The Budget - Where to Look for the Real Story

7/28/2019 The Budget - Where to Look for the Real Story

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The Budget

Where to look for the real story

www.pwc.com

5 July 2012


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Agenda

1. The Budget is more than just a statement

2. Definitions and explanations of some the budget terminology

3. Some of the main provisions of the law relating to the budget

4. The expectations of the business community from the budget5. How the government responded to these needs

6. Overall implication of the budget on business

7. Where reporters should look for the real story

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The budget its more than just a statement

The Budget, these days, is not merely a statement of governmentreceipts and expenditure, but it has got a functional role to play

Budget is a fiscal tool in the hands of the government which iseffectively used for the accomplishment of various socio-economicobjectives.

Through the budget, the government decides funding for every aspectof the economy, where the money will come from, and how themoney will be spent.

It is a social contract between the elected government and the

electorate through which the government makes promises to thenation.

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Through the budget the government sets thecountrys economic agenda

The most important aspect of the government budget to business arethe government policies relating to the overall pace of economicactivity, economic development, employment, and price stability.

By adjusting spending and tax rates (fiscal policy) or managing the

moneysupplyand controlling the use of credit (monetary policy), thegovernment influences economic activity in the country whichultimately affects businesses

Government recognises that the private sector in Uganda is theengine as well as driver of economic growth

As a result of this the proposed public expenditure proposals as wellas proposed changes in laws and regulations contained in the budgetare mainly aimed supporting private sector growth and reducing thecost of doing business in Uganda

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http://economics.about.com/od/supply/http://economics.about.com/od/supply/


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The economy grew by only 3.2% the lowest rate ofgrowth in the last ten years!

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Budget terminology and definitions

Gross Domestic Product (GDP) - The monetary value of all thefinished goods and services produced within a country's borders ina specific time period.

It includes all of private and public consumption, governmentoutlays, investments and exports less imports that occur within adefined territory

Economic growth is the increase in the capacity of an economyto produce goods and services, compared from one period of time toanother.

The growth of an economy is thought of not only as an increase inproductive capacity but also as an improvement in the quality of lifeto the people of that economy

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Economic growth is not the same as as economicdevelopment

Economic development - generally refers to the sustained,concerted actions ofpolicymakers and communities that promotethe standard of living and economic health of a specific area.

It is the quantitative and qualitative changes in the economy

Economic development differs from economic growth in thatwhereas economic development is a policy intervention endeavourwith aims of economic and social well-being of people, economicgrowth is a phenomenon ofmarketproductivityand rise in GDP

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http://en.wikipedia.org/wiki/Policymakershttp://en.wikipedia.org/wiki/Communityhttp://en.wikipedia.org/wiki/Standard_of_livinghttp://en.wikipedia.org/wiki/Economic_expansionhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Public_policyhttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Productivityhttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/Productivityhttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Public_policyhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_expansionhttp://en.wikipedia.org/wiki/Standard_of_livinghttp://en.wikipedia.org/wiki/Communityhttp://en.wikipedia.org/wiki/Policymakers


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Monetary and fiscal policy, fiscal deficit andgovernment debt

Monetary policy - is the process by which the Bank of Ugandacontrols the supply of money, often targeting a rate ofinterest forthe purpose of promoting economic growth and price stability andinflation

Fiscal policy - is the use of government revenue collection(taxation) and expenditure (spending) to influence the economy.

The two main instruments of fiscal policy are government taxationand expenditure.

Fiscal deficit - arises when a government's total expenditures

exceed the revenue that it generates (excluding money fromborrowings).

Government debt arises from an accumulation of yearly deficits

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http://en.wikipedia.org/wiki/Supply_of_moneyhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Supply_of_money


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Some of the main provisions of the Constitutionrelating to the budget, taxation and borrowing

Article 152 - gives Parliament powers to impose tax under theauthority of an Act of Parliament

Article 153 requires all monies received for the purpose of, or onbehalf of , or in the trust of the government to be deposited in the

government consolidated fund Article 154 no monies shall be withdrawn from the consolidated

fund unless it is to meet expenditure charged on the fund by theConstitution or an Act of Parliament

Article 155 - requires the President to present to Parliament

estimates of revenues and expenditure of the government for thenext financial year

Article 159 - gives Parliament power to authorise the governmentto borrow from any source under an Act of Parliament

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Section 3 requires the Minister to develop and implement a macroeconomic and development policy for the government

Section 9 consolidated fund and special funds

Section 10 the need to set up contingencies fund for emergenciesalso referred to in Section 157 of the Constitution

Section 16 - Supplementary budgets must be laid before Parliamentthrough a Supplementary Appropriations Bill

Section 20 authority to raise government loans is vested solely in

the Minister of Finance Sections 27 authority to receive grants on behalf of the government

is vested in the Minister of Finance

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Some of the main provisions of the Public Financeand Accountability Act relating to the budget

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The business communitys priority issues as perthe budget proposal submissions made by the PSF

1. Prioritise investments in infrastructure development to facilitatetrade, improve competitiveness and lower the cost of doingbusiness in the country

2. Invest in social services mainly education and health to improve the

skills development and access to medical services

3. Improve the legal and regulatory framework for doing business andexpedite the enacting of the many pending bills in Parliament

4. Improve service delivery and efficiency in the public sector, with

particular focus on reducing wastage, eliminating corruption andimproving value for money

5. Policies aimed at encouraging rural development andindustrialisation, access to credit for the private sector so as toachieve inclusive economic development

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Nearly 60% of the total budget has been allocatedto the six key sectors namely..

