for both ending projects and phased projects.
Details of these interventions as well as the outcome of the PIP review process and their implications will be
communicated to all all Minstries, Departments and Agencies in the subsequent circulars for the FY 2016/17.
Other measures for improving efficiency in public service delivery will inlcude:
i). Enforcing efficiency in Government expenditure to improve absorption of funds and ensure timely
completion of Government programmes and projects;
ii). Strengthening Government procurement through better procurement planning, enforcement of
procurement regulations, E-procurement, procurement audits and contract management, among others;
iii). Strengthen the operational capacity of key institutions like UNRA and URF to ensure proper planning,
procurement and supervision of works;
iv). Performance orientation of the budget by focusing on the achievement of service delivery
results/outcomes rather than outputs only through programme based budgeting;
v). Develop and implement a high level Result Matrix to Monitor and fast track the implementation of the
strategic interventions presented in the Budget Strategy. This will clearly indicate the key
undertakings, performance benchmarks, responsibility centres and implementation timelines.
vi). Strengthen Monitoring and Evaluation of Government programmes including establishing of a Service
Delivery Unit in Office of the Prime Minister;
vii). Continue to deepen Fiscal Decentralisation by devolving more financial decisions closer to the
frontline service delivery units including consolidating the decentralised budgeting and payment of
salaries, pension and gratuity;
viii). Gradually eliminate domestic arrears including Salaries, Pension and Gratuity as well as other forms of
Government arrears; and
ix). Enhance budget transparency to promote the voice and accountability of citizens by encouraging
citizen participation in monitoring and supervision of Government programmes. . Government will
specially develop an action matrix that will facilitate adequate collaboration and engagement
with CSOs.
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Key Policy Measures
During the budget consultations, we have identified the following policy measures that Government needs to
undertake in FY 2016/17.
i). Enforcing performance contracts for Accounting Officers and gradually to all public servants including
penalties against Public Officers who do not achieve Government’s programmed targets;
ii). Ensuring that all local contracts should be in Uganda Shillings to minimise the impact of cost overruns
on project implementation due to exchange rate fluctuations;
iii). Deepen Fiscal Decentralisation by devolving more financial decisions to local governments; and
iv). Embark on the star-rating system in line with international best practice to motivate public service
delivery units especially individual education and health facilities to recognize and reward managerial
effort;
v). Enhancing Gender and Equity orientation of the national budget at both national and local government
levels to ensure that it adequately addresses the socio-economic needs of all sections of the population;
and
vi). To eliminate persistent wage bill overruns, all recruitment of staff should strictly be planned for within
the Appropriated Budget of a given Vote and any additional staff appointed in the course of the
financial year beyond the Approved Budget should only be accessed to the payroll at the beginning of
the next financial year.
Gender and Equity Orientation of the Budget
Section 9 of the Public Finance Management (PFM) Act 2015 requires the budget to be gender and Equity
compliant through various costed interventions to address gender and equity issues. For inclusive growth, the
agriculture sector will distribute maize seeds to 103 districts and bean seeds to 94 districts. These are both cash
and food crops benefiting both women and men. Land is a critical productive asset and the Lands sector will roll
out the land information system in the remaining 15 zonal offices and digitization of the land titles country wide.
The energy sector is funding biogas projects, and rural electrification. Under works, rehabilitation and
maintenance of district, urban and community roads is being boosted to address equity concerns.
There are interventions for equitable social services. Access to education is to be enhanced with more education
facilities, including sanitation, being constructed. Specific attention has been given to special needs education,
guidance and counseling. The health sector will fund the elimination of mother to child transmission of
HIV/AIDs, family planning, immunization and other reproductive health services. The sector also plans to
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strengthen services through referral hospitals. The water sector will continue to focus on rural water provision,
while enhancing functionality of the water sources.
Other sectors also have costed interventions. The security sector will provide medical services for officers,
militants and their families, as well as education for their children. In addition, rehabilitation services and support
to vulnerable officers and men will be provided. The JLOS sector plans to provide 79 percent of the districts with
basic frontline services. The public sector management sector will ensure that hard to reach allowances are paid to
officers in the 18 hard to reach districts. The accountability sector will operationalize the gender and equity clause
of the Public Sector Management Act 2015.
Sector MTEF Allocations For FY 2016/17
The total additional resources available for the FY 2016/17 is Ushs 735.82 billion. This has been allocated as
follows:
i) Salary Enhancement -Ushs 211.5 billion
o/w Primary and Secondary School Teachers -Ushs 133 billion
o/w Teaching and Non-Teaching Staff of Public Universities -Ushs 78.5 billion
ii) Salary, Pension and Gratuity Shortfalls -Ushs 172.39 billion
iii) Provision of Inputs under NAADS -Ushs 100 billion;
iv) Youth Fund -Ushs 50 billion;
v) Women Fund -Ushs 50 billion; and
vi) Capitalisation of BOU - Ushs 150 billion;
vii) Service Delivery Unit (Office of Prime Minister) -Ushs 2 billion
Total -Ushs 735.82 billion
Given the above situation, Government is required to exercise a high degree of allocation and operational
efficiency in order to enhance the strategic objectives of the FY 2016/17 budget.
Arising out of the above priorities, the resultant sectoral nominal allocations in the Medium Term Expenditure
Framework for the FY 2016/17 compared to FY 2015/16 are shown in Table 6 below and detailed in the Medium
Term Expenditure Framework (MTEF) attached in Annex 1.
