AGRICULTURE BUDGET BREAKDOWN FOR THE FISCAL YEAR 2023/2024

 

 

AGROREF UGANDA

“BREAKING DOWN THE NATIONAL BUDGET OF THE YEAR 2023/2024 FOR A SMALL HOLDER-FARMER”

In the year 2023/2024, Uganda planned to spend Shs. 52.7 trillion

Agriculture was allocated shs 2.2 Trillon

At the 2nd Sitting of the 1st Meeting of the 3rd Session of the 11th Parliament of Uganda at Kololo Independence Grounds. Thursday, 15th June 2023, the Minister of Finance Honorable Matia Kashaija on behalf of the President delivered the Budget Speech of the Financial Year 2023/2024.

This year’s budget Theme is: Full Monetisation of Uganda’s Economy through Commercial Agriculture, Industrialisation, Expanding and Broadening Services, Digital Transformation and Market Access

HIGHLIGHTS OF THE BUDGET SPEECH

AgroRef Uganda recognizes the fact that the budgeting process is very technical and requires not only knowledge of the step by step process but at the same time, commitment to follow the whole process. It is for this same reason, that AgroRef has taken an initiative to pick a few highlights from the budget of the year 2023/2024 and share the figures with our stakeholders who may not have time to read the whole budget document.

RECENT ECONOMIC PERFORMANCE (This looks at the performance of the economy especially of the financial year coming to an end, in this case, 2022/2023)

The size of the economy is estimated at Shs. 184.3 Trillion, compared to Shs. 162.9 Trillion last years. This is equivalent to US$ 49.4 billion. This means that from the financial year of 2021-2022 and the year 2022/2023, the economy has grown by 21.4Trillion shillings

Agriculture has also performed strongly growing by 5.0%, despite the dry spell in the first quarter of the financial year. In particular, food crops, livestock and fishing performed well.

Inflation has significantly decreased since October 2022 when it peaked at 10.7%. Last month, the pace at which prices were rising slowed down to 6.2%. (Inflation is the general increase in the prices of goods and services in a given period of time)

With respect to the cost of money, commercial bank lending interest rates have increased slightly to 19.3% in April 2023 from 18.8% in April 2022. This was mainly caused by the increase in the Central Bank Rate to 10% since October 2022, in order to fight inflation. (This means that if you are going to borrow money in the bank, you will pay an interest (amagoba) of 19.3%. For example, if you borrow shs 1m, at the end of the year, you pay interest of 193,000shs and if you add it to the money borrowed, you pay a total of 1,193,000shs

This is very expensive for our small-holder farmers as loans become very expensive. What will the government do in 2023/2024 to reduce this burden?

To reduce the cost of money for the private sector, Government has taken a deliberate policy to reduce domestic borrowing which is a major driver of commercial bank lending rates. In addition, Government has also provided long-term and affordable capital through the Uganda Development Bank, Emyooga, the Agricultural Credit Facility and the Small Business Recovery Fund to large, medium, small and micro enterprises. A total of Shs 2.77 trillion has been provided to date

In the year 2022/2023, was there a growth in lending by 3.3%. This underscores the ongoing Government interventions to ensure that agriculture access adequate and affordable financing on a sustainable basis

It was also stated that by April 2023, Uganda’s exports of merchandise goods amounted to US$ 4.2 billion compared to US$ 3.1 billion over the same period over the previous financial year. This represents a 35.5% increase, mainly driven by an increase in exports of gold, coffee, fish, sugar, beans, maize and light manufactured products to regional markets.

By November 2022 National Labour Force survey puts the size of the Labor force at 23.5 million people. Out of these, 10 million were employed, representing 42% employment rate. Another 8.2 million, equivalent to 35%, were engaged in subsistence agriculture and 9 out of every 10 employed Ugandans were working in the informal sector.

Fiscal Performance

The fiscal deficit is estimated at 5.1% of GDP this financial year, lower than the 7.4% last financial year. This is due to a reduction in both recurrent and development expenditure and increased grants. The fiscal deficit has been financed through domestic borrowing and external loans.

 

URA collections amounted to Shs 21.7 Trillion by May 2023 and are projected to be Shs 25.6 Trillion by close of June 2023.

