Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698930348714.pdf (Uganda)
THE REPUBLIC OF UGANDA NATIONAL BUDGET FRAMEWORK PAPER FY 2022/23 – FY 2026/27 MINISTRY OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT DECEMBER 2021 National Budget Framework Paper FY 2022/23 TABLE OF CONTENTS TABLE OF CONTENTS .............................................................................................................................. i 1.1 MEDIUM TERM MACROECONOMIC POLICY FRAMEWORK .......................................... vii Real GDP Growth ................................................................................................................................. vii Inflation.................................................................................................................................................. viii Interest Rates....................................................................................................................................... viii Exchange Rate....................................................................................................................................... ix Employment ............................................................................................................................................ ix External Sector Developments ....................................................................................................... ix Trade with EAC Partner States ...................................................................................................... x Economic Growth Strategy in FY2022/23
 ................................................................................ xi 1.2 MEDIUM TERM FISCAL FRAMEWORK ................................................................................... xii Fiscal Strategy ..................................................................................................................................... xii Domestic Revenue .............................................................................................................................. xiii Government Expenditure ................................................................................................................ xiv External Borrowing ............................................................................................................................ xv Domestic Borrowing ........................................................................................................................... xv Debt Repayments ................................................................................................................................. xv Interest Payments ............................................................................................................................... xv 1.3 STATEMENT OF THE RESOURCE FOR THE ANNUAL BUDGET FOR FY2022/23 xv 1.4 RESOURCE ENVELOPE FOR FY 2022/23 ........................................................................... xvi 1.5 UPDATE ON DEBT
 SUSTAINABILITY...................................................................................... xvi 1.6 COMPLIANCE WITH THE CHARTER FOR FISCAL RESPONSIBILITY ..................... xvii 1.7 FISCAL RISK STATEMENT ....................................................................................................... xviii 1.8 STATEMENT OF THE RESOURCE FOR THE ANNUAL BUDGET FOR FY 2022/23xix 1.8 BUDGET STRATEGY FY 2022/23 ............................................................................................ xix Security and the rule of law......................................................................................................... xxi Revitalising business activities ................................................................................................... xxi Enhancing agro-industrialisation and light manufacturing ...................................... xxii Improving the wellbeing and building resilience of the population to economic shocks xxiii Innovation, technology development & transfer .............................................................. xxiii Enhancing the quality and stock of productive infrastructure ................................ xxiv i National Budget Framework Paper FY 2022/23 Minerals, oil and gas, and tourism development ............................................................. xxiv Tourism Development ...................................................................................................................... xxv
xxv Enhancing public sector effectiveness and efficiency .................................................... xxv 1.9 POLICY PROPOSALS FOR FY 2022/23 BUDGET ........................................................... xxvii 1.10 Resource Allocations at Programme Level ..................................................................... xxxi ii National Budget Framework Paper FY 2022/23 The National Budget Framework Paper (NBFP) for FY 2022/23 has been prepared in line with Section 9 (3) of the Public Finance Management Act, 2015 (Amended) and Section 9 (5) which requires the Minister of Finance, Planning and Economic Development to seek approval by Cabinet and submit it to Parliament by 31st December.
The National Budget Framework Paper (NBFP) for FY 2022/23 and the medium-term lays out planned interventions for Uganda’s economic transformation, consistent with Government’s Macroeconomic Objectives spelt out in the Charter for Fiscal Responsibility and the Strategic Objectives of the third National Development Plan (NDPIII) whose overall goal is “Increasing household incomes and improving the quality of life of Ugandans”.
The theme of the National Budget Framework Paper for the FY2021/22 is “Full monetisation of the Ugandan Economy through commercial industrialisation, market access and digital agriculture, transformation”.

To achieve this, Government will undertake continuous sensitization and education of households on good investment decision making.

(Monetisation with appropriate kibalo).


This theme takes into consideration ‘inclusive growth’ which is in line with the” overall Theme adopted at the East African Community level.

The preparation of the National Budget Framework Paper for the FY 2022/23 involved extensive budget consultations both at the national and local government levels.
This included inter-ministerial budget reviews to get consensus on the priority programme interventions for the fiscal year 2022/23 and rationalise expenditures, including sequencing of multiyear interventions to fit within the constrained budget.
Further discussions were held with the Private Sector and Development Partners, in order to understand the socio-economic challenges we face today, the actions necessary to harness opportunities that have arisen from the third National Development Plan (NDPIII) and the NRM Manifesto 2021 – 2026. vi National Budget Framework Paper FY 2022/23 GOVERNMENT’S MEDIUM TERM MACROECONOMIC PLAN, MEDIUM TERM FISCAL FRAMEWORK, POLICY MEASURES AND INDICATIVE REVENUE AND EXPENDITURE FRAMEWORK.
1.1 MEDIUM TERM MACROECONOMIC POLICY FRAMEWORK The overarching goal of the National Development Plan III is to foster economic recovery and attain inclusive socio-economic transformation.

Government’s policy and planning frameworks will continue to support initiatives for accelerating and sustaining inclusive economic growth without compromising macroeconomic stability and debt sustainability.
The macroeconomic strategy therefore, is to enhance returns from public investment through implementation of policies that boost efficiency in public investment, increase domestic revenue mobilization efforts and maintain price stability.

In addition, the Government will continue with measures to boost aggregate demand as well as improve our position with the rest of the world by boosting exports and building up foreign reserves to cushion the country against external shocks.
Table 1 details the key macroeconomic assumptions underlying the macroeconomic policy framework for FY 2022/23 and the medium term.

Table 1: Key Macroeconomic Assumptions Source: MoFPED Real GDP Growth There was a modest recovery in the economy in FY 2020/21 with a growth rate of 3.4 percent compared to 3.0 percent recorded in FY 2019/20.

This recovery was supported by the measures put in place by Government to mitigate the impact of the pandemic on businesses and households.
All sectors of the economy registered positive rates of growth during FY 2020/21, with a modest recovery in industry and services sectors, while growth in agriculture slowed when compared to the previous financial year.

The industry sector registered growth of 3.4 percent in FY 2020/21 compared to the 3.2 percent growth in FY 2019/20.

