THE REPUBLIC OF UGANDA

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BUDGET SPEECH

Financial Year 2017/18

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THEME: INDUSTRIALIZATION FOR JOB CREATION AND

SHARED PROSPERITY

HON. MATIA KASAIJA (M.P.)

MINISTER OF FINANCE, PLANNING & ECONOMIC
DEVELOPMENT

8th JUNE 2017

 I. PREAMBLE
Your Excellency the President,
Your Excellency the Vice President,
Right Honorable Speaker of Parliament,
His Lordship the Chief Justice,
His Lordship the Deputy Chief Justice,
Right Hon. Deputy Speaker of Parliament,
Right Hon. Prime Minister,
Right Hon. Leader of the Opposition
Honorable Ministers,
Honorable Members of Parliament,
Your Excellences, Ambassadors and Heads of Diplomatic Missions
Ladies and Gentlemen,

II. INTRODUCTION
1. Rt. Hon. Speaker, in accordance with Article 155(1) of the Constitution of
the Republic of Uganda, I am honored to present the Budget for Financial Year
2017/18, on behalf of His Excellency, the President. The Financial Year 2017/18
Budget was approved by Parliament on 31st May 2017, in line with the Public
Finance Management Act 2015.
2. Madam Speaker, today I commend Parliament for the approval of the
Financial Year 2017/18 Budget, the highlight of which I will give later in my speech.
In my presentation today I will therefore cover the following :-
i) Report on the state of the economy, and spell out the immediate and
medium term strategies to stimulate economy and propel Uganda into
Middle Income Status;
ii) Update Parliament on the performance of key selected sectors in financial
year 2016/17 Budget, and priorities for the next financial year; and
iii) Highlight the financial year 2017/18 revenue and expenditure framework and
measures for enhancing domestic revenue mobilization.

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3. Madam Speaker, Ugandas development achievements provide renewed
confidence in the NRM Governments strategy to transform Uganda from a low
income country to a prosperous one. Many Ugandans are now living longer and
better lives.
4. Life expectancy today is 63 years, up from 48 years in 2002. This increase in
life expectancy is a result of the NRM Governments delivery of better socio-
economic outcomes such as the provision of education, health and water.
Literacy rates for adults now stand at 74% rising from 68% in 2002. 79% of the
population now accesses safe water compared to 59% in the same year.
Immunization of children against measles is now 82% up from 62% fifteen years
ago. Per capita incomes have more than doubled to USD 637 in 2016 rising from
USD to USD 250 in 2002, notwithstanding an increase in population from 26 million
to 41 million people over the same period.
5. Madam Speaker, despite progress on these socio-economic outcomes, a
lot more needs to be done. The growth of average Incomes has stagnated in the
face of declining economic growth and a fast growing population. There is
growing unemployment, especially among the youth. We are increasingly faced
with the prolonged droughts as a result of environmental damage such as the
destruction of wetlands and deforestation. Land fragmentation is another
problem. Agriculture, the mainstay of the vast majority of Ugandans, is now at risk
due because of excessive reliance on rain-fed farming. These challenges require
immediate redress.
6. Madam Speaker, Government plans to turnaround the economy by
enhancing agriculture production and productivity and the pace of
industrialization. The vagaries of climate change that impede realization of
agricultures potential will be tackled by fast-track irrigation. In order to tackle
unemployment, Government will promote industrialization by supporting value
addition. Value addition especially in agro-processing will utilize agricultural
output and also create more jobs, thereby benefiting the vast majority of
Ugandans, particularly the youth and women.

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7. Accordingly, the theme for the Financial Year 2017/18 Budget is
Industrialization for Job Creation and Shared Prosperity.

III. THE STATE OF THE ECONOMY

8. Madam Speaker, before I report on sector performance and spell out the
priorities for next year, let me give an account the state of our economy today.
Ugandas economic and social progress, and future prospects have been
affected by global, regional and domestic developments.

Global Factors

9. Global factors that have negatively impacted on our economy include the
following:-

i) slow economic recovery in Europe has translated into lower demand for
our export commodities.
ii) economic recovery in the USA has led to a reduction in capital flows to
Africa, as investors prefer to invest in US markets.
iii) A rise in global Interest rates globally has resulted in high cost of capital
and borrowing.

Regional and Domestic Factors

10. Madam Speaker, regional and domestic development that have affected
the state of the economy include the following:-

i) Civil conflict in parts of the East African region, have disrupted export
markets for our goods and services. These conflicts have also led to influx
of refugees into Uganda, putting pressure on our social amenities;
ii) The effects of climate change and environmental degradation have
threatened food security and economic growth;
iii) Private sector growth has been constrained with high interest rates and
non-performing assets;

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 iv) Delays and inefficiency in the implementation of Government
programmes and projects have dampened their anticipated positive
impact on the economy; and
v) Corruption and inefficient Implementation of Government projects and
programmes, which have hampered overall service delivery.
11. Madam Speaker, despite these challenges, Ugandas economy is not in
recession but growing moderately. The size of the economy this financial year is
projected to rise to Shs 90.6 trillion, equivalent to USD 26.2 billion. This represents a
real annual economic growth rate of 3.9%. Although this is lower than the target
growth of 5.5%, Ugandas performance is higher than the average Sub-Saharan
Africa growth rate this year, which is projected to be 1.4%. Growth in agricultural
output slowed to 1.3% this year compared to growth of 2.8% in the previous year,
as result of the unusually prolonged drought. The Industrial sector growth also
dropped to 3.4% this year as against 4.7% last fiscal year. Growth in Services also
slowed to 5.1% compared to 5.9% last year. However, Aggregate demand, while
subdued, has grown at 2.7% this year, compared to 1.0% last financial year.