What Is a Fiscal Deficit?

A fiscal deficit is a shortfall in a government's income compared with its spending. The government that has a fiscal deficit is spending beyond its means.

ECONOMIC GROWTH STRATEGY AND OUTLOOK

The economic growth strategy underlying the budget for the financial year 2023/2024 and the medium term includes:

1.      Effective implementation of the various export strategies and enhancing access to global and regional markets;

2.      Support for the private sector by reducing the cost of doing business through, including Development of small scale solar-powered irrigation schemes to address climate change and ensure food security

3.      Provision of affordable credit for micro and small enterprises and lowincome groups through the Small Business Recovery Fund, Emyooga and Microfinance Support Centre; and funding for medium to large enterprises through the Uganda Development Bank.

4.      Provision of quality seedlings, pesticides, fertilizers, storage and marketing in the agro-industrialization value chain in order to increase agricultural production and productivity;

5.      Mitigation of the negative impact of climate change on the economy and livelihoods;

FINANCIAL YEAR 2023/2024 BUDGET PRIORITIES

The budget for the financial year 2023/2024 is aimed at achieving among others;

         I.        Boosting household incomes and micro enterprises;

       II.        Commercializing agriculture to enhance production and productivity and improve competitiveness of agricultural products;   Supporting private sector growth;

      III.        Boosting Household Incomes and Micro Enterprises

DID YOU KNOW, THAT, since the launch of the PDM in February 2022, a total of Shs. 590.2 billion has been disbursed to all the 10,459 parishes nationwide, translating into Shs. 50 million per parish. The balance will be disbursed by end this month. In the financial year that commenced on 1^st July 2023, the Parish Development Model has been allocated Shs. 1.1 Trillion.

The Emyooga initiative will further boost household incomes and micro enterprises at parish and sub-county levels by directly funding parish and sub-county level enterprise groups. By March 2023, seed capital worth Shs. 249 billion had been disbursed to 6,721 constituency-based Emyooga SACCOs. Over 600,000 individuals had successfully applied for credit from their Parish-based Associations. Nearly half (46%) of these were women, youth (25%) and PWDs (4%)

In the financial year of 2023/2024, Shs. 100 billion has been allocated to the Emyooga initiative.

COMMERCIALIZING AGRICULTURE

In the year 2023/2024, additional funding amounting to Shs. 110 billion was provided for food security interventions in Government institutions with farms including the UPDF, Uganda Prisons, Ministry of Agriculture, the National Agricultural Research Organisation and the National Agricultural Genetics Resource Center and Databank.

The priority actions to commercialize agriculture next financial year include the following

1.      Support agricultural research for the development of climate resilient crops and animal species

2.      Promote environmental conservation, restoration and protection of degraded water catchment areas and forest cover;

3.      Construct small, medium and large-scale irrigation schemes in water stressed areas. These will include the construction of earth dams at Unyama in Gulu, Namalu in Nakapiripirit, Sipi in Bulambuli, Kabuyanda in Isingiro, among others;

4.      Implement large-scale mechanization and irrigation; and

5.      Improve farmer mobilization, education and partnerships with large commercial farmers for the production of strategic commodities, such as coffee maize and tea to meet national and international demand.

In the financial year 2023/2024, Shs. 2.2 trillion, has been allocated for food security, irrigation, climate change mitigation, value chain development, agricultural research and disease control, among others.

 

SMALL AND MEDIUM ENTERPRISE DEVELOPMENT

In this financial year, Small, Medium Enterprise (SMEs) in the manufacturing and export sectors will be supported by the US$ 200 million World Bank Investment for Industrial Transformation and Employment (INVITE) Project that will provide grants and concessional credit to qualifying SMEs. It should be noted that an allocation of Shs 209.3 billion has been provided through the INVITE Project for next financial year.

In this financial year year, interventions that build human capital have been allocated Shs. 9.6 trillion. In addition, the Government together with the World Bank are implementing the US$ 500 million Uganda Intergovernmental Fiscal Transfer programme to construct health centers III and IVs, seed secondary schools, and micro-scale irrigation facilities in Local Governments that do not have these facilities.