Similarly, the services vii Outturn.Outturn.Proj.
OutturnProj.Proj.Proj.Proj.Proj.2019/202020/212021/222022/232023/242024/252025/262026/27Nominal GDP at Market Prices (shs bn)139,689 147,962 151,648 167,371 186,632 209,481 232,808 262,092 Real MP GDP growth3.0%3.4%3.8%6.0%6.5%7.0%7.4%7.6%Headline Inflation (period average)2.3%2.5%2.7%4.6%5.2%5.3%3.9%5.0%Core Inflation (period average)2.3%3.5%2.4%3.4%5.0%5.3%3.6%5.0%Macroeconomic Assumptions National Budget Framework Paper FY 2022/23 sector also grew by 2.7 percent compared to 2.5 percent registered in FY 2019/20.
Growth in agriculture, forestry and fishing sector slowed to 3.8 percent from 4.8 percent in FY 2019/20.

This was due to a significant decline in fishing activities to -8.8% from 0.3% in FY 2019/20 following curfew and related lockdown measures.

Economic growth in the FY 2021/22 is projected at 3.8 percent and is expected to improve further to about 6 percent in FY 2022/23.
The projected improvement in economic activity is on account of the expected recovery in aggregate demand following Government interventions in reviving private sector activity.

The wide spread vaccination of the population against COVID-19 is also expected to lead to full re-opening of the economy.
In addition, the performance of the agriculture sector will increased be boosted by on-going production and productivity, while the services sector is expected to continue with the gradual recovery following re-opening of the economy.
interventions geared towards Over the medium term, growth is projected to reach potential levels (between 6.0 to 7.0 percent), supported mainly by enhanced private sector activity due to increased aggregate demand post Covid-19; increased returns from public infrastructure investments; increased activities in the oil and gas sector; and recovery in industry which will be supported by manufacturing as well as public and private construction.
Inflation Annual headline inflation averaged at 2.5 percent in FY2020/21, a slight increase from 2.3 percent recorded in the previous financial year.

The slight increase in the general price level was largely attributed to the impact of the significant rise in transport fares on other goods and services.

Transport costs rose sharply during the year following pandemic related restrictions on public service vehicle capacities.
In FY2021/22, annual headline inflation is projected to slightly increase to 2.7 percent, mainly due to the impact of measures introduced to mitigate the spread of the corona-virus pandemic on prices of goods and services.

Over the medium term, annual inflation is projected to remain within the government’s target range of 5(+/-3) percentage points, supported by prudent fiscal and monetary policy measures.
Interest Rates As a result of the accommodative monetary policy, average lending rates declined to 18.9 percent during FY 2020/21 from an average of 19.3 percent in FY 2019/20.

Over the course of FY 2020/21, low inflation outlook enabled the easing of monetary policy conditions.
The Central Bank Rate was maintained at 7.0 percent from July to May, 2021 and was revised downwards to 6.5 percent-its lowest level in June 2021. viii National Budget Framework Paper FY 2022/23 Exchange Rate The Ugandan shilling strengthened against the US Dollar, appreciating by 1.4 percent from an average mid-rate of UShs 3,714.6 per US Dollar in FY 2019/20 to UShs 3,661 per US Dollar in FY 2020/21.
This performance was due to higher inflows from portfolio investments in the securities market and export earnings, especially from coffee and mineral products.

In addition, the global weakening of the US Dollar and increased inflows from development partners tagged to the fight against covid-19, contributed to the strengthening of the shilling during the financial year.
Going forward, the exchange rate will be largely affected by developments in the exports sector, oil sector and how quickly the tourism sector recovers from the negative effects of the covid-19 pandemic.

Employment The National Household Survey carried out in FY 2019/20 revealed that the unemployment rate reduced from 10 percent in FY 2016/17 to 9 percent in FY 2019/20.

In the survey, the size of the labour force was estimated at 9.1 million, out of which 58 percent were male.
Majority of the working population (52 percent) were in wage employment followed by employment in subsistence agriculture at 47 percent.

The results revealed a pandemic-related shift in employment dynamics, with the proportion of the working age population that were employed having reduced from 60 percent in FY 2016/17 to 52 percent in FY 2019/20.

The survey also noted an increase in the proportion of households that were engaged in subsistence agriculture between the two periods.
An update of the labour survey concluded that the percentage of the working persons in formal employment declined from 57 percent prior to March 2020 to 47 percent post March 2021.

At the same time, the percentage of persons working in subsistence agriculture increased from 41 percent in March 2020 to 52 percent after March 2021.
External Sector Developments Uganda’s current account deficit widened by 65.1 percent in FY 2020/21 to a record high of USD 4,135.27 million from USD 2,504.14 million in FY 2019/20.

This was attributed to a higher increase in the imports of goods and services that more than offset the growth in export receipts.

In addition, a decline in remittances also contributed to an increase in the current account deficit.
Table 2 below shows a summary of the current account and its components for the last 5 Financial Years.
ix National Budget Framework Paper FY 2022/23 Table 2: Selected Balance of Payments flows (USD million) FY FY FY FY Current account Trade Balance Export of goods and 2016/17 2017/18 2018/19 2019/20 -2,504.14 -1,028.57 -3,676.87 -1,765.36 -1,736.79 -2,385.18 -2,479.18 -3,311.90 FY 2020/21 -4,135.27 -5,120.82 services 4,965.61 5,553.93 6,422.05 5,475.71 6,629.77 Import of goods and services Primary income Secondary income o/w Remittances FDI inflows Source: Bank of Uganda 6,730.96 -723.71 7,939.11 -926.44 9,152.57 11,750.58 -705.72 -624.39 1,691.26 1,460.50 1,574.84 1,748.66 1,797.12 1,102.03 1,291.65 1,163.88 847.77 967.82 714.20 1,369.05 929.03 1,217.44 9,733.96 -915.94 1,252.40 From the table, Uganda’s trade deficit widened to US$ 5,120.82 million in FY 2020/21 from US$ 3,676.87 million in FY 2019/20.
This was due to the faster increase in the value of imports of goods and services by 28.4 percent which offset the increase in export receipts.

Increase in imports was attributed to higher demand following the easing of pandemic-related containment measures as well as improvements in supply chains and trade logistics from the global scene.

On the other hand, the increase in export earnings during the year was largely explained by higher mineral products exports.
Remittances to the country slightly declined to US$ 1,102.03 million in FY2020/21 from US$ 1,291.65 million in FY 2019/20.

This performance was affected by a fall in incomes of migrant workers due to loss of employment and weak economic growth in migrant hosting countries.