12. Madam Speaker, while the financial sector remains well-capitalized, a

sharp rise in interest rates in 2013 led to increased non-performing loans which
peaked at 10.5% of total loans in December 2016, but have reduced to 6.3% as
at March 2017.

Public Debt

13. Madam Speaker, Ugandas external and domestic Public debt amounted
to USD 8.7 billion. In nominal terms this is equivalent to 34% of our GDP. When future
debt payment obligations are discounted to todays value, our Public Debt to
GDP ratio stands at 27%, much lower than the threshold of 50% beyond which
public debt becomes unsustainable. Ugandas public debt is therefore
sustainable over the medium to long term.

Monetary and External Sector

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 14. Madam Speaker, International reserves at end December 2016 stood at
US$ 3 billion, equivalent to five and half months of future imports of goods and
services. This is above the required level in the EAC monetary convergence of four
and half months of imports. The exchange rate has remains broadly stable for
much of the financial year, and inflation remained within single digit at 6.8%
despite pressure from food crop prices.

IV. THE ECONOMIC OUTLOOK AND GROWTH STRATEGY

Future Economic Outlook
15. Madam Speaker, Uganda aims to graduate to middle income status by 2020.
Average incomes, or GDP per capita will therefore reach USD 1,039. Given a
population estimate of about 45 million people in 2020, the size of the economy
will need to grow by an additional USD 18 billion before 2020 for us to attain middle
income status.
16. Madam Speaker, despite current slowdown in economic growth, projections are
that the economy will rebound to a growth rate of 5.5% in FY 2017/18 and
eventually to at least 7% in the medium term. This projection is based on
improvements in agricultural production and productivity, and the recovery in
aggregate domestic demand and private sector credit. In addition, Infrastructure
and oil sector investments will significantly contribute to this recovery in growth
and consequently lead us into middle income status.
17. Madam Speaker, achieving middle income status will require addressing many of
the challenges I have already enumerated. Dealing with climate change is key
to agriculture in addition to reorganizing the sector. Financial sector reform is
necessary to lower interest rates, and reduce the cost of capital to the private
sector. Delays in implementation of key Government projects and programmes
must be eliminated. Corruption by elements of the public service that frustrate
investors must be eradicated.

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18. Madam Speaker, restoring annual economic growth rates to at least 7% is the first
step to attain middle income status. Our economic recovery strategy therefore
rests on four pillars. These are:
i) Industrialization through Value Addition;
ii) Increasing production and productivity in the key primary growth sectors
of Agriculture, Tourism and Oil, Gas and Minerals;
iii) Enhanced Private Sector Development; and
iv) Increased Public Sector Efficiency.

Industrialization through Value Addition

19. Madam Speaker, Ugandas industrialization will be anchored on agriculture,
agro-processing and value addition. Linking agriculture to industry is the
mechanism in which the economy will be transformed to deliver inclusive growth
and development. This process requires the implementation of the following
strategies:
i) Promoting processing of agricultural raw materials;
ii) Building linkages between agro-industries and farms;
iii) Adapting farmers to meet industrial and market needs by increasing
production of quality raw materials; and
iv) Developing Agro-industrial Clusters in agro-ecological zones,
20. Madam Speaker, to enable the implementation of these strategies the following
measures will be undertaken:-
i) Implement Agricultural zoning linked to industries. For example in Citrus and
Mangoes can be zoned in Eastern and Northern Uganda; Cassava in the
North & Eastern Uganda; Mangoes & Passion in Central & Western
ii) Supporting innovations by building a critical mass of highly skilled ICT, science
technology and engineering professionals to drive industrialization. I have
therefore provided Shs 43 billion to establish an Innovation Fund, of which Shs
13 billion will finance talented youth in the ICT Sector;

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 iii) Provision of fully-serviced demarcated industrial and business parks with
adequate electricity, water, telecommunications at Luzira, Jinja and
Namanve/Bukasa; and
iv) Improvement in Skills Training, Business Incubation, Work Space provision and
financing SME Product Start-up Kits in order to promote value addition by
Small and Medium-scale Enterprises (SMEs).

Production and Productivity in Key Primary Growth Sectors

21. Madam Speaker, the primary sectors where Uganda has competitive advantage
are Agriculture, Tourism and Minerals, Oil and Gas.
22. In Agriculture, challenges which Government will address include the following :
i) Climate change arising from destruction of wetlands and deforestation,
which consequently results into prolonged drought in some cases floods;
ii) Low survival rates of distributed seedlings at about 40%, because of poor
quality inputs, mismatch between input distribution and planting seasons,
weak extension services, and excessive dependence on rain-fed agriculture;
iii) Inadequate post-harvest handling infrastructure that accounts for over 30%
loss of production;
iv) Inadequate compliance with and enforcement of standards right from farms
to processors;
v) High cost of financing for agriculture enterprises with some agricultural
projects being charged interest rates of as high as 30%; and
vi) Lack of coordination among institutions in the Agricultural Sector.
23. In tourism the challenges are low hospitality skills, inadequate marketing and
promotion of tourist products and insufficient coordination between tourist
operators and Tourism sector institutions. The Minerals, Oil and Gas sector suffers
from fragmented Minerals legal framework and consequently low investment to
develop Ugandas minerals, in addition to delayed implementation of key
projects such as the Oil Refinery and the East Africa Crude Oil Pipeline.