In this year, an allocation of Shs. 4.5 trillion, representing 13.3% of the total budget, has been budgeted for road maintenance and construction, railway development and rehabilitation, water and air transport development. Of particular significance, an allocation of Shs I billion has been provided to each District, City and Municipality for road grading, murram and compacting. In total, Shs 176 billion has been allocated for this purpose.

A total Shs. 1.3 trillion has been allocated for Electricity interventions.

Another Shs. 192 billion has been provided to accelerate digital transformation

A total Shs.447 billion to fast track the development of petroleum resources next financial year.

In this financial year, the government has enhanced the salaries for scientists by Shs 508 billion.  The government further provided Shs. 257 billion to support science, innovation and technology development.

MAINTAINING SECURITY, GOOD GOVERNANCE AND THE RULE OF LAW

The security, governance, the legislature and the administration of justice have been allocated, Shs. 9.1 trillion next financial year, up from Shs. 8.1 trillion in the year 2022/2023.

In order to live within our means, the government has reduced consumptive expenditure. During this year, there will be no purchase of new vehicles for political leaders and public officers except for hospital ambulances, medical supplies or distribution, agricultural extension services, security and revenue mobilization. Travel abroad has also been restricted to statutory functions and for critical legal and resource mobilization functions.

 

DOMESTIC REVENUE MOBILIZATION FOR FY 2023/24

Uganda Revenue Authority (URA) has projected to collect domestic revenues for FY 2023/24 ar to a tune of Shs 29.7 Trillion, of which Shs 27.4 Trillion will be tax revenue and Shs. 2.3 billion will be Non-Tax Revenue.

PUBLIC DEBT

Uganda’s public debt stood at Shs. 80.8 trillion, equivalent to US$ 21.7 Billion as at end December 2022. Of this amount, external debt (money borrowed outside Uganda) was Shs 47.9 trillion equivalent to US$ 12.9 billion while domestic debt (Domestic debt is the money the government borrows inside the country) was Shs 33.0 trillion equivalent to US$ 8.9 billion.

Public debt is projected at Shs. 88.9 trillion, equivalent to US$ 23.7 billion by 30th June 2023 (This means that Uganda will borrow an extra SHS 8.1Trillion in the financial year 2023/2024 to meet its expenses)

RESOURCE ENVELOPE FOR FINANCIAL YEAR 2023/2024

The resource envelope for Financial Year 2023/2024 (A Resource envelope is the money the government has planned to spend a financial year)

In the year 2023/2024, Uganda plans to spend Shs. 52.7 trillion

The government hopes that this money will come from the following sources;

1.      URA is expected to collect Shs. 29.7 trillion of which Shs. 27.4 trillion will be tax revenue and Shs. 2.3 trillion will be Non-Tax Revenue.

2.      The government will borrow inside the country Shs. 3.2 trillion.

3.      Budget support accounts for Shs. 2.8 trillion (Budget support refers to money that is not borrowed but is given to the government from development partners and other countries)

4.      External financing for projects amounts to Shs. 8.3 trillion; of which Shs. 3.01 trillion is from grants, and Shs. 5.3 trillion is from loans.

5.      Appropriation in Aid, collected by Local Governments amounts to Shs.  287 billion.

6.      Domestic Debt Refinancing will amount to Shs 8.4 trillion. (This means that out of the total of 52.7 Trillion the government has planned to spend in the year 2023/2024, 8.4trillions will used to pay interest on loans already borrowed by government; ONLY INTEREST)

7.     Other financing Shs. 229.0 billion

 

 

ABOUT AGROREF UGANDA

Agriculture Reform (AgroRef) Uganda is a Non-Governmental and Not-for -Profit Organization focusing on advancing agricultural policy reforms, budget advocacy and supporting building of systems, fostering values of equity, accountability, transparency and sustainability of organisations especially small holder farmer organizations including but not limited to agricultural cooperatives using a Human Rights Based Approach.

Our Mission

To drive agricultural policy reforms especially for agricultural cooperatives prioritizing inclusivity and sustainability, driving a Human Rights Approach coupled with strengthening management and governance of farmer led and focused organizations.

Our Vision

We aim to create a world where farming communities flourish, and food security is a reality for all.

 

 

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