FDI inflows declined by 12.4 percent to US$ 847.77 million in FY2020/21, as pandemic related uncertainties continued to subdue investor sentiments.
Trade with EAC Partner States Uganda traded at a deficit of US$ 835 million with EAC Partner States in FY 2020/21 after registering export receipts worth US$ 1,271 million and imports worth US$ 2,107 million (see table 3).

Trade deficits were registered with Tanzania, Kenya and Rwanda – at US$ 1.091 million, US$ 230 million and US$ 19 million, respectively while surpluses were registered with the rest of the Partner States (see table 4).
Imports from Tanzania significantly increased to US$ 1,214.3 million in FY 2020/21 from US$ 458.3 million in FY 2019/20 thereby leading to a higher trade deficit with the nation.
x National Budget Framework Paper FY 2022/23 Table 3: Trade Balance between Uganda and EAC Partner States (USD Million) Exports Imports Merchandise Trade Balance 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 1,157 1,306 1,579 1,255 1,108 1,271 698 753 800 1,147 1,303 2,107 459 552 780 108 -196 -835 Source: Bank of Uganda Table 4: Merchandise Trade Balance by Country (USD Million) 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 Kenya Burundi Rwanda South Sudan Tanzania -106 38 230 280 17 73 37 180 308 -46 337 -176 -238 -230 16 196 357 28 162 410 48 -7 325 61 -19 443 -126 -317 -324 -1,091 EAC 459 552 780 108 -196 -835 Source: Bank of Uganda Economic Growth Strategy in FY2022/23 Economic Strategy in the short to medium term has the twin objectives of restoring economic activity to pre-pandemic levels and subsequently accelerating the pace of Socioeconomic Transformation.
Economic recovery will be achieved by boosting aggregate demand by restoring domestic consumption, renewing private and public investment, and enhancing export promotion.

The key to Economic Recovery is the mitigation of the COVID-19 pandemic by vaccinating Ugandans and strengthening health systems to mitigate the COVID19 pandemic and other ailments.
In the medium-term, increasing the wealth of households and eliminating poverty, particularly using the Parish Development Model, is key for socioeconomic transformation.

In addition, diversifying the economy and Uganda’s exports, are key to returning to the planned economic growth trajectory.
Our economic policy in the fiscal year xi National Budget Framework Paper FY 2022/23 2022/23 and in the future therefore, seeks to achieve the following three broad objectives; i) Ensure Peace and Stability through enhanced Security and Macroeconomic stability, as key foundations for growth and development.

ii) Mitigate the impact of the COVID19 pandemic through widespread vaccination, support to businesses, and re-opening the economy to enable all sectors to function optimally.
iii) Enhance socio-economic transformation by redirecting budgetary resources towards wealth and job creation, industrialization, export promotion and other areas with high returns on investment.

1.2 MEDIUM TERM FISCAL FRAMEWORK Fiscal Strategy The overall fiscal strategy is to promote inclusive growth to increase household incomes and improve quality of life of Ugandans without compromising fiscal and debt sustainability.
This will entail implementation of Domestic Revenue Mobilization Strategy (DRMS) to reduce the share of the budget that is financed through borrowing.

The DRMS aims at achieving revenue to GDP growth of 0.5% every financial year.

The Charter for Fiscal Responsibility (FY2021/22-2025/26) also sets numerical targets for the fiscal deficit and public debt.

The measurable fiscal objectives in the Charter are: i. ii.

The ratio of public debt to GDP in nominal terms is reduced to below 50% by FY 2025/26.
The overall fiscal deficit including grants gradually adjusts to a deficit not exceeding 3% of GDP by FY 2025/26.

iii.

A maximum of petroleum revenue worth 0.8% of the preceding year’s estimated non-oil GDP outturn will be transferred to the consolidated fund for budget operations and the remainder shall be transferred to the Petroleum Revenue Investment Reserve.

Table 5 sets out the fiscal framework for FY2022/23 and the medium term.
xii National Budget Framework Paper FY 2022/23 Table 5: Medium Term Fiscal Framework Notes: Figures net of HIPC debt relief unless stated otherwise.

In the outer years, projections for project grants, external development expenditure and concessional project loans may include forecasted new projects not yet allocated in the MTEF.
Source: MoFPED Domestic Revenue Domestic revenues are projected to amount to UShs 25,516 billion in FY 2022/23 and will grow at an average of 0.5 percent of GDP, supported by implementation of the Domestic Revenue Mobilization Strategy (DRMS).

The Strategy aims to guarantee a reasonable, realistic, and practical approach the implementation of reforms in the tax system over the medium term.
resource mobilization sustainable through to Of the total domestic resources in FY 2022/23, UShs 23,755 billion is projected to be raised from tax sources and UShs 1,761 billion from Non- tax revenue sources.

Domestic resources are projected to increase to 13.6 percent of GDP in FY 2022/23, and will continue to grow by 0.5 percent per annum over the medium term as economic activity is expected to rebound when the effects of the COVID-19 pandemic dissipate.
xiii Medium Term Fiscal Framework (Shs bn)Outturn.

2019/20Outturn.

2020/21Proj.

Outturn 2021/22Proj.

2022/23Proj.

2023/24Proj.

2024/25Proj.

2025/26Proj.
2026/27Total revenue and grants18,44221,69323,85026,38529,96334,58143,58152,012 Revenue17,28619,73922,42525,51629,25233,89442,98551,516 Tax revenue15,91218,33720,83723,75527,27031,57836,91542,987 Non-tax revenue (including AIA)1,3741,2621,5881,7611,9812,2652,4662,861 o/w Appropriation in Aid4325297288028879921,1171,260 Grants1,1561,9541,424869711687596496 Budget support45562975632121210 Project grants7011,3251,349806691666575496Expenditures and net lending28,39335,19132,39732,75737,43042,50951,07559,948 Current expenditures15,09318,62817,73119,91322,10824,43827,58530,805 Development expenditures12,06415,08214,15512,44315,12218,07123,49022,239 Net lending and investment8316411110000903 Other spending (clearance of arrears, etc.
)405841400400200000Overall balance -9,950 -13,498 -8,547 -6,372 -7,467 -7,927 -7,494 -7,936 Financing9,95013,4988,5476,3727,4677,9277,4947,936External financing (net)6,1956,0008,4053,5365,5105,1525,4218,179Domestic financing (net)3,8786,8181432,8361,9572,7752,073-243 Memorandum items:Fiscal deficit (% of GDP) Including grants and HIPC debt relief-7.1%-9.1%-5.4%-3.6%-3.8%-3.7%-3.1%-2.9% Excluding grants-7.9%-10.4%-6.3%-4.1%-4.2%-4.0%-3.3%-3.1%Expenditure (% of GDP)20.3%23.7%20.4%18.7%19.3%19.6%20.9%21.8%Donor grants and loans (% of GDP)3.7%5.0%5.1%3.7%4.1%4.6%4.9%2.7% National Budget Framework Paper FY 2022/23 To implement the Domestic Revenue Mobilisation Strategy (DRMS), Government will focus on the following strategic priorities: i.
Reduce inequalities by enhancing progressivity of tax and non-tax policy instruments; iii.