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24. Government will prioritize improvement in production and productivity in these
sectors. Agriculture value chain reform will make Uganda food secure, enhance
value addition to take up agriculture output, while creating jobs and increasing
export earnings. The strategic actions that Government will implement include
reforestation, prevention of wetland destruction and enhancing irrigation to
reduce reliance on rain-fed agriculture. In addition, reorganizing the
procurement and distribution of planting material for better quality and timely
delivery will be undertaken. In Tourism measures include increased promotion and
marketing of tourist products and building skills in the hospitality industry. To
promote commercial production In the Minerals, Oil and Gas sector, the legal
framework will be reviewed to improve governance and attract investment. The
Oil Refinery and Crude Oil Pipeline projects will also be implemented urgently to
enable production of first oil by 2020. These actions is will enable the Minerals, Oil
and Gas sector increase the resource base for economic growth. I will elaborate
priority actions in these areas to enhance productivity in key primary growth
sectors later in my presentation.

Private Sector Development

25. Madam Speaker, Government will support Ugandas private sector to become
more competitive at national, regional, and international levels. The private
sector, as we all know, plays a key role in production, trade, export promotion
and employment creation. Therefore resolving private sector constraints is key to
stimulating the economy.
26. Madam Speaker, tremendous progress has been made in reducing cost of doing
business and therefore improving trade. Port transit and border clearance times
have improved significantly. Clearance of goods at Mombasa Port has been
reduced from 13 to 5 days, and the transit time for goods from Kenya has reduced
from 4 to 2 days. It now takes an average of 4 hours to clear through Malaba
compared to 24 hours previously.

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27. On the downside, private sector activity has slowed in the recent past with a
number of businesses suffering distress. The key causes include the following:-
i) High cost of capital coupled with the absence of Long Term Financing;
ii) Insufficient local content especially in major infrastructural projects; and
iii) Slowdown in domestic aggregate demand for goods and services;
iv) Continued accumulation of domestic arrears by Government departments;
v) High cost of transport that make our exports uncompetitive regionally; and
vi) High costs of electricity that makes manufacturing unprofitable.
28. Madam Speaker, in order to provide an immediate boost to the economy,
Government will spend the domestic arrears budget in the first quarter of next
financial year to settle verified arrears it owes to private suppliers. I have provided
U. Shs. 300 bn for this purpose. I have also established a hotline at the Ministry of
Finance for suppliers to report delays in approved and verified payments.
Releases to Government departments delaying payments for goods and services
supplied to Government for more than fourteen (14) days will be withheld until
such payments have been made. The One Stop Centre will also be fully
operationalized to increase efficiency of business licensing and registration.
29. Madam Speaker, whereas Governments domestic borrowing is essential for the
development of our capital markets, excessive domestic borrowing constrains
private sector growth because it raises the cost of borrowing, making businesses
unprofitable. In addition, financing the Government budget from this source has
proven much more expensive compared to other sources of financing. To support
private sector growth, Government will reduce domestic borrowing from 2% of
GDP to 1% of GDP in the short to medium term. Achieving this objective will require
implementing measures to boost domestic tax and Non-tax revenues, which I will
elaborate later.
30. Madam Speaker, Ugandas savings rate remain low in relation to investment
needs which requires development of a sustainable National Financing
framework. Government will reform the pensions and insurance sectors to

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 mobilize long term capital. This should in turn lead to a reduction in interest rates
as long term financing becomes available.
31. In order to increase the availability of long-term capital for the private sector, I
have provided the Uganda Development Bank Limited (UDBL) with an additional
UGX 50 billion, and Government has also guaranteed a $26 million loan from the
Islamic Development Bank (IDB). The Financial Institutions Act has also been
amended to provide for new financial products such as Islamic Banking and
Agency/Mobile Banking.
32. Madam Speaker, implementation of the local content strategy will be enhanced
with the Buy Uganda, Build Uganda initiative to allow local contractors to
participate in infrastructure projects and other key Government investment
programmes. This will require amendments to the PPDA Act, for which
consultations are being concluded.
33. Madam Speaker, private sector activity and the provision of social services are
greatly facilitated by adequate infrastructure, especially in energy and transport.
Government will expedite the completion of ongoing projects and reduce the
electricity and transport costs. While the benefits investment in infrastructure will
be realized in the medium term, they require concerted action now to ensure
future results. I will return to the details of the priority actions to speed up
infrastructure development later in my speech.

Public Sector Efficiency

34. Madam Speaker, inefficiency and corruption in our Public Sector institutions are
key challenges to the delivery of public services, economic growth and poverty
reduction. Government will continue to improve Public Sector efficiency through
the following actions:-
i) Amend the PPDA Act to eliminate delays in procurement which is one of the
major causes of low absorption across MDAs, especially on major
infrastructure projects. In addition, disciplinary actions will be taken against

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 Accounting Officers who either intentionally or out of
negligence/incompetence delay procurement processes.
ii) Enforce the preparation of and implementation of Sector Strategic Plans.
Quarterly release of funds commencing next financial year shall be tied to
the implementation of these Strategic Plans.
iii) Performance Contracts of Accounting Officers will be linked to results to
ensure accountability across Government. In line with this, the Head of Public
Service will appraise the Permanent Secretaries to ascertain their
achievement of results in line with the NDPII and Sector Strategic Plans.
iv) In order to improve Public Investment Management, all Government
projects will be adequately prepared and appraised with feasibility studies
before funds are allocated implementation. Capacity will be built across
Government to improve project selection, appraisal, implementation and
monitoring. In addition, a database of bankable projects will be developed
in line with the National Development Plan.

V. SECTOR PERFORMANCE AND PRIORITIES

35. Madam Speaker, I now turn to the performance of key sectors for the Financial
Year 2016/17 Budget, details of which are in the financial year 2017/18
Background to the Budget. I will also elaborate the priority actions to enhance
production and productivity in key primary sectors, and also detail priority actions
that are required in supportive sectors such as infrastructure development and
social service delivery.

