Uganda eyes recovery from coronavirus with Sh1.3tr spending plan

Uganda last Thursday unveiled a 45-trillion-shilling ($12.3 billion; Sh1.3 trillion) fiscal budget that will revive the country’s economy after facing shocks from the Covid-19 pandemic, flooding and destructive desert locusts. 

Matia Kasaija, Minister of Finance, presented the 2020/21 financial year budget before Parliament in a ceremony broadcast live on television. 

The new budget, presented under the theme “Stimulating the Economy to safeguard Livelihoods, Jobs, Businesses and Industrial Recovery,” reflects a $1.3 billion (Sh137.8 billion) increase from the previous year. 

Minister Kasaija said 56.2 per cent of the budget funding would come from domestic resources, while the rest will come from both local and foreign borrowing, as well as appropriation in budget aid. 

“The focus of the budget for the next financial year places emphasis on supporting livelihoods and the recovery of business enterprises, without losing focus on our long-term development initiatives,” the minister said.

“To this end, the government will support the private sector to scale up production, and sustain and increase employment,” he added. 

Import substitution

The minister unveiled a stimulus package that will help small, medium and large enterprises withstand the effects of the Covid-19 pandemic.

Enterprises, according to the minister, will be allowed to delay payment of corporation tax or presumptive tax due between April and June 2020.

For hard-hit sectors like tourism, manufacturing, and horticulture, payment can be deferred until September 2020. 

The government has also introduced low-interest loans that will be accessed through the Uganda Development Bank for investors in the manufacturing sector as well as commercial agriculture. 

Minister Kasaija said the government has increased import tax on goods that can be locally manufactured, in a bid to promote import substitution. 

Instead of relying on international supply, he said the scarcity of goods created by the Covid-19 pandemic has shown that local manufacturers can be empowered to step in.

Refined sugar 

The minister announced a 60 per cent increase in import duty on agricultural products and a 35 per cent increase on others, in a bid to boost consumption of locally made products. 

“We have been importing refined industrial sugar, yet we are a surplus producer of sugar. We have agreed with sugar manufacturers to produce refined industrial sugar locally and we shall protect them from imports,” Kasaija said. 

The minister also announced other tax incentives to further bolster local manufacturing.

He said supply of agricultural equipment had been exempted from Value Added Tax (VAT), while supplies of processed milk would also be VAT exempt to enhance the price competitiveness of milk produced in the country.

Kasaija said in order to respond effectively in fighting epidemics or pandemics, the government scrapped customs tax on supplies for diagnosis, prevention, treatment and management.