iv.

ii.
Support Uganda Revenue Authority’s efforts to curb non-compliant behaviour by investing in institutional capacity building, ICT infrastructure and strengthening accountability and transparency of revenue administration; Implement a coordinated approach to revenue mobilization across Government Ministries, Departments and Agencies to improve revenue mobilization and taxpayer compliance, and promote a conducive business climate; Improve efficiency of the framework of tax incentives by evaluating effectiveness of various tax incentive policies with a view to minimizing revenue foregone from wasteful tax expenditures; Implement unilateral, bilateral and multi-lateral interventions to combat tax-motivated illicit financial flows and tax avoidance by strengthening the international tax policy framework and its implementation; Implement the prioritised initiatives in the Domestic Revenue Mobilization Strategy Implementation Plan after public consultation with relevant stakeholders.
v. vi.

vii.

Provide an enabling environment for taxpayers and tax practitioners to effectively engage in revenue policy reforms.

This will strengthen their role in advocating for or against tax and non-tax policies, raising awareness on tax rights and obligations and strengthen the social contract.
Government Expenditure Government expenditure excluding domestic debt refinancing and external amortisation is projected to amount to UShs 32,757 billion in the FY 2022/23 (equivalent to 18.7 percent of GDP) from UShs.

32,397 billion (equivalent to 20.4 percent of GDP) in the current financial year.

The reduction in expenditure as a percentage of GDP is in line with the need to undertake fiscal consolidation to ensure fiscal and debt sustainability.
Over the medium term, recurrent expenditure is projected to average at 11.3 percent of GDP, while development expenditure is projected to average at 8.5 percent of GDP.

xiv National Budget Framework Paper FY 2022/23 External Borrowing A total of UShs 6,868 billion is projected as external financing in FY 2022/23.

Of this, UShs 4,770 billion is in form of project loans, while UShs 1,229 billion is expected as budget support loans.
Domestic Borrowing Government borrowing from the domestic market for fiscal purposes in FY 2022/23 is projected at UShs 2,836 billion, equivalent to 1.6 percent of GDP.

Borrowing from the domestic market is projected to decline to an average of 1.3 percent per annum over the medium-term to maintain debt sustainability and promote increased private sector lending.
Debt Repayments Amortization of external debt is projected to increase to UShs 2,463 billion which is equivalent to 1.4 percent of GDP in FY 2022/23 and will continue to rise to 2.3 percent by FY 2026/27.

The rise in amortisation is due to the typically characterised by shorter grace periods, and maturity of some loans.

in non-concessional financing, which increase is Interest Payments Interest payments are projected to amount to UShs 5,088 billion in FY 2022/23.
Of this amount, UShs 4,059 billion is projected to cover domestic interest payments while UShs 1,029 billion will cater for foreign interest payments and commitment fees.

The ratio of interest payments to GDP is projected at 2.9 percent in FY 2022/23, and will decline thereafter, to an average of 2.5 percent over the medium term.

1.3 STATEMENT OF THE RESOURCE FOR THE ANNUAL BUDGET FOR FY2022/23 Total resources available for Government expenditure will be obtained from both domestic and external sources.
Domestic resources comprise of tax and non-tax revenue as well as borrowing from the domestic market while external resources include budget and project support grants and loans.

xv National Budget Framework Paper FY 2022/23 1.4 RESOURCE ENVELOPE FOR FY 2022/23 The total resource envelope, in FY 2022/23 is projected at UShs.

40,408 billion, as detailed in the table 6: Table 6: Projected Resource Envelope for FY 2022/23 (UShs.
Billions) Source S/ N Domestic Revenues Petroleum Fund Budget Support Domestic Financing Project Support (External Financing) Domestic Refinancing (Roll-over) Local Revenue for Local Governments Total Resource Inflows (1+2+3+4+5+6+7) External Debt Repayments (Amortization) Project Support (External Financing) 9 10 Domestic Refinancing 11 Domestic Arrears 12 Appropriation in Aid (AIA) - Local FY2021/2 2 22,425.4 200.0 3,583.2 2,942.6 6,868.3 8,547.0 212.4 44,778.8 FY2022/2 3 25,515.7 - 1,291.7 2,836.0 5,575.9 7,651.5 212.4 43,083.2 (1,786.9) (2,462.5) (6,868.3) (8,387.0) (555.5) (212.4) (5,575.9) (7,651.5) (395.5) (212.4) Revenue 13 GOU MTEF: Resource Envelope Less 26,968.8 26,785.4 External Debt Repayments, Project Support, Domestic Refinancing, Arrears and AIA Interest payments 14 15 GOU Discretional Resources (MTEF less Interest Payments) Source: MoFPED (4,697.8) 22,271.0 (5,088.1) 21,697.3 1.5 UPDATE ON DEBT SUSTAINABILITY From June 2020 to June 2021, our public debt increased from US$ 15.34 Billion, equivalent to Ushs.
57,215.30 Billion, to US$ 19.54 Billion, equivalent to Ushs.

69,512 Billion, by the end of June 2021.

This corresponds to a 27.4 percent increase in total debt stock.

Of this, domestic and external debt accounted for 36.6% (USD 7.2 Billion, equivalent to Ushs.

25,451 Billion) and 63.4% (USD 12.4 Billion, equivalent to Ushs.

44,061 Billion), respectively.

It is projected to increase to over 52.7% by the end of this financial year and peak at 53.1% at the end of the FY2022/2023.
xvi National Budget Framework Paper FY 2022/23 The challenge of the COVID19 pandemic has had far-reaching implications and has led to an increase in the fiscal deficit for the last two fiscal years.