I. Production and Productivity in Key Primary Sectors

Agriculture
36. Madam Speaker, the Agriculture sector is key in providing food security and
export earnings, in addition to creating gainful job opportunities for Ugandan
youth and women. During the year, actions in the Agriculture sector have
included distribution of inputs under Operation Wealth Creation (OWC), market

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 infrastructure development, and the rehabilitation of major irrigation schemes.
Planting materials distributed include 72 million coffee plantlets, 148 million tea
plantlets, 10 million citrus seedlings, 6 million mango seedlings and 4 million cocoa
seedlings. In addition 7 urban markets have also been reconstructed and works
on 11 additional markets will commence next year under the Market
Improvement Programme (MATIP). To further improve market access, 11,000 Km
of new community access roads were constructed, covering 90 districts and 158
sub counties; 77 rural markets were constructed in 35 districts; and 297 agro-
processing facilities were established under Community Agriculture Infrastructure
Improvement Project (CAIIP).
37. Madam Speaker, during this year an additional Shs. 23 billion was allocated for
recruitment of Agricultural extension workers, bringing extension staffing levels to
78%. This will make Agricultural Extension system more effective in the promotion
of appropriate farm level practices and also complement the continuing
provision of inputs under Operation Wealth Creation.
38. Madam Speaker, next financial year, Government will address the adverse
effects of climate change by commencing construction of irrigation schemes in
13 selected Districts where design studies have been concluded. These districts
are Iganga, Bugiri, Pallisa, Tororo, Butaleja, Namutumba, Soroti, Serere, Dokolo,
Lira, Amuru, Nwoya and Hoima. In addition design studies for irrigation schemes
will be completed in the Acomai River system in Sironko, Bukedea and Bulambuli
districts and the Atari River system in Kween and Bulambuli districts.
39. Solar-power water irrigation systems will also be established in all nine (9) Zonal
Agricultural Research and Development Institutes as a pilot before replicating
and rolling out across the country. In addition, 520 valley tanks will be constructed
to increase availability of water for agricultural production at farm level, with
areas affected by the recent drought and food shortages given priority.
Government will also pilot fertilizer-provision to a targeted 10,000 farming
households using subsidized electronic vouchers, in addition to contued
distribution of planting and stocking materials. [ALLOCATION]

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40. Madam Speaker, in order to add value to agricultural produce, Government will
accelerate public investment in the entire value chain for strategic commodities.
Support will be provided to boost the processing of Milk and other dairy products,
oil palm, oil seeds and cotton. Equipment for medium scale fruit processing,
motorised maize milling, and rice milling will be purchased and distributed under
NAADS. A new Cottonseed Processing Plant will be established by the Cotton
Development Organisation (CDO) [CLARIFY WHERE].
41. Government will also increase productivity by implementing the following
interventions:-
i) Support the establishment of post-harvest handling storage by the private
sector, together with cooperatives at parish-level;
ii) Expand Bulk Water Irrigation Infrastructure on major lakes and rivers, and
tackling climate-change through afforestation, and prevent wetland
destruction;
iii) Rollout the Agricultural Insurance across the country to subsidize agriculture
insurance premiums for both small and large scale farmers; and
iv) strengthen security of land tenure by formalizing land ownership and
household acquisition of titles.
42. Madam Speaker, unleashing Agricultures potential can eliminate Ugandas
trade deficit currently at USD 2.8 billion. Immediately addressing commodity
specific constraints faced in coffee, tea and fish sub-sectors alone can triple
export earnings from USD 615 million today, to USD 1.8 billion annually. In this
regard, Government will implement the following priority actions in the coffee, tea
and fisheries sub-sectors.
43. In the coffee sub-sector, Government will:-
i) Rehabilitate the existing 320,000 hectares of coffee with fertilizer application
and irrigation, while intensifying agriculture extension for proper
management of the 260,000 hectares of new coffee planted between 2009
and 2015;

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 ii) Generate sufficient disease-resistant clonal coffee plantlets in order to
mitigate the coffee wilt disease (CWD); and
iii) Mobilize smallholder farmers into groups to work with key market traders to
meet export market demands and sustainably unlock the coffee value
chain. This will be done in partnership with private sector organisations like
the National Union of Coffee Agribusiness and Farm Enterprises (NUCAFE).
44. Madam Speaker, these actions will more than triple the national average coffee
yield from the 600 kilograms per hectare today, to about 2,100 kgs per hectare.
As a result coffee exports will increase to about 9- 12 million 60-kg bags by 2020,
increasing Ugandas earnings from coffee export to more than US$ 1 billion from
the US$ 400 million today.[ALLOCATION]
45. Madam Speaker, in the tea-subsector Government will work with the Uganda Tea
Association (UTA) and other private stakeholders to increase the productivity of
tea farmers. Priority actions include mobilizing small holder farmers to access high
yielding clonal tea varieties, and increase extension services, with emphasis on
greater fertilizer usage.
46. These actions will increase the average smallholder farmer productivity from 1.5
metric tonnes per hectare (MT/ha) today to at least the 2.5 metric tonnes per
Hectare (MT/ha) obtained in tea estates.
47. Ugandan tea also needs branding and marketed to increase returns from
international tea auction markets. Currently a kilo of Ugandan tea earns US Dollars
0.5 less than Kenyan tea because of the absence of Ugandan branded tea.
48. These actions will lead to a seven -fold increase in the coverage of tea planted
from the 28,000 hectares today to potentially 200,000 hectares; and consequently
increase exports from 60,000 Metric tonnes to more than 400,000 Metric tonnes in
the medium term. This increase would earn Uganda more than US$ 500 million in
tea exports, compared to the US$ 80 million today. [ALLOCATION]
49. Madam Speaker, in the fisheries sub-sector industry productivity can be increased
by employing new fish-farming technology such as aquaculture or cage fish
farming. A fish-farmer using a cage-system can realize 48 metric tons per annum,

