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Background to the Budget Background to the Budget BACKGROUND TO THE BUDGET 2015/16 FISCAL YEAR Maintaining Infrastructure Investment and Promoting Excellence in Public Service Delivery Ministry of Finance, Planning and Economic Development BACKGROUND TO THE BUDGET 2015/16 FISCAL YEAR Maintaining Infrastructure Investment and Promoting Excellence in Public Service Delivery Maintaining Infrastructure Investment and Promoting Excellence in Public Service Delivery BACKGROUND TO THE BUDGET 2015/16 FISCAL YEAR able of Contents TChapter 1 : INTRODUCTION ......................................................................................1 Chapter 2 : GLOBAL AND REGIONAL DEVELOPMENTS AND PROSPECTS .................4 2.1 Global Economic Developments and Prospects .........................................................4 2.1.1 Global Economic Growth ..............................................................................4 2.1.2 World Commodity Prices and Inflation ..........................................................5 2.1.3 International Trade .......................................................................................6 2.1.4 International Finance for Development ..........................................................7 2.2 Regional Economic Developments and Prospects .................................................8 2.2.1 Sub Saharan Africa .......................................................................................8 2.2.2 The East African Community and South Sudan ...........................................9 Chapter 3 : REGIONAL AND INTERNATIONAL DEVELOPMENT COOPERATION ........11 3.1 Trade and Investment ........................................................................................11 3.1.1 Customs Union ...........................................................................................11 3.1.2 The EAC Common Market ...........................................................................13 3.1.3 EAC Monetary Union ...................................................................................14 3.1.4 Economic Partnership Agreements (EPAs) ...................................................14 3.1.5 Africa Growth and Opportunity Act (AGOA) .................................................15 3.2 Infrastructural Development and Competitiveness .............................................15 3.3 Tourism .............................................................................................................16 Chapter 4 : PERFORMANCE OF THE ECONOMY .....................................................17 4.1 Real Sector Developments ......................................................................................17 4.1.1 Economic Growth Performance ........................................................................17 4.1.2 GDP Performance by Sector .............................................................................18 4.1.3 Sectoral Contribution to Employment ..............................................................19 4.2 Monetary and Financial Sector Developments ....................................................21 4.2.1 Monetary Policy Framework ........................................................................21 4.2.2 Inflation ......................................................................................................22 4.2.3 Interest Rates ..............................................................................................23 4.2.4 Exchange Rate Developments ......................................................................24 4.2.5 Private Sector Credit ...................................................................................26 4.2.6 Commercial Banks ......................................................................................28 4.2.7 Credit Institutions .......................................................................................28 4.2.8 Financial Inclusion .....................................................................................29 4.2.9 Capital Markets ..........................................................................................30 4.3: Fiscal Sector Developments ...............................................................................31 4.3.1 Government Fiscal Objectives for FY 2014/15 .............................................31 4.3.2 Overall Fiscal Performance in FY 2014/15 ..................................................32 4.3.3 Performance of the Resource Envelope in FY 2014/15 .................................35 4.3.4 Domestic Revenue Performance in FY 2014/15 ...........................................36 4.3.5 Overseas Development Assistance (ODA) Performance .................................40 4.3.6 Expenditure Performance in FY 2014/15 ....................................................42 Maintaining Infrastructure Investment and Promoting Excellence in Public Service Delivery i BACKGROUND TO THE BUDGET 2015/16 FISCAL YEAR 4.3.7 Financing Outturns for FY 2014/15 ............................................................43 4.4 External Sector Developments ...........................................................................43 4.4.1 The Overall Balance of Payments .................................................................43 4.4.2 The Current Account ...................................................................................45 4.4.3 Capital and Financial Accounts ...................................................................49 Chapter 5 : NATIONAL DEVELOPMENT AND PUBLIC INVESTMENT ..........................50 5.1 Introduction ......................................................................................................50 5. 2 National Development ........................................................................................50 5.2.1 Performance of NDP I ..................................................................................50 5.2.2 The Second National Development Plan (NDP II): Unfinished Business ........... and the Way Forward ..................................................................................53 5.3 Public Investment Agenda ..................................................................................56 Chapter 6 : PUBLIC SERVICE DELIVERY: SECTOR PERFORMANCE AND PRIORITIES FOR FY 2015/16 AND THE MEDIUM-TERM .............................................60 6.1 Public Governance .............................................................................................61 6.1.1 National Defence .........................................................................................61 6.1.2 Law Enforcement ........................................................................................62 6.1.3 Legislation ..................................................................................................63 6.1.4 Civil Service Administration ........................................................................64 6.2 Infrastructure Development ...............................................................................66 6.2.1 Transport ....................................................................................................66 6.2.2 Energy ........................................................................................................71 6.2.3 Information and Communication Technology...............................................73 6.3 Wealth Creation and Employment ......................................................................74 6.3.1 Agricultural production and commercialization ...............................................75 6.3.2 Tourism and Hospitality ..............................................................................78 6.3.3 Trade, Industry and Cooperatives ................................................................78 6.4 Human Capital Development .............................................................................82 6.4.1 Education and Skills Development ..............................................................83 6.4.2 Healthcare ..................................................................................................85 6.4.3 Water and Sanitation ..................................................................................87 6.4.4 Social Development .....................................................................................90 Chapter 7 : MACROECONOMIC AND FISCAL OUTLOOK FOR FY 2015/16 AND THE ... MEDIUM TERM .......................................................................................92 7.1 Macroeconomic and Fiscal Policy Framework .....................................................92 7.2 Macroeconomic Forecast for FY2015/16 and the Medium Term .........................92 7.3 Resource Envelope Projections for FY2015/16 and the Medium Term ................93 7.3.1 Domestic Revenue .......................................................................................94 7.3.2 External Financing ......................................................................................94 7.3.3 Domestic Borrowing ....................................................................................94 7.3.4 Debt Repayments ........................................................................................95 7.4 Medium-Term Fiscal Strategy ............................................................................95 7.5 Sector Allocations ..............................................................................................95 ii Maintaining Infrastructure Investment and Promoting Excellence in Public
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