Bukenya inspecting a guard of honour at Parliament yesterday
Newvision Wednesday, 11th June, 2008
By Paul Busharizi and Felix Osike
Finance minister Ezra Suruma yesterday announced the Government was scrapping taxes for schools, hotels and hospitals, agro-processing companies, heavy truck transporters and salt, while increasing spending on roads, power generation and health.
In his budget speech to Parliament, under the theme “Strategic priorities to accelerate prosperity for all,” Suruma did not make any tax changes in fuel, airtime or soft drinks.
But the minister raised taxes on cigarettes, first motor-vehicle registration and used cars over 8 years.
“I dedicate this budget to millions of Ugandans who sacrifice their time, love and soul to help others and build a better future for our children,” he said to applause.
Suruma said the economy grew at 8.9% this financial year, despite the steep rise in oil prices, the shortage of electricity and the interruption of Uganda’s supply routes to Mombasa during the Kenyan chaos.
“This is considerably higher than the growth rate of 6.5% which we projected in last year’s budget,” the minister said. “Next fiscal year, real GDP growth is projected to grow by 8.1%.”
Present were Vice-President Prof. Gilbert Bukenya, who represented President Yoweri Museveni, Chief Justice Benjamin Odoki, political parties’ leaders and diplomats.
The total budget is sh6.1 trillion, a 28% increase from the previous year. Of this, almost sh4 trillion will be raised from domestic revenue and sh269b from domestic banking.
Combined, domestic resources represent about 70% of the budget, while donor support has gone down to 30%. Two years ago, donors were funding half of Uganda’s budget.
“This optimistic economic outlook is premised on the Government’s commitment to redirect public investment to the critical growth sectors,” Suruma said.
In this regard, he said, he would exempt schools and tertiary institutions from income tax, and extend the tax relief on construction materials for hotels and hospitals for another year.
“I have substantially increased expenditure on both education and health in the bid to increase our people’s access to quality education, life saving drugs and other health services.”
On education, he said the Government would focus on improving the efficiency and quality of UPE and USE by strengthening the Education Standards Agency to undertake its inspection function.
“While enrolment numbers have grown significantly in primary education, completion rates are still low. The Government will ensure that once children are enrolled, they complete primary education.”
On health, he said drugs would be labelled to prevent their theft and sale in private clinics and on the open market.
Of the additional sh98b for the sector, sh60b will go to the provision of Anti-Retroviral Treatment to everybody who needs them.
Suruma also announced the scrapping of taxes on income from new agro-processing investments, provided they are located within a
radius of 30km of Kampala.
“Uganda is an agricultural country, and we need to encourage production and processing of our agricultural products,” he said.
In another move aimed at boosting value addition of raw materials, Suruma announced a reduction in excise duty from 30% to 20% on local beers.
The minister also threw transporters a bone, scrapping VAT on trucks of 3.5 tonnes and above. This, he said, was “to reduce the cost of transportation and its effect on the prices of food and other products.”
Alongside the tax cuts, Suruma announced a landmark provision of sh320b to construct the Northern Transport Corridor, a dual carriageway from Busia/Malaba at the Kenyan border to Katuna at the Rwandan border.
Another sh960b will be spent in the next three years on the construction of major highways. In total, funds for the road sector increased from sh625b this year to a record sh1.1 trillion next year.
The Government has committed such huge resources, Suruma explained, because delays in disbursement of donor funds had caused the roads to deteriorate, increasing the cost of repairs.
“It is now clear that the cost of delay in the disbursement of donor funds that are tied to the fulfillment of conditionalities is harmful to the economy.”
He, however, warned against corruption and overcharging in the construction of new roads. “We must increase efficiency and effectiveness in the implementation of road projects, complete projects in a reasonable time and do so at a fair and competitive cost.”
The minister also tripled resources for micro-finance, from sh10b to sh32b, while NAADS saw its budget increase with 62%, to sh97b, despite wide-spread criticism of its effectiveness.
“The additional funding will be for inputs to the small farmers who cannot afford to purchase the necessary agricultural inputs.”
Additionally, Suruma provided sh50b as credit guarantees for banks that lend for agricultural activities.
He announced he was increasing allocation to the Energy fund by sh109b for the construction of Karuma Dam. In respect to the power sector, he also proposed to scrap VAT on heavy fuel oil, used in thermal plants for power generation.
In a bid to create employment and support industrialisation, the Government foresees an additional sh20b as capital injection for small and medium enterprises through the Uganda Development Bank.
With an average economic growth of 8.9% in the last three years, Suruma said in conclusion, Uganda’s speed of progress was comparable to that of the fastest growing economies of the world such as China and India.
“The world has marveled for long at the achievements of the Asian Tigers. I hope you will permit me to express the hope that the world will soon recognise that there are also African tigers, and Uganda is certainly one of them.”
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