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 twelve times more than from traditional capture fishing. Enforcement of
regulations to prevent overfishing to restore fish stocks in lakes and rivers is also
required.
50. These measures would almost triple fish export earnings to US$ 360 million per
annum with cage fish farming compared to US$ 135 million earned today from
capture fishing. [ALLOCATION]
51. Madam Speaker, using sector specific approaches and actions that address the
challenges for each commodity enterprise as I have demonstrated for coffee,
tea and fisheries, additional earnings can and must be generated from
horticulture, diary and beef, grains and pulses .

Tourism
52. Madam Speaker, tourism has developed rapidly. Uganda was ranked as one of
the Worlds top five tourist destinations in 2017 by CNN, and the best African
country to visit and fourth best in the world. Tourist arrivals to Uganda have more
than doubled to 1.3 million people in 2015, rising from 540,000 in 2006. Tourism also
employs 1.2 million people both directly and indirectly. Consequently, Uganda is
targeting tourist arrivals to increase to 4 million visitors per year, and increase
tourism earnings from USD 1.35 billion today to USD 2.7 billion by 2020. This will
translate into significant jobs for Ugandans.
53. Madam Speaker, Ugandas huge touristic potential is constrained because of
poor infrastructure to access tourism sites, inadequate skills in the hospitality
industry and low visibility to attract national and international tourists. In addition,
tourist products are under developed and protected areas suffer human
encroachment with wildlife endangered by illegal hunting and trade.
54. Madam Speaker, Ugandas tourism potential will be harnessed. In addition to
touristic infrastructure development that has been done, Government will
develop the necessary skills in the hospitality industry, while marketing and
promoting Uganda as a world-class tourist destination with appropriate tourist
products. In order to attract target tourists, the certification of hotels and

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restaurants will also be concluded in 2018. [ALLOCATION] I will address tax
incentives for tourism later in my presentation.

Oil, Gas and Minerals

55. Madam Speaker, in Oil and Gas sector, 98% of land acquisition for the Oil
Refinery has been completed. Government will also select a Lead Investor to
partner with in the development of the Refinery. In addition, the Hoima-Tanga
route was selected as the least cost route to transport Ugandas crude oil to
the East African Coast. The Inter-Governmental Agreement to support the
private sector develop the East Africa Crude Oil Pipelines was signed in May
2017. In addition, a total of eight (8) production licenses have been granted
and further Oil Production licenses will be granted expeditiously.
56. Madam Speaker, the following priority actions in the Oil Gas and Mineral sector
will be implemented starting next financial year and the medium term to
provide a new and larger base for economic growth:
i) Promote and monitor petroleum exploration and develop petroleum
refining, pipeline, and bulk storage infrastructure so that commercial
production of first oil occurs in 2020;
ii) Review the regulatory framework in the minerals sector
iii) promote mineral exploration, development, production and value addition;
iv) Fully equip a modern Minerals Laboratory to test the quality of minerals; and
v) Register artisanal miners and build capacity of small scale miners.
57. In order to facilitate development of the Oil and Gas sector, the following oil
sector related infrastructure development activities will commence next
financial year:
i) Construction of the Kabaale International Airport in Hoima District;
ii) Rehabilitation of the Tororo Pakwach Railway Metre Gauge line to support
delivery of equipment for Oil production;
iii) Upgrading of Road Infrastructure that I detailed earlier; and
iv) Development of Pakwach Butiaba Ferry/barge water transport

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 II. Infrastructure Development
Power
58. Madam Speaker, in the Power sub-Sector positive developments have been
registered with electricity access increasing to 21% of households in 2016
compared to 11% in 2011. During the year, Power infrastructure development has
progressed with construction works at the Karuma and Isimba hydropower
projects are at 51% and 63% respectively. In addition construction works are
underway at 12 out of 17 projects, under the Global Energy Transfer Feed-in Tariff
(GETFiT) Programme. These include the 10MW Soroti Solar Plant which was
commissioned in 2016 and Muvumbe Hydro Power Plant (6.5MW) commissioned
in March 2017. Additional works continue at Siti I (6.1MW), Nkusi (9.6MW), Rwimi
(5.5MW), Lubilia (5.4MW), Waki (4.8MW), Nyamwamba (9.2MW), Siti II (16MW),
Sindila (5MW) and Kyambura (7.6MW). Consequently an additional 156MW will
be commissioned by 2019 under the GETFiT renewable energy programme.
59. Regarding Rural Electrification, 113 out of 117 districts have been connected to
the grid. 474.33Km of medium voltage and 240Km of low voltage lines have been
constructed. The remaining 287 out of 1,500 sub-counties will be connected in the
medium term. I have allocated . to continue implementation of various Power
projects.
60. Madam Speaker, in order to reduce power tariffs, Government is engaging the
financiers of the Bujagali Hydropower Project to refinance its debt.

