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Background to the Budget 2014/15 Fiscal Year

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Background to the Budget 2014/15 Fiscal Year Ministry of Finance, Planning and Economic Development BACKGROUND TO THE BUDGET 2014/15 FISCAL YEAR MAINTAINING THE MOMENTUM: Infrastructure Investment for Growth and Socio-Economic Transformation June 2014 1 THE REPUBLIC OF UGANDA Ministry of Finance, Planning and Economic Development BACKGROUND TO THE BUDGET 2014/15 FISCAL YEAR Maintaining the Momentum: Infrastructure Investment for Growth and Socio-Economic Transformation June 2014 I II TABLE OF CONTENTS INTRODUCTION .......................................................................................................... 1 CHAPTER 1: GLOBAL AND REGIONAL ECONOMIC DEVELOPMENTS AND PROSPECTS 5 1.1 GLOBAL ECONOMIC DEVELOPMENTS AND PROSPECTS .......................................................... 5 1.1.1 Global economic growth ............................................................................................. 5 1.1.2 World commodity prices and inflation........................................................................ 7 1.1.3 International trade ..................................................................................................... 9 1.1.4 International finance for development ..................................................................... 10 1.2 REGIONAL ECONOMIC DEVELOPMENT AND PROSPECTS ....................................................... 11 1.2.1 Sub-Saharan Africa.................................................................................................. 11 1.2.2 The East African Community and South Sudan ...................................................... 12 CHAPTER 2: REGIONAL AND INTERNATIONAL DEVELOPMENT COOPERATION FRAMEWORKS .......................................................................................................... 14 2.1 FACILITATING TRADE AND INVESTMENT ........................................................................... 14 2.1.1 Trade integration in Regional Economic Communities ............................................. 14 2.1.2 The EAC Common Market ........................................................................................ 16 2.1.3 East African Monetary Union ................................................................................... 17 2.1.4 EAC-COMESA-SADC Tripartite Framework ............................................................. 19 2.2 INFRASTRUCTURE DEVELOPMENT ................................................................................... 19 2.3 PROMOTING POLITICAL STABILITY, PEACE AND SECURITY .................................................... 20 CHAPTER 3: MACROECONOMIC PERFORMANCE IN FY2013/14 ............................... 22 3.1 MACROECONOMIC OBJECTIVES AND TARGETS FOR FY2013/14 ......................................... 22 3.2 ECONOMIC GROWTH PERFORMANCE ............................................................................... 23 3.2.1 GDP performance by expenditure ............................................................................ 24 3.2.2 GDP performance by sector ...................................................................................... 26 3.3 MONETARY SECTOR DEVELOPMENTS .............................................................................. 28 3.3.1 Monetary policy framework ..................................................................................... 28 3.3.2 Inflation .................................................................................................................... 29 3.3.3 Interest rates ............................................................................................................ 30 3.4 PRIVATE SECTOR CREDIT .............................................................................................. 32 3.5 FINANCIAL SECTOR DEVELOPMENT ................................................................................. 34 3.5.1 Commercial banks ................................................................................................... 34 3.5.2 Credit institutions .................................................................................................... 35 3.5.3 Microfinance institutions .......................................................................................... 35 3.5.4 Financial inclusion ................................................................................................... 36 3.5.5 Capital markets ....................................................................................................... 37 3.5.6 Pension sector developments ................................................................................... 40 3.6 THE EXTERNAL SECTOR ................................................................................................ 42 3.6.1 The overall balance of payments ............................................................................. 42 3.6.2 The current account ................................................................................................. 45 3.6.3 Capital and financial accounts ................................................................................ 49 CHAPTER 4: PUBLIC FINANCE IN FY2013/14 ........................................................... 50 4.1 GOVERNMENT’S FISCAL OBJECTIVES FOR FY2013/14 ...................................................... 50 4.2 OVERALL FISCAL PERFORMANCE IN FY2013/14 .............................................................. 50 4.3 PERFORMANCE OF THE RESOURCE ENVELOPE IN FY2013/14 ............................................ 54 4.3.1 Domestic revenue performance in FY2013/14 ........................................................ 54 4.3.2 Performance of Official Development Assistance ..................................................... 58 4.4 EXPENDITURE PERFORMANCE IN FY2013/14 ................................................................. 60 4.5 FINANCING OUTTURNS FOR FY2013/14 ......................................................................... 62 4.6 Public debt in FY2013/14 ........................................................................................... 62 CHAPTER 5: PUBLIC INVESTMENT AND FINANCIAL MANAGEMENT REFORMS ........ 64 5.1 THE PUBLIC INVESTMENT AGENDA .................................................................................. 64 5.2 ABSORPTIVE CAPACITY CONSTRAINTS .............................................................................. 65 5.3 PUBLIC INVESTMENT REFORMS ...................................................................................... 67 5.4 PUBLIC FINANCIAL MANAGEMENT (PFM) REFORMS ........................................................... 68 III CHAPTER 6: SECTOR PERFORMANCE AND INVESTMENT PRIORITIES ..................... 74 6.1 INFRASTRUCTURE DEVELOPMENT ................................................................................... 74 6.1.1 Transport ................................................................................................................. 74 6.1.2 Energy ...................................................................................................................... 81 6.1.3 Oil and gas ............................................................................................................... 85 6.1.4 Information and Communication Technology (ICT) .................................................. 86 6.2 HUMAN DEVELOPMENT................................................................................................. 88 6.2.1 Poverty reduction ..................................................................................................... 88 6.2.2 Social inclusion ........................................................................................................ 91 6.2.3 Human capital development .................................................................................... 93 6.2.4 Water and environment ........................................................................................... 98 6.3 PRIVATE SECTOR DEVELOPMENT AND EMPLOYMENT CREATION .......................................... 100 6.3.1 Business environment for private sector development ........................................... 101 6.3.2 Youth employment .................................................................................................103 6.3.3 Enhancing agricultural production and productivity .............................................. 104 6.3.4 Science, Technology and Innovation (STI) .............................................................. 107 6.3.5 Harnessing Uganda’s tourism potential ................................................................ 108 6.4 PUBLIC GOVERNANCE ................................................................................................ 109 CHAPTER 7: MEDIUM-TERM MACROECONOMIC AND FISCAL FRAMEWORK .......... 112 7.1 MACROECONOMIC AND FISCAL POLICY FRAMEWORK ........................................................ 112 7.2 MACROECONOMIC FORECAST FOR FY2014/15 AND THE MEDIUM TERM ............................ 112 7.3 RESOURCE ENVELOPE FOR FY2013/14 AND THE MEDIUM TERM ...................................... 113 7.3.1 Domestic revenue ................................................................................................... 114 7.3.2 Budget support ...................................................................................................... 115 7.3.3 Project support ....................................................................................................... 116 7.3.4 Semi-concessional and non-concessional financing ..............................................
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