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The Journey Continues: Towards Socio-Economic Transformation”

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The Journey Continues: Towards Socio-Economic Transformation” THE REPUBLIC OF UGANDA THE BACKGROUND TO THE BUDGET 2013/14 “THE JOURNEY CONTINUES: TOWARDS SOCIO-ECONOMIC TRANSFORMATION” June 2013 INTRODUCTION ........................................................................................................ 1 CHAPTER 1: GLOBAL AND REGIONAL ECONOMIC DEVELOPMENTS AND PROSPECTS ........................................................................ 4 1.1. Global Economic Developments ............................................................................ 4 1.1.1. The Global Economic Outlook for Growth ............................................................................................... 4 1.1.2. International Trade................................................................................................................................... 5 1.1.3. International Commodity Markets ........................................................................................................... 7 i. Energy Prices ................................................................................................................................... 7 ii. Food Prices ...................................................................................................................................... 8 iii. Industrial Inputs ............................................................................................................................... 8 1.1.4. Progress towards the Millennium Development Goals............................................................................ 8 1.1.5. International Finance for Development ................................................................................................. 10 1.2. Regional Economic Development and Prospects .................................................. 11 1.2.1. Economic Developments in the East African Community – A Country by Country Perspective ........... 13 i. Kenya ............................................................................................................................................. 13 ii. Tanzania ........................................................................................................................................ 13 iii. Rwanda .......................................................................................................................................... 14 iv. Burundi .......................................................................................................................................... 15 1.2.2. Trade Integration in the East African Community .................................................................................. 17 1.2.3. Working towards a Monetary Union in the East African Community ................................................... 18 CHAPTER 2: DOMESTIC ECONOMIC OUTCOMES AND PROSPECTS . 20 2.1. Domestic Economic Outcomes in FY2012/13 ........................................................ 20 2.1.1. GDP Growth............................................................................................................................................ 20 i. Agriculture, Forestry and Fishing ................................................................................................... 22 ii. Industrial Sector............................................................................................................................. 23 iii. Services Sector ............................................................................................................................... 24 iv. GDP by Expenditure ....................................................................................................................... 26 2.1.2. Monetary Sector..................................................................................................................................... 28 iii. Interest Rates ................................................................................................................................ 30 iv. Securities ....................................................................................................................................... 32 2.1.3. Financial Sector Performance and Reforms ........................................................................................... 32 i. Financial Sector Performance ........................................................................................................ 32 ii. Capital Markets ............................................................................................................................. 35 iii. Insurance Industry ......................................................................................................................... 36 iv. Financial Sector and Pension Reform Initiatives ............................................................................ 37 2.1.4. The External Sector ................................................................................................................................ 41 i. Current Account ............................................................................................................................. 43 2.2. Macroeconomic Outlook ..................................................................................... 46 2.2.1. The Macroeconomic Forecast for FY2013/14 to FY2017/18 .................................................................. 46 i. Short- and Medium-Term real GDP Growth Prospects .................................................................. 47 iii. Inflation Prospects ......................................................................................................................... 49 iv. Balance of Payments Prospects ..................................................................................................... 49 2.2.2. The Investment Outlook ......................................................................................................................... 49 i. Foreign Investment in Uganda ...................................................................................................... 50 ii. Domestic Investment ..................................................................................................................... 51 2.2.3. Key macroeconomic risks ....................................................................................................................... 52 ii i. Domestic Risks ............................................................................................................................... 53 ii. International Risks ......................................................................................................................... 54 CHAPTER 3: PUBLIC FINANCE ..................................................................... 55 3.1. Fiscal Objectives and Fiscal Strategy .................................................................... 55 3.1.1. Government’s Fiscal Objectives ............................................................................................................. 55 3.1.2. Fiscal Strategy for FY2012/13 ................................................................................................................. 55 3.1.3. Improvements in Public Financial Management .................................................................................... 56 i. Public Finance Bill 2012 ................................................................................................................. 56 ii. Improvements to Project Cycle Management ............................................................................... 57 iii. Management of Oil Revenues ....................................................................................................... 57 iv. Cross-Cutting Reform Efforts ......................................................................................................... 57 3.1.4. Debt Sustainability Analysis (DSA) .......................................................................................................... 57 3.1.5. The Debt Strategy 2013 and a new Debt Management Framework ..................................................... 59 3.2. Performance of the Resource Envelope and Fiscal Outturns FY2012/13 ............... 60 3.2.1. Performance of the Resource Envelope in FY2012/13 ........................................................................... 60 i. Domestic Revenue Performance FY2012/13 ................................................................................. 60 ii. Impact of Domestic Revenue Measures for FY2012/13 ................................................................. 63 3.2.2. Expenditure Outturns and the Fiscal Deficit in FY2012/13 .................................................................... 65 3.2.3. Financing Outturns in FY2012/13 ........................................................................................................... 66 3.2.4. Public Debt in FY2012/13 ....................................................................................................................... 67 3.3. Fiscal Projections for FY2013/14 and the Medium Term ....................................... 73 3.3.1. The Fiscal Strategy for FY2013/14 and the Medium Term Budget Framework .................................... 73 i. Domestic Revenues ........................................................................................................................ 74 ii. Grants ...........................................................................................................................................
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