Roads
61. Madam Speaker, the stock of paved Roads has increased from 3,317km in
2011/12 to 4,919km, just only 1,081Km short of the 2020 NDP II target of 6,000km.
While progress has been made in upgrading roads, road safety remains a
challenge due to high rates of accidents on these roads.
62. Madam Speaker, next financial year, Government will continue expansion of the
paved national roads network. In addition oil roads will be constructed to support
commercial production of petroleum by 2020. The following Ten (10) Roads and

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 Two (2) Bridges will be upgraded in this respect: Hoima Butiaba Wanseko;
Masindi Biiso; Masindi Bugungu via Murchison Falls; Kaseeta Lweera via
Bugoma Forest; Hohwa Nyairongo Kyarusesa; Wanseko Bugungu; Buhimba
Nyarweyo Kakindo Kakumiro Mubende; Lusalira Kaibamba- Nkonge-
Sembabule; Kyotera Rakai; Kabale- Kiziramfumbi; and Tangi and Emmi Bridges;
63. Madam Speaker, Government will also increase the maintenance of both the
paved and unpaved road networks. To this end, regional road equipment
maintenance workshops will be operationalized.

Railway Transport
64. Madam Speaker, 84.5% of acquisition of the Right of Way for the Malaba -
Kampala Standard Gauge Railway project has been completed during the year.
Negotiations to conclude the financing for the construction of the SGR Project
are also underway. Discussions with the Kenya Government are also underway to
ensure the synchronization of the construction of the Kampala Malaba SGR with
the Naivasha Kisumu- Malaba SGR segments.

Water Transport
65. Madam Speaker, with respect to water transport, the Interim Master Plan for the
New Kampala Port at Bukasa has been completed and initial preparatory works
will begin in early 2018. The design for the remodeling of the Portbell and Jinja
Piers has been completed with construction due to commence in 2018/19.

[PRIORITY ACTIONS REQUIRED]

III. Improving Service Delivery and Human Capital Development

Health
66. Madam Speaker, there has been progress in Health outcomes over the last five
years, since 2011. Infant mortality has declined from 54 to 43 deaths per 1000 live
births; and the under-five child mortality has declined from 90 to 64 deaths per
1000 live births. Maternal mortality has also declined from 438 to 336 deaths per

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 100,000 births respectively. Contributory factors for the decline in maternal
mortality include the rise in the deliveries in a health facility which have
increased from 57 to 73 percent of all births. In addition, there has been a decline
in the fertility rate from an average of 6.2 to 5.4 children per woman. The uptake
of family planning has also increased with the share of married women aged 15
to 49 practicing family planning rising from 30 to 39 percent.
67. Madam Speaker, improvements with respect to disease burden have also been
registered. In order to raise coverage of Long Lasting Insecticide Treated Nets
(LLINs) from 75% to 100%, mass distribution of 24 million was undertaken. Malaria
prevalence has reduced from 42% to 19% according to the 2015 Malaria
Indicator Survey. Mother to Child HIV Transmission has also reduced with the
number of new infections dropping from 22,000 in 2012 to 3,400 in 2016.
68. Madam Speaker, progress has been made in health infrastructure development.
The Mulago National Referral Hospital extensive re-construction and equipping
into a specialized facility is expected to be completed by August 2017. The
Mulago National Hospital Project also includes construction of a new 320 bed
Specialized Maternal and Neonatal Health Care which is due for completion in
June 2017. The construction of Kawempe and Kiruddu was completed and
equipping is ongoing. The reconstruction and re-equipped Cancer Institute is
also expected to be fully functional in July 2017. Just a week ago, construction
of a specialized international hospital was launched by His Excellency the
President at Lubowa.
69. Madam Speaker, despite these good milestones, the health system is inefficient
in some critical areas. Drug stock-outs and mismatch of supplies to districts faced
with specific disease prevalence remain. Cases of shoddy work in health
infrastructure provision also occur at district and lower levels. There is weak
supervision and monitoring as well as absenteeism of health workers at health
facilities.

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70. Madam Speaker, next financial year, priority will be placed on the following
measures to improve health outcomes and remove inefficiency in health
service delivery:-
i) elimination of drug-stock-outs and Increased facility inspection to
eradicate negligence of duty, corruption, and poor service delivery at
health facilities;
ii) Emergency rehabilitation of Health Units and general hospitals with
stronger supervision to eliminate shoddy construction work in health
infrastructure, especially at local government level;
iii) Universalisation of access to maternal health through strengthening the
Community Health Extension Workers (CHEWs);
iv) Increased sensitization and awareness of the population to health living.
[ALLOCATION]
Education
71. Madam Speaker, during the year, the completion rate at primary education
improved to 61.6% in 2016 compared to 54% in 2010. The completion rate at
Ordinary Secondary improved marginally to 40% in 2015 from 39% in 2010. The
universalisation of education has continued with primary school enrolment
increasing to 8.8 million pupils in 2016 compared to 8.1 million in 2011. Secondary
school enrolment increased to 1.4 million students in 2016 from 1.3 million in 2011.
72. During the year Government fulfilled its pledge to increase Primary Teachers
salaries by 50%. Salaries of both Teaching and Non-Teaching Staff across all the
Public Universities were also enhanced and arrears for non-teaching staff settled.
In addition, Lira and Kabale universities were taken over by Government and
civil works at Soroti University will be completed to enable operations to
commence next year. In addition, 840 staff were recruited and posted to the 20
Technical Institutes under the Skilling Uganda programme.
73. Madam Speaker, despite this progress challenges in education include
declining proficiency in literacy and numeracy; skill gaps, infrastructure deficits,
teachers absenteeism and cases of ghost pupils/students that distort

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 budgeting for and release of capitation grant. In order to improve education
service delivery, the following interventions will be implemented:-
i) Curriculum reform with an emphasis on science, competency and life
skills;
ii) Improvement of existing learning facilities at tertiary institutions including
re-construction of laboratories and workshops;
iii) Certification of non-formal training to enable acquisition of practical skills
for youth without formal education;
iv) Establishment of 12 seed secondary schools in sub-counties which lack
these schools, for which I have provided Shs 8.58 billion;
v) Rehabilitation of dilapidated primary schools and traditional secondary
schools for which I have provided Shs. 15.23billion; and
vi) Installation of lightening arrestors for 140 schools in the most lightening
prone districts namely Mubende, Ssembabule, Bushenyi, Lwengo,
Bukomansimbi and Lyantonde;

vii) Use National Identification to eliminate ghost students.

