budget overview 2011/12

Budget 2011/12.

Reference made to Table 1 below.  The proposed budget for 2011/12 is 9,840 Billion compared to the approved budget for 2010/11 of 7,556 Billion-which shows a 30% increase. However the projected expenditure for 2010/11 is 9,325.7 Billion, recording a deviation between the approved budget and the projected expenditure of 24%. The increase of the proposed budget 2011/12 from the projected expenditure outturn for 2010/11 is marginal – of 6%.  Notably also inflation for the year ending May 2011 is 16%, implying without the use of supplementary budget in the coming FY, the 6% increase is less than the prevalent inflation rate of 16%. Thus in real terms the proposed budget 2011/12 is lower than the projected expenditure outturn for 2010/11.

Table 1: Budget comparisons between FY 2010/11 and 2011/12
Details	Approved Budget 2010/11	Projected outturn 2010/11	proposed Budget 2011/12	Deviation between Projected outturn 2010/11 and Approved Budget 2010/11	Deviation between Proposed Budget 2011/12 and Approved Budget 2010/11	Deviation between Proposed Budget 2011/12 and the Projected outturn 2010/11
Amount In Billion UGX	7556	9325.7	9840	23%	30%	6%

Budget Priorities:

The budget priorities are in line with the National Development. The priorities this year are; Infrastructural development in roads, Railways, and Energy, enhancing agricultural production and productivity. Employment creation esp. for the youth and women, human resource development and improving public service delivery;

The biggest allocation is to the education sector.

NDP, MTEF Alignment

·         At aggregate level, the MTEF is marginally mis- aligned to the NDP in that the anticipated overall expenditure framework in the MTEF is 0.5 percent less than what the NDP stipulates (Table 2).

·         The mis-alignment is even larger at sector allocation level, with a misalignment of 37 percent between the MTEF and NDP in FY 2011/12.

·         However, if the supplementary funds were allocated in accordance to NDP priorities, the sectoral misalignment would have been reduced.

Table2 : NDP alignment to MTEF
	FY10/11	FY11/12	FY12/13	FY13/14	FY14/15
Overall Deviation	(10.6)	(0.5)	(1.6)	(3.5)	(14.5)
Composition Deviation	36.18	37.29	36.74	42.44	36.24
Source: Calculations based on Budget speech MTEF 2011 data

Deviation between the NDP and Budget FY 2011/12

	FY 2011			FY11/12
Sector Shares	MTEF	NDP	Deviation	MTEF	NDP	Deviation
01 Agriculture	6.1	6.6	(0.5)	4.7	6.0	(1.3)
02 Lands, Housing and urban Development	0.3	0.5	(0.2)	0.4	0.6	(0.2)
03 Energy and Mineral Development	5.5	6.7	(1.2)	13.0	11.8	1.2
04 Works and Transport	14.6	23.6	(9.0)	14.2	23.7	(9.5)
05 Information and Communication Technology	0.2	0.8	(0.6)	0.1	0.9	(0.8)
06 Tourism, Trade and Industry	0.7	2.0	(1.3)	0.6	1.9	(1.3)
07 Education	17.5	14.6	2.9	15.3	13.1	2.2
08 Health	9.3	14.5	(5.2)	10.7	13.6	(2.9)
09 Water and Environment	3.5	4.6	(1.1)	2.9	4.4	(1.5)
10 Social Development	0.4	1.6	(1.2)	0.3	1.5	(1.2)
11 Security	9.1	6.2	2.9	7.5	6.1	1.4
12 Justice/Law and Order	7.5	3.7	3.8	6.0	3.3	2.7
13 Public Sector Management	11.8	7.0	4.8	11.2	6.2	5.0
14 Accountability	6.9	4.1	2.8	8.9	3.9	5.0
15 Legislature	2.3	1.4	0.9	1.8	1.2	0.6
16 public Administration	4.2	2.1	2.1	2.5	1.8	0.7
Total	100.0	100.0	0.0	100.0	100.0	-
Source: Calculations based onBudget speech MTEF 2011 data

Fiscal Framework

• The graph below shows that expenditure spike in 2010/11 FY. The spark led to a higher deficit but the projected to decline in the outer years starting FY 2011/12.
• Given the revenue trend for the earlier, it seems ambitious to predict the progressing revenue to GDP ratio when it as averaged 12-13% over the years