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Table 6: Showing the Sectoral Nominal Allocations in Ushs Billion and Percentage Shares for the
FY 2015/16 and FY 2016/17 (Excluding External Debt Repayments and Arrears)
SECTOR
2015/16
Approved
Budget
2016/17
Budget
Projection
% of Budget
FY 2015/16
Budget
FY
2016/17
Works And Transport 3,328.8 3,786.9 18% 19%
Energy and Mineral Development 2,826.4 2,352.6 15% 12%
Education 2,029.1 2,195.1 11% 11%
Interest Payments Due 1,656.2 2,014.0 9% 10%
Security 1,636.1 1,503.9 9% 8%
Health 1,270.8 1,385.4 7% 7%
Accountability 1,005.5 1,130.9 5% 6%
Justice/Law and Order 1,051.3 1,025.0 6% 5%
Public Sector Management 948.1 981.1 5% 5%
Agriculture 480.0 627.7 3% 3%
Water and Environment 547.3 519.9 3% 3%
Public Administration 757.7 503.8 4% 3%
Gratuity, Pension and salary shortfalls 383.9 0% 2%
Legislature 371.3 318.9 2% 2%
Taxes - 230.0 0% 1%
Lands, Housing And Urban
Development 164.8 224.8 1% 1%
Social Development 90.2 189.3 0% 1%
Tourism, Trade And Industry 81.2 76.6 0% 0.4%
Information Communication
Technology 66.7 22.1 0% 0.1%
Grand Total 18,311.4 19,471.8 100% 100%
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The nominal and percentage allocations in Table 6 above depict the financing of the activities that are directly
implemented by the relevant sector. However, Government does not operate in silos and as such, there is an inter
sectoral collaboration between the various sectors, because activities under one sector impact on the other.
Therefore, the above percentage shares should not be looked at in isolation of other sectors. For example,
whereas the activities that are directly implemented by the Agriculture sector constitute of 3% of the MTEF
allocations, these are complimented by activities under rural roads, agricultural financing, value addition, water
for production to mention but a few.
1.7 FISCAL RISKS STATEMENT
Government remains committed to managing fiscal risks in a transparent and prudent manner to enhance the
credibility of fiscal policy and to ensure macroeconomic stability. To this end, this section identifies the key
sources of fiscal risks to the budget and the medium term fiscal framework and how Government intends to
manage these risks.
Macroeconomic risks
Divergence from the macroeconomic assumptions underpinning Government’s fiscal framework poses a risk
to fiscal policy objectives. Uganda’s medium-term growth projections partly depend on the stimulatory
impact of new public investment projects, particularly in infrastructure. Prolonged delays in the execution of
these projects due to absorptive capacity constraints could therefore negatively impact Uganda’s growth
performance and fiscal indicators.
Management strategy
Government reforms in public finance management, the new PFM Act and planned public investment
management guidelines are expected to help ensure the effective use of available resources for committed
purposes and reduce delays in procurement and the execution of projects.
Public Debt risks
Given limited domestic resources and concessional financing, a number of planned infrastructure projects are
to be financed in part by external loans on non-concessional but favourable terms. In recent years,
Government has also begun to issue securities for fiscal policy purposes. Both of these financing
mechanisms are associated with higher borrowing costs when compared to conventional concessional
borrowing and therefore impose higher fiscal costs on Government.
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Interest rates have increased on all tenors of Treasury instruments over the last year which increases the costs
of domestic borrowing. Foreign currency denominated debt comes with an added exchange rate risk, which
represents a particular concern following the recent depreciation of the Ugandan Shilling against the US
dollar; and delayed or reduced availability of external funds could delay execution of Government’s
investment programme.
Management strategy
Government is improving the quality of public debt management by enhancing the analysis underpinning the
medium-term debt strategy, and broadening the range of instruments, markets and financiers to reduce
borrowing costs and improve risk management. To avoid interest rate risks, Government shall aim to only
contract external debt on fixed interest terms in the medium term. Foreign exchange rate risk will be
controlled and monitored by ensuring that the proportion of foreign currency debt in total debt does not rise
above a maximum of 80% in the medium term.
Debt Sustainability Analysis
Current debt numbers indicate that Uganda’s public debt, which includes both external and domestic debt, is
sustainable and under no debt distress with the Net Present Value (NPV) of public debt-to-GDP ratio
standing at 24.1 percent as of end June 2015. This is significantly below the Public Debt Management
Framework threshold and the EAMU Convergence Criteria of 50 percent.
The Ministry of Finance conducts an annual Debt Sustainability Analysis. Preliminary results of the 2015
Debt Sustainability Analysis indicate that the present value of the public debt-to-GDP ratio shall peak at
about 33.9% of GDP in FY2018/19 and FY2019/20, at a sustainable level and at low risk of distress (Table
5). The macroeconomic assumptions and planned infrastructure projects underpinning the DSA are consistent
with the medium term macroeconomic framework. Table 7 summarises the preliminary results of the 2015
DSA.
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Table 7: Summary of the Debt Sustainability Analysis, 2015 (%)
Source: 2015 Debt Sustainability Analysis, Ministry of Finance, Planning and Economic Development
Risks from volatile financing
Government’s infrastructure investment programme is dependent on external financing, which if not readily
available, may pose serious risks to the country’s ability to complete future projects and those already
underway.
Uganda has experienced an increase in the share of non-performing external loans in recent years.
Government still incurs costs on undisbursed funds in the form of commitment fees. Low levels of
disbursement largely reflect low absorption of implementing agencies, related to poor project selection,
delays in acquiring land and covering compensation costs, and procurement and financial management
related challenges. Slow utilisation and absorption capacity constraints increase overall costs for executing
Government’s public investment programme. Delays in approving loan agreements automatically feed into
delays in project implementation and disbursement, accumulated commitment fees and greater fiscal costs.
Management strategy
Government is improving its methods for project selection, design, appraisal, implementation and evaluation.
For example, the projects appraisal process of the Development Committee in the Ministry of Finance,
Planning and Economic Development has been strengthened. The process now requires a