The slowdown in growth plus the additional expenditure requirements to finance Government’s response measures further constrained fiscal space and necessitated additional borrowing.

Government remains very keen on maintaining debt sustainability and as such will continue to prioritise concessional borrowing.
In addition, the following measures will continue to be pursued to slow down debt accumulation and promote its sustainability.

1.

Implementation of the measures under the Domestic Revenue Mobilisation Strategy that is aimed at increasing domestic revenue by 0.5 percentage points of GDP each year.

2.

Enhance efforts towards export promotion and import substitution to increase foreign currency inflows and reduce the outflows.

3.
3.

Sequencing projects, with priority given to those generating a bigger growth dividend.

In addition, Government will also continue to enhance project execution by fully implementing the reforms under the Public Investment Management Strategy (PIMS), for timely realization of their benefits and subsequently their impact on the economy.
1.6 COMPLIANCE WITH THE CHARTER RESPONSIBILITY FOR FISCAL The Charter for Fiscal Responsibility (CFR) for the period FY 2021/22 to FY 2025/26 presents Government's strategy for operating a fiscal policy which is consistent with sustainable fiscal balances and the maintenance of prudent and sustainable levels of public debt over the medium term.

The budget for FY 2022/23 is in line with the CFR.


The Charter has 3 fiscal objectives namely: (i) total public debt is reduced to below 50% of GDP by FY 2025/26; (ii) the overall fiscal balance including grants should gradually adjust to a deficit not exceeding 3% of non-oil GDP by FY 2025/26 and (iii) a minimum of 0.8% of the preceding year’s estimated non-oil GDP outturn shall be transferred to the consolidated fund for budget operations.
The balance shall be transferred to the Petroleum Revenue Investment Reserve (PRIR) for investment in accordance with the PFMA as amended.

In order to ensure more compliance with the charter, a path was set for both debt and fiscal deficit.

xvii National Budget Framework Paper FY 2022/23 1.7 FISCAL RISK STATEMENT A comprehensive analysis of fiscal risks is key to prudent fiscal management.
Therefore, the government prepares a fiscal risk statement annually to assess risks that can affect the achievement of the set fiscal strategy.

The risk framework is categorised into: macroeconomic risks, risks related to public debt and Natural disasters.

a.

Macroeconomic Risks Changes in macroeconomic assumptions create risks to both revenue and expenditure projections as they play a key role in the formulation of the budget.

This section assesses two important sources of macroeconomic risks: i.
Global and regional economic and trade environment Currently, the global economy faces threats from the impact of the COVID-19 pandemic.

More specifically, the new variant Omicron which was discovered in Southern Africa in November, 2021 and the low uptake of vaccination (4% of the population is fully vaccinated in Africa).
The first source of risk relates to the path of the pandemic, the needed public health response, and the associated domestic activity disruptions, most notably for contact-intensive sectors.

Subsequently, the extent of global spill overs from subdued demand, weaker tourism and lower remittances are likely to pose a risk to economic activity thereby posing a risk to the national budget.

Lastly, financial market sentiment is likely to have implications for global capital flows.

ii.
ii.

Estimation of macroeconomic indicators Volatility and optimism bias in growth projections can have negative effects on tax revenues and public debt.

This has been exacerbated by the uncertainty arising from uncertainty arising from the resurgence of the covid-19 pandemic and its consequences.

These challenges could negatively affect economic growth outturns going forward and in turn affect tax revenues and public debt b.
Risks related to public debt Risks associated with external and domestic debt, include: - 1) Refinancing risks due to a high composition of short term instruments in the financing mix 2) Materialization of contingent liabilities: Contingent liabilities are payment obligations that only arise if a particular event occurs.

Currently, the main contingent liabilities stem from loan guarantees and public corporations debt.
3) Increased cost of debt especially if we are increasingly borrowing on non-concessional or commercial terms 4) Interest rate risk: Commercial loans are sometimes contracted at a variable interest rate, which is linked to benchmark lending rates such as LIBOR and EURIBOR.

Variable rate loans expose xviii National Budget Framework Paper FY 2022/23 future debt service to upward movements in the benchmark lending rates.
5) Foreign exchange rate risk: Borrowing more externally increases Uganda’s exposure to foreign exchange rate risk.

In the event of sharp and sustained deprecation, external debt service would increase drastically posing a significant impact on sustainability of the debt.

c. Natural disasters Due to climate change, the frequency of natural disasters like drought, flooding, landslides has increased.
These disasters have significant consequences on the National Budget in case unplanned or emergence funding is required.

Despite the PFM Act 2015 providing for a contingencies fund to cater for such unforeseen occurrences, these could be of greater magnitude than the provision, hence posing a fiscal risk.

d. Insecurity Security threats both at home and in the region which may destabilise economic activity hence affecting trade.
Government will therefore continue to support the security agencies to counter the threats and maintain peace in the country.

1.8 STATEMENT OF THE RESOURCE FOR THE ANNUAL BUDGET FOR FY 2022/23 Total resources available for Government expenditure will be obtained from both domestic and external sources.

Domestic resources comprise of tax and non-tax revenue as well as borrowing from the domestic market while external resources include budget and project support grants and loans.
1.8 BUDGET STRATEGY FY 2022/23 1.8.1 The Economic Strategy in the short to medium term has the twin objectives of restoring economic activity to pre-pandemic levels and subsequently accelerating the pace of Socioeconomic Transformation.

Economic recovery will be achieved by boosting aggregate demand by restoring domestic consumption, renewing private and public investment, and enhancing export promotion.
1.8.2 The key to Economic Recovery is the mitigation of the COVID-19 pandemic by vaccinating Ugandans and strengthening health systems to mitigate the COVID19 pandemic.

In the medium-term, xix National Budget Framework Paper FY 2022/23 increasing the wealth of households and eliminating poverty, particularly using the Parish Development Model, is key for socioeconomic transformation.

In addition, diversifying the economy and Uganda’s exports, are key to returning to the planned economic growth trajectory.
1.8.3 The economic policy in the fiscal year 2022/23 and in the future therefore, seeks to achieve the following three broad objectives: - i) Ensure Peace and Stability through enhanced Security and Macroeconomic stability, as key foundations for growth and development.

ii) Mitigate the impact of the COVID19 pandemic through widespread vaccination, support to businesses, and re-opening the economy to enable all sectors to function optimally.
iii) Enhance socio-economic transformation by redirecting budgetary resources towards wealth and job creation, industrialization, export promotion and other areas with high returns on investment.

