12 June 2008
document
Kampala — Exports increase by 15%
Theme: Strategic priorities to accelerate Prosperity- For-All
Delivered on June 12 2008 by Dr. Ezra Suruma, the Minister of Finance, Planning and Economic Development.
Preliminaries
Your Excellency the President,
Mr. Speaker Sir,
Honourable Members of Parliament,
1. I beg to move that Parliament resolves itself into a Committee of Supply for the consideration and approval of:
a) The Revised Revenue and Expenditure Estimates for the Financial Year 2007/2008; and
b) The Proposals for the Estimates of Revenue and Expenditure for the Financial Year 2008/2009.
2. Mr. Speaker Sir, Article 155(1) of the Constitution provides that the President shall cause the preparation and lay before Parliament estimates of revenue and expenditure for each financial year. I am accordingly performing this duty on behalf of the President.
Introduction
3. Mr. Speaker Sir, the budget I am presenting today is a statement of the revenues that Government expects to collect in the Financial Year 2008/09 and how it plans to allocate these revenues as it pursues its vision for the economic and social transformation of Uganda and prosperity for all the people.
4.The theme for this year's budget is "Strategic Priorities to Accelerate Prosperity for All.' It is the NRM Government's continued desire and determination to transform Uganda into a country of opportunity and prosperity
for all Ugandans. Expenditure will therefore be focused on areas that will increase employment opportunities and on the critical infrastructure and institutions of Uganda.
Structure of the budget statement
5. Mr. Speaker sir, the structure of the budget speech today is as follows: a) I will first present highlights of the economic and fiscal performance in 2007/08 and the outlook for financial year 2008/09.
b) I will then outline some of the emerging trends in the domestic, regional and international economy.
c) Thirdly, I will present the priorities and the strategy for expanding employment and growth opportunities during Financial Year 2008/09.
d) Finally, I will announce the proposed taxation measures and the way forward.
Economic Growth
Economic performance & forecast
6. Mr. Speaker sir, real GDP growth in Financial Year 2007/08 is estimated at 8.9 percent. This is considerably higher than the growth rate of 6.5 percent which we projected in last year's Budget speech. Mr. Speaker, to avoid doubt let me point out that the figure I am reading is the rate of growth after removing the effects of the rise in prices. The figure of 9.8 percent growth which the President cited in his State of the Nation Address was the market rate of growth and he was careful to say so. When the impact of inflation is removed from the figures it then becomes possible to compare the rates of growth of various years.
7. Mr. Speaker, the economy has grown substantially faster than we had anticipated. It is a remarkable performance of our economy given the extreme
pressures we encountered such as the floods in the east and the disruption of our export and supply routes to the sea. Next fiscal year, real GDP growth is projected to grow by 8.1 percent. We are expecting better prices for our export products especially coffee, fish and tea, as well as continued strong demand for regional exports mainly foodstuffs. We also expect continued strong expansion in manufacturing, construction, transport and communications. The medium term objective is to achieve average GDP growth rates of at least 8 percent per annum. This optimistic economic outlook is premised on the Government commitment to redirect public investment to the critical growth sectors of the economy that will lead to productivity enhancement. This includes addressing infrastructure constraints particularly transport and energy, as well as addressing productivity issues in agriculture. Sustaining a high level of growth will entail shifting resources within the Medium Term Fiscal Framework (MTFF) from largely consumption to investment.
Investment
8. Investment is certainly one of the most strategic activities of the economy. Government has always been committed to creating an attractive and enabling environment for the private sector as an engine of growth. Private investment grew strongly over Financial Year 2007/08 at 15 percent in real terms consistent with private investment growth over the last five years. As a percentage of GDP, private investment has risen from 13.7 percent in Financial Year 2001/02 to 21 percent in Financial Year 2007/08. Public investment grew by 23 percent in Financial Year 2007/08, much higher than in the last five years.
Exports
9. Mr. Speaker Sir, the growth of our export sector has continued to be very strong. Total export earnings for both goods and services are projected to increase by 15 percent to US$ 2,293 million this Financial Year, up from US$ 1,998 million last year. This is an increase of US$ 295 million in one year!
Merchandise exports excluding services are projected to increase by 15 percent to $1,520m in the 12 months to June 2008, while exports of services are projected at $ 541m in the same period. Coffee export receipts are estimated to increase by 32 percent from US$ 228.5 million in Financial Year 2006/07 to about US$ 301.6 million in Financial Year 2007/08. This increase is on account of an 11 percent increase in the coffee volumes and a 19 percent increase in the international coffee prices.
10. Export earnings from non-traditional items such as bottled water, beer, foodstuffs, cement and other items usually regarded as non-tradable grew by 32 percent in 2007/08 following a 117 percent increase in 2006/07. This is on account of increased regional trade with our neighbouring countries. Overall non-coffee export earnings are projected to increase by about 10 percent from US$1,010.8 million to US$1,116.0 million for the 12 months to June 2008. Remittances from Ugandans working abroad are estimated at US$ 1,392 million in Financial Year 2007/08 up from US$ 646 million in Financial Year 2006/07. Remittances are increasingly becoming a major source of foreign exchange earnings, and are playing a strategic role in supporting macroeconomic stability as well as private investment.
Business Environment
11. Mr. Speaker Sir, it is our objective to make Uganda a leading competitive destination for private investment in Sub-Saharan Africa by reducing the cost of doing business. Over the last year, the Government has implemented programmes to improve the business climate by implementing the following measures to reduce the cost of doing business.
- The reduction of the energy deficit through the introduction of alternative energy sources
lImproving the regulatory environment by passing a number of commercial policies and laws that are important for business operations.
These included the Tourism Act and the Biotechnology and Biosafety policy.
lImproving the efficiency of the land registry leading to reduction in the time taken to transact mortgages. The time taken to complete a search has been reduced from 12 days to 30 minutes for the sorted files, and mortgage transactions reduced to three days.
- The construction of the National Data Transmission backbone connecting Kampala, Entebbe, Jinja and Bombo.
12. In the Financial Year 2008/09, Government will continue efforts to improve the business environment by implementing the following actions:
- Enactment of additional commercial laws including the Counterfeit bill, the Mortgage bill, the Free Zones bill, the Company bill, the Insolvency bill, and amendment of the Investment Code.
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