.

Source: Ministers Budget Speech

Works and transport

Health

Education

Agriculture

Water and environment

Power and energy

Public sector management

Others

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Business concern poor roads are the majorreason for high cost of ding business in Uganda

Budget Implication on Business and the Role of Public Relations13

05 July 2012

Businesses concern poor roads are making businesses veryuncompetitive, thereby increasing the cost of doing business

Governments response - 15% of the total budget was allocated toroad works and transport to finance 16 major roads construction andrehabilitation projects totalling > 1,500 kms

New road projects planned include the Kampala EntebbeExpressway, Mbarara bypass, dualing the Northern Bypass, etc

Also major bridges construction works are planned including thenew Nile bridge in Jinja and 13 other new bridges in North and NorthEastern Uganda

Major focus will be on rehabilitation and maintenance of roads inagricultural areas and export routes and 142 new units of roadmaintenance have been acquired for this work


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Business concern the education system is notaddressing the needs of the job market

There is a major need for specific skills and competencies in the jobmarket and the education system is not addressing this need

Governments response education system will change to focusmore on quality and relevance of the education and vocational skills

development Objective will be to equip school leavers with appropriate skills for

the job market and employment creation under the BTVET

Government also promised to enhance quality and relevance ofeducation by improving effectiveness and efficiency in the sector

Youth Venture Capital Fund to continue into FY2012/13 with anadditional Shs 3.25b

A new Shs 16b Graduate Venture Capital Fund also set up to supportgraduates with bankable projects


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Business concern unreliable power supply + thehigh cost of power = reduced industrial pdctcn

The industrial sector contracted by nearly 7% due to unreliableelectricity supply and increase in the power tariffs

Governments response Bujagali Hydro Power Project will be fullycommissioned by end of July 2012 (250 MW)

Construction of Karuma Hydro Power Project to commence this year(600 MW)

Complete preliminary designs for Ayago (600 MW) and Isimba (140MW) Hydro Power Projects

Plans to construct several Mini Hydro Power Projects totalling 125MW

Huge investments planned in power transmission lines totallingnearly 800 kms in length

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Business concern theres an urgent need forregulatory reforms for private sector development

Reduction of regulatory burden on business is essential to reduce thecost of doing business in Uganda

Governments response - a comprehensive business licensing reformsunderway many of the existing licences either to be abolished,

amalgamated, or streamlined

A One Stop Centre to be established at the UIA to deal with allapprovals, licenses, and facilitation of investors

An electronic license registry to be set up, business registrationprocedures to be simplified and done online, land registrycountrywide to be computerised, and so on.

Electronic cargo tracking system to be introduced which willeliminate the need for road blocks on transit routes

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Business concern limited resources should beprioritised to production and less consumption

Governments response allocating nearly 60% of the budget to sixpriority sectors of the economy for maximum effectiveness

A commitment to make public sector efficiency and effectiveness apriority in FY2012/13

Strengthening of the performance and contract management acrossthe six priority sectors of the economy

Ring fencing budget allocations and committing to provide quarterlyprogress reports on budget implementation to cabinet for closeroversight of performance

Defining three KPI by which public expenditure is to be appraised,and a commitment to ensuring value for money for all public goodsand services



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Business concern need clear focus on agricultureto improve production and productivity

Government acknowledged that - Agriculture holds the key toUgandas economic transformation, job and wealth creation

Promised specific intervention to help unlock the countrysagriculture potential will include

a) Provision of improved seeds and farm inputs

b) Supporting the seed industry in improved breeding

c) Irrigation schemes to ensure all year round crop production

Focus will be on supporting farmers to produce and export stable

food crops that have a sure market in the region

Government will adopt a commodity based approach focusing 110commodities to complement the agricultural zoning strategy

Post Budget analysis breakfast 1815 June 2012


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Business concern an urgent need to widen thetax base and also reduce tax burden on business

Governments response the narrow tax base provides very limitedoptions for new tax incentives

To ease burden on lower paid workers PAYE threshold to increasefrom Shs 130,000 to Shs 235,000 a month

To finance the increase in the PAYE threshold, higher paid workersto be taxed at a rate of 40% on incomes over Shs 10 million a month

VAT on the supply of water to be reinstated

Withholding tax on interest income derived from treasury bill andother government securities to go up from 15% to 20%

Tax exemption on income derived from agro processing activities hasbeen abolished and replaced with accelerated capital deductions

Number of designated withholding agents now increased to captuaremore taxpayers into the tax net



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In conclusion, the budget was good for business,this is because it..

It focus and appropriately allocated the limited resources to the keysectors of the economy that greatly affect business in Uganda

Committed government to a tax policy that promotes investment, asopposed to one that is aimed at simply maximising tax revenue

Promised that governments resources will only be used to boost theproductive capacity of the economy,

Also promised public sector efficiency and effectiveness in servicedelivery,

Committed to promoting inclusive and sustainable development,eliminate inefficiency and wastage, provide the necessary policyand legal framework, and

Most importantly promised to fight corruption, reduce the cost ofdoing business and promote businesses competiveness



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A very responsive budget to the demands of privatesector but as always implementation will be the

issue

2105 July 2012Budget Implication on Business and the Role of Public Relations

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2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13

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78.6 78.8 77.880

The Budget - Where to Look for the Real Story

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Transcript of The Budget - Where to Look for the Real Story