1.8.4 The Economic Strategy is expected to result in the recovery of economic growth to 6% in the FY2022/23 and to at least 7% in the medium term.
DEVELOPMENT OBJECTIVES AND BUDGET PRIORITIES FOR FY 2022/23 1.8.5 The Budget for FY 2022/23, under the theme “Full monetisation of the Ugandan Economy through involvement of Rural Households into commercial Agriculture, industrialisation and market access”, will be based on the following actions: - i) ii) Addressing Security and Governance, including Corruption; Attaining Economic Recovery by: - a) Revitalising business activities through implementing fiscal and monetary measures to boost aggregate demand.
b) Enhancing agro-industrialisation and light manufacturing through sustaining the resilience of agriculture along the value chain, agro-processing, and support light manufacturing.

to c) Enhancing the quality and stock of productive infrastructure through maintaining a good road network system, completing existing contracts, rehabilitation of the railway, electricity transmission to industrial parks, undertaking studies and acquiring infrastructure corridors for future investments.
d) Commercializing Minerals and Oil and Gas, while re-boosting tourism development.

xx National Budget Framework Paper FY 2022/23 iii) Enhancing Human Capital Development (Health, Education and Water for human consumption).

iv) Rationalizing Government and automating processes to promote efficiency and effectiveness.
Security and the rule of law 1.8.6 In order to address domestic and external security threats as well as improve dispensation of justice, the following interventions will be implemented: - i) ii) of security infrastructure, enhancing Improvement collaboration among security agencies as well as improving collaboration with peers on sharing of intelligence information and mitigation of threats.
Strengthening the administration of Justice through the recruitment and facilitation of judicial officers; establishment of 2 regional courts of appeals (Gulu and Mbarara; 2 high court circuits in Luwero and Soroti; 3 chief magistrate courts (Alebtong, Lyantonde and Budaka); and 4 Grade I magistrate courts in Abim, Patongo, Karenga and Kyazanga.

The rollout of the Electronic Court Case Management Information System and Video Conferencing Systems in 10 courts.
Revitalising business activities 1.8.7 To restore business activity, the immediate focus will be on implementing fiscal and monetary measures to boost aggregate demand.

The key to this is to mitigate the impact of COVID19 on businesses and SMEs.

The following interventions will be prioritized: - i) ii) iii) Business recovery fund to enable small businesses to access low-cost capital to recover.

EMYOOGA Funding, and support to SACCOs to provide seed interest capital enterprising groups.
Implement the Development Model inclusion pillar of the Parish for small businesses including special financial iv) UDB Capitalisation and other financing schemes such as the v) Agricultural Credit Facility.

Strengthening Private Sector Institutional and Organizational Capacity by focusing on the establishment of functional Business Development support service centres regionally.
1.8.8 The Government will also fast-track the approval of the Financial Sector Development Strategy (FSDS) by Cabinet to ensure a sound xxi National Budget Framework Paper FY 2022/23 and integrated financial sector.

This aims at increasing formal savings to 53% of GDP, and the percentage of adults using formal financial services to 80% by 2025, with 79% female inclusion, 89% inclusion of youths, and 77% of rural adults.
The legal and regulatory framework will be strengthened through the implementation of: - i) ii) The National Payment Systems Act, (NPS Act, 2020), which provides for the establishment of the national payment switch to reduce the cost of financial transactions/transfers.

The amendment of Institutions, 2003. the Microfinance Deposit-Taking iii) The National Strategy for Combating Money Laundering and the Financing of Terrorism and Proliferation.
Enhancing agro-industrialisation and light manufacturing 1.8.9 In line with H.E.

The President’s directives on the fourteen (14) production commodities and the Cabinet Minute 307 (CT 2021), Cabinet approved the Agricultural Value Chain Development Strategy 2021-2026 which prioritises the Parish Development Model Pillar 1 (Production, Storage, Processing and Marketing).

This will be augmented by the analogy of the one (01) acre model (e.g.
the Nyakana Model), which is a demonstration of transition from the subsistence to the money economy.

1.8.10 Consequently, next financial year, the focus will be on sustaining the resilience of agriculture along the value chain, agro- processing, and support to light manufacturing by doing the following: - i) ii) Focus on and redirect resources to the production of key commodities that have a high impact on transforming the 39% of households in subsistence agriculture to the money economy.
These are coffee, dairy, poultry and poultry products, fish, citrus, among others.

Expand storage and processing capacity for agricultural commodities within the 18 zones of the country.

iii) Provide funds for private sector equity investment through Uganda Development Corporation (UDC) to be invested in key commodity agro-processing value chains iv) Support industries that use locally sourced raw materials to v) produce most of the goods that we import.
Capitalize Uganda Development Bank (UDB) to provide affordable and long-term capital at lower interest rates to agriculture, agro-processing, and manufacturing.

vi) Develop the iron and steel industry to reduce the cost of construction.

xxii National Budget Framework Paper FY 2022/23 vii) Government investment in and support to private sector industries with untapped export potential particularly in agro- industry and light manufacturing.
viii) Continue with our policy of attracting Foreign Direct Investment through the implementation of the new Investment Code of 2019. ix) Strengthen standards for quality assurance to improve access of Uganda’s export to regional and international markets.

Support development of regional Industrial Parks.


x) Improving the wellbeing and building resilience of the population to economic shocks 1.8.11 The Government has taken steps to procure vaccines, expand hospital capacity through the recruitment of additional staff and volunteers to assist with the management of the pandemic; expanding High Dependency Units (HDU) and Intensive Care Units (ICUs) to 3,100 and 218, respectively; and increasing the number of standard hospital beds by 475.
These efforts will continue.

1.8.12 The immediate priority of the Government during FY2022/23 will be to mitigate the COVID19 impact while also obtaining value for money for the resources dedicated to combating the pandemic through: - Countrywide vaccination to mitigate the COVID19 impact.

i) ii) Maintaining resources in the budget for increasing the capacity for mitigating other communicable and non-communicable diseases.
iii) Fast-tracking the national health insurance policy, including the national ambulance systems to reduce the cost of the services on the government.

iv) Sustainably bringing back education to normality and v) attaining pre-COVID19 levels of access to education.

