BACKGROUND TO THE BUDGET BACKGROUND TO THE BUDGET Fiscal Year 2017/18 Fiscal Year 2017/18 Ministry of Finance, Planning and Economic Development BACKGROUND TO THE BUDGET FISCAL YEAR 2017/18 JUNE 2017 PB Industrialisation for Job Creation and Shared Prosperity Industrialisation for Job Creation and Shared Prosperity i BACKGROUND TO THE BUDGET Fiscal Year 2017/18 ii Industrialisation for Job Creation and Shared Prosperity BACKGROUND TO THE BUDGET BACKGROUND TO THE BUDGET Fiscal Year 2017/18 Fiscal Year 2017/18 Ministry of Finance, Planning and Economic Development BACKGROUND TO THE BUDGET FISCAL YEAR 2017/18 JUNE 2017 ii Industrialisation for Job Creation and Shared Prosperity Industrialisation for Job Creation and Shared Prosperity iii BACKGROUND TO THE BUDGET Fiscal Year 2017/18 iv Industrialisation for Job Creation and Shared Prosperity BACKGROUND TO THE BUDGET BACKGROUND TO THE BUDGET Fiscal Year 2017/18 Fiscal Year 2017/18 TABLE OF CONTENTS Chapter 1 INTRODUCTION ...................................................................................................... 1 Chapter 2 : GLOBAL AND REGIONAL DEVELOPMENTS AND PROSPECTS .............. 3 2.1 Global Economic Developments and Prospects .................................................................... 3 2.1.1 Global Economic Growth ......................................................................................... 3 2.1.2 World Commodity Prices and Inflation .................................................................... 4 2.1.3 International Trade ................................................................................................... 5 2.1.4 International Finance for Sustainable Development ................................................ 6 2.1.5 Foreign Direct Investments and Remittances ........................................................... 7 2.2 Regional Economic Developments and Prospects ........................................................... 8 2.2.1 Sub Saharan Africa ................................................................................................... 8 2.2.2 The East African Community .................................................................................... 9 Chapter 3 : DEVELOPMENT COOPERATION .....................................................................11 3.0 Regional 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 Agreement (EPA) ................................................................ 15 3.2 Infrastructural Development and Competitiveness ........................................................ 15 3.2.1 Roads ............................................................................................................................ 15 3.2.2 Railways ........................................................................................................................ 16 3.3 Tourism and Development ............................................................................................. 16 3.4 Peace and Security .............................................................................................................. 16 3.5 International Cooperation .................................................................................................... 18 3.5.1 Implementation of Agenda 2030 for Sustainable Development............................. 18 3.5.2 International Trade Agreements .................................................................... 18 3.6 Climate Change ..................................................................................................................19 3.7 Refugees ............................................................................................................................. 19 Chapter 4 : PERFORMANCE OF THE ECONOMY ............................................................ 21 4.1 Real Sector Developments .................................................................................................. 21 4.2 Monetary and Financial Sector Developments ................................................................... 23 iv Industrialisation for Job Creation and Shared Prosperity Industrialisation for Job Creation and Shared Prosperity v BACKGROUND TO THE BUDGET Fiscal Year 2017/18 4.2.1 Monetary Policy Framework ................................................................... 23 4.2.2 Financial Sector Developments ................................................................ 30 4.3 Fiscal Sector Developments ........................................................................................... 35 4.3.1 Government’s Fiscal Objectives for FY2016/17 ........................................... 35 4.3.2 Revenue Performance for FY 2016/17 (as of March 2017) ............................. 35 4.3.3 External Resource Mobilisation ................................................................ 40 4.3.4 Overall Fiscal Performance in FY2016/17 ................................................. 42 4.4 External Sector Developments ....................................................................................... 45 4.4.1 Overall Balance of Payments ................................................................... 45 4.4.2 The Current Account .............................................................................. 47 4.4.3 Capital and Financial Accounts ................................................................ 50 Chapter 5 : NATIONAL DEVELOPMENT ............................................................................. 51 5.0 Introduction ....................................................................................................................... 51 5.1 National Development Outcomes ..................................................................................... 51 5.1.1 Quality of Life ........................................................................................... 51 5.1.2 Living Standards ........................................................................................ 54 5.1.3 Employment and Incomes ............................................................................ 56 5.2 Sustainable Development Goals and the Unfinished MDGs Business ............................... 57 5.3 Public Investment ................................................................................................................ 59 5.3.1 National Development Plan (NDP II) Core Projects: Implementation progress ... 59 5.3.2 Infrastructure development ...................................................................... 59 5.3.3 Industrial Development .......................................................................... 63 5.3.4 Trade and Business Development .............................................................. 64 5.3.5 Social Development ............................................................................... 66 5.3.6 Public Investment Management ................................................................ 67 5.4 Private Sector Development ................................................................................................ 69 CHAPTER 6: SECTOR PERFORMANCE AND PRIORITIES ........................................... 73 6.0 Introduction ......................................................................................................................... 73 6.1 Public Governance .............................................................................................................. 73 6.1.1 Law and order ...................................................................................... 73 6.1.2 Civil liberties and freedom ...................................................................... 74 6.1.3 National Citizenship and Immigration Control ...................................................... 74 6.1.4 National Stability, Peace and Security ................................................................... 75 6.1.5 Regional Stability .................................................................................. 75 vi Industrialisation for Job Creation and Shared Prosperity BACKGROUND TO THE BUDGET BACKGROUND TO THE BUDGET Fiscal Year 2017/18 Fiscal Year 2017/18 6.1.6 Parliamentary Representation, Oversight and Legislation ............................. 76 6.1.7 Effective Service Delivery Oversight .......................................................... 77 6.1.8 Budget Absorption ................................................................................. 79 6.1.9 Fiscal Sustainability ............................................................................... 79 6.2 Infrastructural Development ............................................................................................... 82 6.2.1 A reliable and Efficient Transport Network ............................................................ 82 6.2.2 An Inclusive Construction Industry ........................................................... 93 6. 2.3 Universal Access to Modern