Water, Environment and Sanitation

74. Madam Speaker, during the year, access to Safe Water nationwide improved
with rural coverage improving to 68% in 2016 from 67% in 2015. Urban safe water
access also improved from to 74.5% in 2016 from 73% in 2015. However, these
access rates are still below the NDP-II target of 100% by 2020. Furthermore,
access to hand-washing facilities remains significantly below the national target
of 50% and is a major cause for preventable diseases such as Diarrhea and
Dysentery. Functionality of sanitation facilities has also declined from 92% in the
previous FY to 90% in 2016. Critical aspects that Government plans to address
include improving functionality of water and sanitation facilities.
[KEY PRIORITY ACTIONS REQUIRED]

Social Empowerment Programmes

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 75. Madam Speaker, Government has supported the implementation of Youth
Livelihood Programme fund Projects proposed by Youth for funding. These
Projects will create jobs for the youth. A total of 120,000 youth have received skills
and financial support that enabled them to generate 9,500 projects worth Shs.
68.41 billion. Repayments under the programme have also improved. Of the
Ushs. 14.80 billion due for repayment, Ushs. 8.92 billion has been paid.

76. In order to strengthen the economic empowerment of Women, implementation

of the Uganda Women Entrepreneurship Programme was scaled up to cover all
Local governments. 577 women groups have now been covered and 7,380
women have had projects worth Ushs 2.95billion financed. The Uganda Women
Entrepreneurship Programme will be rolled out to cover an additional 3,500
women.
[REVIEW]
Improving Governance
77. Madam Speaker, in the justice system, the disposal rate of cases is being
addressed with a case backlog reduction strategy. Access to justice for juveniles
has improved with juvenile cases being fast-tracked and 71% receiving non-
custodial sentences. Furthermore, 98% of infrastructure to be built under the
Justice Sector Strategic Plan have been completed and will be commissioned by
December 2017.
78. In addition, Government amended the Leadership Code to permit confiscation
of properties acquired through corruption. In order to eliminate corruption in
public offices, the Inspectorate of Government has established a directorate to
specifically handle high profile corruption cases. Its core function is to
expeditiously and efficiently investigate alleged cases of high profile and
syndicated corruption in the public offices resulting into prosecutions, asset
recovery and administrative Sanctions. This will mainly focus on cases coming
from key sectors of roads, transport and infrastructure, education, health,

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 Agriculture and cases of high public interest and impact and which require highly
specialized knowledge, skills and tools to investigate.
79. Madam Speaker, Government has strengthened the enforcement of the
leadership code through implementation of the online wealth declaration
system. This is aimed at easing the processing of declaration and analysis. The
Financial Intelligence Authority has also been strengthened to deliver on Anti-
Money laundering targets and strong collaboration with institutions implementing
the Financial Action Task Force (FATF) on Counter terrorism financing measures.

VI. FINANCIAL YEAR 2017/18 REVENUE AND EXPENDITURE FRAMEWORK

Domestic Revenue Mobilization
80. Madam Speaker, domestic resources that finance our development needs
remain low. At only 13% of GDP, our tax revenue is inadequate to fund critical
development programmes and projects. Major projects especially in transport,
energy and ICT are therefore financed through borrowing, both externally and
domestically. As a result of this, public debt has increased in recent years.
Nonetheless, the public infrastructure assets being created will significantly
increase production, productivity and competitiveness of our country.
81. Governments resource mobilization strategy is to boost domestic tax revenue in
order for critical investments to be financed by domestic revenue. The Uganda
Revenue Authority (URA) has been provided increased financial resources to
improve administration. Non-Tax Revenue and Appropriation in Aid present a
potential source of financing the budget. Preliminary assessment of Non-Tax
Revenue performance shows poor governance. In view of this, all Non-Tax
Revenue and Appropriation in Aid shall be collected by the Uganda Revenue
Authority and shall be remitted to the Uganda Consolidated Fund in accordance
with the 2015 Public Finance Management (PFM) Act. Allocation of these
resources to the various activities of MDAs will be done through the National
Budget process.

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Revenue Performance
82. Madam Speaker, revenue performance this year has been subdued as a
result of constrained economic growth. Tax collections for the year now ending
are projected to amount to Shs 12,882.3 billion, against a budgeted figure of Shs.
., reflecting a shortfall of Shs. 377.02 billion. The shortfall has been caused by
declining import volumes which grew marginally by only 0.79% against a target of
9.1%. This decline in import volumes is a result of the depreciation of the Uganda
shilling. Major tax collection heads reflected this trend with direct taxes on
business, employment and property incomes, registering a shortfall of Shs 96.04
billion by April 2017.
83. Despite the tax collection shortfalls I have mentioned, this years revenue
performance, however, represents a 13.6 % increase over the previous year. As a
contribution to total resource envelope, we have witnessed improvements in
revenue mobilization effort, with tax revenue increasing from 48% in 1998/99 to
the current 67%. The improvement in revenue collection is attributable to the
growing size of the economy over the years, and reforms in tax policy and
administration.
84. Madam Speaker, in the forthcoming year, Governments revenue
mobilization strategy will focus on enhancing tax administration by building a
stronger compliance culture. Hence tax rates have been kept unchanged, with
only modification being made to close loopholes. Tax administration will be
enhanced through strengthening detection of non-complaint taxpayers,
recovery of tax arrears and combating smuggling, undervaluation and under
declaration. The automation of online assessments and the electronic tracking of
transit goods from Mombasa are also ongoing. Customs data will be synchronized
with income tax returns. This will lead to improved systems, including
implementation of automated customs border posts, ICT based verification of
imports, and strengthened internal control systems to prevent leakages.