Undertake Monitoring and Evaluation for expenditures to ensure value for money.
Innovation, technology development & transfer 1.8.13 COVID19 has amplified the essence of science and innovation and the need to have homegrown solutions to reduce reliance on donations, especially the vaccine inequity experiences.

Government will therefore focus on: - i) Developing scientifically accredited indigenous medicines e.g., the Nalubale Dawa.

xxiii National Budget Framework Paper FY 2022/23 ii) Fast-tracking virus research and domestic production of human and animal vaccines.
iii) Sustaining ongoing initiatives like KIIRA-EV, Sericulture, among others.

Enhancing the quality and stock of productive infrastructure 1.8.14 Achievements have been made towards increasing coverage of road transport infrastructure.

However, to get more value for money, the focus will be on increasing maintenance and undertaking preparatory activities for new constructions in future as the economy recovers.
Further, investment in intermodal transportation in rail and water will be key in connecting productive areas to the market.

Given this context, the focus of this programme will be to maintain a good road network system, complete existing contracts, undertake studies and acquire infrastructure corridors for future investments.

1.8.15 The COVID19 has amplified for digital transformation, yet the cost of the internet is still high.
This is especially because the pandemic affected the usual and physical way of doing things and running businesses.

The focus of the programme will be on: - the need i) ii) last mile connectivity/rollout broadband Implementing infrastructure in key government service delivery units ensuring all essential services such as schools, hospitals, post offices, tourism sites, police, LGs etc) are connected.
Supporting the development and commercialization of local ICT products and building a critical mass of talent to develop applications and services.

iii) Supporting the roll-out of e-services such as e-extension, e- education, e-health as well as remote collaboration solutions, to digitally transform public service delivery particularly considering COVID Providing digital literacy training to SMEs and communities to create awareness about ICTs and empower them in the use of ICT products and services.
iv) Minerals, oil and gas, and tourism development 1.8.16 Mineral exploitation and development are critical for Uganda’s industrialization process.

Investing in mineral development lowers the cost of production, increases return on investment and boosts the supply of locally manufactured products like cement, iron and steel, and fertilizers.
Considering dwindling tax revenues due to COVID19, xxiv National Budget Framework Paper FY 2022/23 this programme prioritises investments for Import Replacement, Export Promotion; and improvement in domestic resource-based royalties.

Because of this, the focus for this programme is towards maintaining existing investments in exploration and quantification for steel and minerals in Karamoja, as well incentives for import replacement of iron and steel.

1.8.17 It facilitates opportunities.


The Oil and Gas industry has the potential to transform Uganda’s economy.

Sustainable development of petroleum resources enhances value addition to oil and gas resources as one of the key resource-based also growth industrialization agenda through the exploitation of the available oil resources.

This contributes to export, employment, and improved quality of life.
If well utilized, sustainable exploitation of oil resources provides resources that can leverage investments in other sectors of the economy and lead to increased household incomes.
The focus of this programme will be towards fast-tracking completion of the East African Crude Oil Pipeline (EACOP) and refined products pipeline; establishment of the National Petroleum Data Repository; undertaking the preparatory process for establishing a robust petrochemical industry, and capitalization of Uganda National Oil Company.
Tourism Development 1.8.18 i) Under tourism, the following interventions will be prioritized: - in ongoing product investment Sustaining upstream development and tourism-related infrastructure – roads, electricity, internet, security, etc.

Increasing access to recovery financing Intensification of domestic tourism.
ii) iii) iv) Facilitate the Uganda Tourism Board (UTB) to rebrand Uganda, in preparation to exploit the potential surge in tourism when COVID19 and related travel restrictions begin to subside, and tourists look for attractive holiday destinations.

Enhancing public sector effectiveness and efficiency 1.8.19 Public sector effectiveness and efficiency will be improved through the following measures: - i) Continued rationalization of government.
The process has already commenced with the transfer of REA to the Ministry of Energy and the dissolution of the Ministry of Science and Technology.

xxv National Budget Framework Paper FY 2022/23 ii) In line with the strategy of the Government to catalyze industrialization, the Government is finalizing the computation of the requirements for phased salary enhancement for scientists and health workers who are engaged in research and innovation, the implementation of which will commence in the FY2022/23.
iii) The Government is implementing the Parish Development Model (PDM) as a mechanism aimed at alleviating poverty by improving household through employment and wealth creation, especially targeting the 39% of households still outside the money economy.

incomes and welfare 1.8.20 For FY2021/2022, the Government released Ushs.

200 Billion for all Parishes in the country.

The focus will be on implementing the following actions: - i) ii) Recruitment of the 5,192 to 10,594 required Parish Chiefs.
Collection of data to guide proper planning for implementation of the Model.

iii) Creation of Parish Development Committees (PDCs) and orienting them about the Model.

iv) Finalization of the Implementation Guidelines and orientation v) 1.8.21 of stakeholders; and Setting up an Implementation Unit.
Going forward, other activities will be undertaken, and these include training of local government officials and Parish Chiefs; alignment of sub-program plans and budgets to the PDM; operationalizing the community information system; establishment and strengthening of community-based financial institutions; and strengthening the legal and policy framework of the model.
1.8.22 To sustainably develop and transform the economy, we need to take urgent actions against climate change and ensure the efficient development of urban centres.

Well-planned and developed urban centres are critical for supporting the efficient settlement of persons, service delivery and trade.
To this end, the Government will prioritise the following: - i) ii) Climate change mitigation actions, including commercial tree planting; the eviction of wetland encroachers, and restoration of the wetlands; and the enactment of by-laws by local government authorities.

Implementation of the integrated physical and economic development plans in the new cities and issuance of guidelines for their operationalization.
xxvi National Budget Framework Paper FY 2022/23 iii) Implement projects Metropolitan Area (GKMA) Strategy.
in line with the Greater Kampala 1.9 POLICY PROPOSALS FOR FY 2022/23 BUDGET To ensure prudent macroeconomic management and effective implementation of the budget as well as speedy economic recovery in the coming fiscal year 2022/23, we recommend the following fiscal and administrative measures: - i) Enhancing fiscal and debt sustainability by scaling up revenue mobilization and limiting commercial borrowing, including domestic borrowing as a country to bring back public debt and the fiscal balance within the fiscal objectives.
This will safeguard on crowding out of the much-needed private investment which is a critical component of our economic recovery.