FY	2007/08	2008/09	2009/10	2010/11	2011/12	2012/13	2013/14	2014/15	2015/16
Domestic revenue % of GDP	13.3%	12.6%	12.4%	13.2%	13.7%	14.3%	14.8%	15.3%	15.8%
URA revenue % of GDP	12.9%	12.2%	12.1%	12.9%	13.4%	14.1%	14.6%	15.1%	15.1%
Expenditure % of GDP	18.2%	17.4%	19.6%	24.0%	21.5%	21.3%	21.2%	18.7%	19.0%
Donor grants and loans % of GDP	5.1%	5.3%	5.1%	6.9%	6.3%	5.9%	5.9%	3.9%	3.9%
Fiscal deficit  Incl. grants	1.9%	1.9%	4.7%	6.6%	4.1%	4.6%	4.7%	2.3%	2.2%

Future prospects and challenges

• Oil Forecasts-Discoveries made to-date can support production of over 100,000 barrels of oil per day for 25 years.  At the current barrel price of 130 USD, that would mean potentially gross revenue of 13,000,000 USD per day for the next 25 years. This figure does not take into consideration the transaction costs. Bearing in mind the oil prices will only go higher in future.

·         Job Creation and Employment Strategy: Interventions include: a youth entrepreneurship venture capital fund to be established (Ush. 25 billion), undertake a youth entrepreneurial training programme (Ush. 3.5 billion), and undertake business development skills clinics (Ush. 1 billion).

·         Improving Government Effectiveness in Service Delivery: Several measures from which Ush. 40 billion has been saved have been instituted as follows: effected cuts of 50 percent on advertising budgets for all Ministries and Agencies; effected cuts of 30% on the budget for allowances, workshops and seminars, travel inland and abroad, fuel and vehicle maintenance, printing and stationary, welfare and entertainment, books, periodicals and newspapers, special meals and the purchase of furniture for selected Ministries and Agencies; and freeze the purchase of Government vehicles, except for critical areas such as hospitals, police and the security services and an immediate forensic audit of Government salaries, wages and pensions will be conducted to establish credibility.

In addition, the following measures will be implemented, in collaboration with the ministries of Public Service, Works and Transport and the Public Procurement and Disposal of Assets (PPDA) Authority to improve service delivery:-Hold Accounting Officers, including Chief Administrative Officers personally responsible for the delivery of performance targets, once funding has been made available to them; Implement performance contracts for top civil servants up to the level of Heads of Departments to strengthen performance management and enhance transparency and accountability; Enforce use of unit costing for all government procurement, against which mis-procurement will occur if reserve prices are not met; and Enforce use of government-procured equipment in the maintenance of national district and community access roads, with operational financing from the Uganda Road Fund and Uganda National Road Authority. Any waivers to use private sector contractors will first have to be approved by the Treasury.

Inflation Measures in short to medium term folds;

First the focus on curbing food prices with through mainly increasing agriculture Productions and Productivity: interventions include: maintaining the Agricultural Credit facility (Ush. 30 billion); through NAADS increase commercialization of improved seeds and other planting materials; strengthen disease and pest control, and in collaboration with the private sector provide irrigation and water harvesting technologies.

·         50% excise duty tax reduction on sugar prices. To the critics, this reduction is insignicant-50% reduction is 25 UGX reduction from the 2,700 UGX price per kilogram. Of Which 25 shilling cannot afford anything today in Uganda.

·         Completion of the 250MW bujagali Hydro project which will reduce to some extent energy costs

·         Excise duty removal on kerosene. The critics again argue that removal of excise duty on kerosene means 200 UGX has been taken off from the 2800 UGX per litre of kerosene. 200 UGX cannot afford a sachet

Challenges;

·         Corruption; the World Bank 2005 /APRM mechanism estimates 500BN loss every year through corruption. Which implies over the last 12 Years- 6 trillion shillings has been lost and yet the average government expenditure over the same period has been about 5-6 trillion UGX. This implies a full budget year has been lost in the last 12 years

·         Budget indiscipline- use of supplementary budgets undermines credibility of budget