Income Tax

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85. Madam Speaker, the Income Tax Act has been amended as follows:-
i) Deductions for accelerated depreciation have been introduced as an
incentive for upcountry investments. This will allow recovery of costs of
acquiring plant and machinery and construction of industrial buildings much
faster before the payment of corporate income tax.
ii) Lotteries and Gaming Tax has been rationalized by imposing withholding tax
on winnings in order to prevent evasion. This will deal with under-declaration
of tax returns by some gaming houses claiming high winnings by gamblers.
iii) Multinational enterprises will now be required to provide information in
respect of their dealings with their associates. Multinational enterprises failing
to comply will incur a penalty tax of shillings fifty million.
iv) To limit disputes on rental income tax payable, estimates of rental rates will
be based on the rating of rental property in a specific location, if the
taxpayer does not file returns, or provides a misleading return. I appeal to all
rental income taxpayers to file their returns in a timely manner to avoid
paying estimated rates.
v) The Bujagali Energy Limited has been exempted from Corporate Income Tax
to reduce the cost of power to end-users;
vi) The income of a body established by an Act of Parliament to regulate the
conduct of professionals, such as the Institute of Certified Public Accounts of
Uganda, has been exempted;
vii) The interest on outstanding tax and the penal tax has been limited to ...
This measure will also apply to interest due as at 30th June
viii) annual depreciation allowance of 35% on a motor vehicle provided to an
employee for a private purpose.

Value Added Tax

86. Madam Speaker, the value Added Tax Act has been amended as follows:-

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 i) VAT on crop extension services, animal feeds and premixes, deep cycle
batteries and composite lanterns, irrigation works, sprinklers and ready to use
drip lines has now been exempted
ii) interest on outstanding VAT and the penal tax as was done with the Income
Tax Act is similarly limited to ..

Excise duty
87. Madam Speaker, the Excise Duty Act has been amended to introduce
specific rates on beer and soft drinks that are equivalent to the current ad
valorem rates. This will ease administration and reduce time and money
spent in disputes especially as regards the cost, insurance and freight (CIF)
value of imports.

88. Madam Speaker, as part of the campaign to reduce consumption of cigarettes,

Parliament approved an increase in excise duty of cigarettes as follows;

i) locally manufactured soft cap from Shs 50,000/= to Ushs 55,000/=

per 1000 sticks and imported soft cap from Shs 50,000/= to Ushs
75,000/= per 1000 sticks; and
ii) locally manufactured hinge lid from from Shs 75,000 to Ushs 80,000/=
per 1000 sticks and imported hinge lid from Shs 75,000 to Ushs
100,000/= per 1000 sticks.

Tax Procedures Code

89. Madam Speaker, Tax Procedure will now require all persons to file a provisional
return before the end of the first quarter and make payments on a quarterly
basis. The only exception is for persons in Lotteries and Gaming who will be
required to file weekly and provide monthly returns for income tax purposes. This
change is aimed at easing payments and improving compliance.
90. Madam Speaker, goods that I will statutorily prescribe will henceforth be
required to affix tax stamps, regardless of whether such goods are produced
locally or imported. The tax stamps will minimize under declaration of such goods

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 by both importers and local dealers, and boost tax collections. Failure to affix
tax stamps, the defacing of stamps, the possession of unstamped goods, or any
attempt to acquire or sell stamps without authorization will lead to penalties as
prescribed by law.

EAC Pre-Budget Consultations

91. Madam Speaker, under the East African Community, EAC Ministers of Finance
held pre-budget consultative meetings and agreed measures with respect to
the EAC common external tariff, details of which will be contained in the Gazette
to be issued by the EAC Secretariat.

Revenue Enhancement Measures for LGs

92. Electronic business registration and revenue collection system (E-logrev) was
piloted in Entebbe, Kira and Jinja municipalities with success. The E-logrev will be
rolled out to 34 other municipalities to improve local government financing and
access to information on revenue collection in real time.

Expenditure Framework
93. Madam Speaker, the total budget approved by Parliament for financial year
2017/18 amounts to Shs. 29 Trillion. Approved Recurrent Expenditures amount to
Ushs 17.48 trillion. Shs. has been allocated for Salaries and Wages and Shs
for Non-Wage Expenditurre.
94. Development Expenditures amount to Shs 11.51 trillion.

[ADDITIONAL MACRO BUDGET ALLOCATIONS

CONCLUSION

95. Madam Speaker, in conclusion, Government has put in place measures to

achieve higher rates of economic growth in the medium term. The anchors for
renewed growth will be Agriculture, Tourism and Minerals Oil and Gas.

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96. Governments priority on Industrialization is linked to agriculture and agro-
process which will spur growth and create jobs.
97. In addition to investments in transport, power, and ICT infrastructure,
Government will address implementation challenges and improving quality
along the production, marketing and export chains.
98. Institutional reforms and strengthening will be implemented to decisively
combat corruption and improve service delivery.
99. To the business community and those engaged in the agriculture sector, the
budget for FY 2017/18 carries a special promise which should increase your
production and productivity and make you more competitive.
100. To all Ugandans, this means production will be boosted and more jobs
created, especially for our youth and women.
101. There will be improved access to opportunities for all to enable inclusive
participation and collective contribution towards our shared prosperity

102. Madam Speaker, I beg to move.

For God and my Country

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