This bold measure will also ensure adherence to the Charter for Fiscal Responsibility and match its responsiveness to our needs as well as bring the public debt and the fiscal balance within the policy targets of 50% of GDP and 3% of non-oil GDP, respectively.
ii) Reduce public expenditure and improve the efficiency of the Government through freezing the creation of administrative units (Constituencies, Districts, Cities, Municipalities, Sub-Counties, and Town Councils), and speed up rationalisation of Government Ministries, Departments and Agencies in line with the programmatic approach as approved by Cabinet under Cabinet Memorandum CT (2018) 128.
The Presidential Advisory Committee on the Budget (PACOB) has strongly recommended that the Government through the Ministry of Public Service should fast-track the implementation of the Cabinet’s decision to rationalize and merge some Government Departments and Agencies to reduce resource wastage, duplication of services and bring about efficiency in service delivery.

Government will soon the necessary constitutional amendments and laws to enable completion of this exercise.
in Parliament table This bold step will not only eliminate wastage but also create fiscal space for enhancing financing for critical programmes such as the Parish Development Model and the comprehensive salary enhancement, all of which will contribute immensely to improving efficiency in the delivery of public services.
xxvii National Budget Framework Paper FY 2022/23 iii) Promotion of Local Content by ensuring that Government procurement targets purchase of locally produced goods and services to enable expansion of the private sector investments that will in turn increase production and employment opportunities for the population.

Bidders that have a clear commitment to using local materials/inputs and services of local suppliers, including labour must be given priority.
A clause on this commitment must be part of the contract agreement to ensure compliance.

iv) Limit supplementary budgets for only emergencies and unforeseen expenditures as provided for under the PFM Act 2015.

Accordingly, budgeting for resources will be reprioritized so that we avoid supplementaries and limit to only “unforeseeable” and unavoidable” circumstances.

v) Postponement of salary enhancements across the board until the economy recovers and resources become available.

We have a demand of Ushs.


1,900 Billion for the enhancement of salaries, wages and gratuity for scientists, Uganda Peoples’ Defences Forces (UPDF) and integration of the Local Defence Units (LDUs) into the UPDF.

This will raise our total wage bill from Ushs.

5,533 Billion to Ushs.

7,433 Billion next financial year.


The Presidential Advisory Committee on the Budget also observed that the Government made a commitment to enhancing salaries of public servants by 50% starting FY2015/16 over the next three financial years.

However, to date, only 30% increment to some categories like Permanent Secretaries, health workers and scientists has been implemented.

The Committee, therefore, recommended that the Government develops a road map for the implementation of this commitment.
Against this background, Government is developing a proposal for enhancing all cadres in Government beginning with health workers and other scientists.

vi) Pre-financing of Projects.

For us to remain sustainable in dealing with pre-financing of projects and to ensure that there is fiscal space, particularly in the Roads Sub-Sector, next fiscal year and over the medium-term, we propose to use this Alternative Financing xxviii National Budget Framework Paper FY 2022/23 Modality.
This modality entails a contractor to pre-finance the entire construction of the road project and the government repays the contractor within a period of seven (7) to ten (10) years, including the construction period.

Government will soon present the detailed paper on this matter to this House.

The Government will issue the Bill of Exchange in settlement of the Interim Payment Certificates that will arise during Engineering Procurement and Construction (EPC).
No payments will be made by the Government of Uganda during the contract period.

Equally, all financing costs reflecting the time value of money, are amortized over a long period of up to ten (10) years, inclusive of the construction period.

I will, together with the Minister of Works and Transport, present the detailed Paper on this matter to Cabinet soon.
vii) Expanding infrastructure for post-harvest storage of commodities and support agro-processors across the sub-regions of the country to expand their off-take capacities.

To build on this resilience, trade and market barriers for agricultural commodities must be addressed so that farmers are not frustrated when the Parish Development Model is fully implemented in FY 2022/23.

viii) Increasing access and reducing the cost of capital.
Addressing the socio-economic challenges earlier identified calls for amongst other things, strengthening Government’s flagship microfinance interventions under the Parish Development Model and EMYOOGA initiatives by including elements of Business Development Service and professional management of umbrella association for informal sector businesses.
This will enable vocational and technical practitioners under these umbrellas associations to take advantage of economic opportunities that require them to be coordinated and that are formal in nature.

ix) Timely payment of government suppliers and the clearance of domestic arrears for which funds have been provided in the budget for the fiscal year 2022/23.
To avoid stifling private sector investment and associated consequences such as the increase in rates of non-performing loans, which in turn increases the cost of borrowing and lead to distress, loss of employment and production, xxix National Budget Framework Paper FY 2022/23 Ushs.400Billion has provided for outstanding arrears.

Going forward, all government institutions will be required to pay suppliers within 10 days from the date of invoice.
x) Enforcing strict adherence to Performance Contracts by Accounting Officers.

To ensure accountability with results, effective next fiscal year, my ministry will strictly be based on performance reports, achievements of NDPIII results for which resources have been provided for and audit reports for re- appointment of accounting officers across government.

xi) Enhancing public investment management.


Government through the APEX platform, including the PACOB, will enhance the executive oversight for projects and ensure that remedial actions are taken swiftly to safeguard against poor quality work and avoid delays in achieving the expected dividends to the economy as well as wastage arising from the payment of commitment fees for externally financed projects.
Funding/releases to projects whose implementation are off-track should be suspended and the responsible officers apprehended.

This will bring financial discipline to the management of public resources.

Going forward, only projects with feasibility studies and have been evaluated through the PIMS Framework will be admitted to the Public Investment Plan (PIP).

Also, starting next fiscal year the Government will provide funds for feasibility study equivalent to US$ one (1) million.
xii) The Government should fast track a policy on the acquisition of the Right of Way and corridors for the development of infrastructure to ease planning and avoid delays in infrastructure development.

xxx National Budget Framework Paper FY 2022/23 1.10 Resource Allocations at Programme Level The Budget for FY 2022/23 has been fully aligned with the Programme Planning and Budget Approach as per the third National Development Plan.
In line with the budget priorities for the fiscal year 2022/23 and the long-term socio-economic transformation agenda of the government, we are continuing to review the budget allocations by Program and Vote.

This will be completed when we receive all the Vote BFP submissions.

The detailed allocations by Program and Vote are to be submitted as an addendum to this Document by 31st December xxxi