Hon. Matia Kasaija, Minister for Finance, Planning, and Economic Development reading the national budget for FY2022/23 in June 2022. Photo by The Observer

Does the FY2022/23 budget address Uganda's poverty and inequality concerns?

Ugandans recently received the FY 2022/23 budget. This year's budget is hinged on a theme: "Full Monetization of Uganda's Economy through Commercial Agriculture, Industrialization, Expanding and Broadening Services, Digital Transformation and Market Acces. The budget is well aligned with the country's vision 2040 that strives to transform Ugandan Society from a Peasant to a Modern and Prosperous Country within 30 years.

The budget further recognizes that Uganda is majorly an Agri-based economy, with more than 70% of its population engaged in agriculture directly and indirectly. This year’s budget , however was read amidst fundamental economic challenges some of which have a direct corelation with the negative consequences of covid-19 and other external factors including the ongoing Russia -Ukraine war.

For stance, prices of commodities are high, and basic necessities of life like food are unaffordable, especially for the poor and vulnerable. Globally, national budgets are important tools that can be used in addressing challenges that affect their citizenry and further reduce the inequality gaps through influencing income distribution.

Uganda's FY 2022/23 National budget aims at addressing three major objectives namely ; i) Addressing the health and economic challenges presented by COVID 19 for the economy to recover back to pre-pandemic levels ii) maintaining investments in the fundamentals areas of security and macro-economic stability, as key foundations for recovery, growth and socioeconomic infrastructure and iii) Fostering faster socio-economic transformation, targeting lifting the 39% of households stuck in the subsistence economy to the money economy.

To achieve these objectives the government highlighted eight key priorities that includ, 1) Enhancement of security, the rule of law and fighting corruption, 2) Sustaining economic recovery, 3)Implementation of the Parish Development Model to create wealth and jobs, 4) Promotion of agro-industrialization, standards and market entry, 5) Commercialization of oil and gas, 6) Enhancement of transport, energy and ICT infrastructure 7) Enhancing human capital development, science, innovation and knowledge transfer and lastly Enhancing public sector effectiveness and efficiency.

While making the budget speech , the Minister informed the country that Uganda had attained the middle income status. Attaining lower and consequently upper midle income status has been a long-term aspiration of Uganda as is fronted in the country's vision 2040.

Despite this announcement, growth is co-existing with a lot of inequalities characterised with high poverty levels, low literacy levels, low life expcatancy and low access to social protection. This places Uganda at a lower rank using the globally recognized scale of the Human Development index and Commitment to Reducing Inequality (CRI) Index.

With nearly three-quarters of Ugandans categorized as poor[1], per the international poverty threshold of $3.20 per day, a strategy to commercialize agriculture and industrialization is crucial. This is because, using the backward and forward linkages, more people can be employed, especially the youth, who form the biggest proportion of Uganda's population.

Selected allocation to the key poverty and inequaity reducing sectors

According to the Oxfam Working for the many: public services fights inequality study 2014, poverty and inequality can be reduced through deliberate efforts to fund specific sectors like agriculture which employs 68% of the population. Therefore investment in key public social services such as Health, Education and Social protection is vital if we are to address poverty and economic inequality.

Evidence provides that poverty and inequality can be reduced through deliberate efforts to fund specific sectors. Sectors which employ the majority of poor such as agriculture, and others that enhances people’s human capital such as education and health are key. According to Oxfam’s study on public services and inequality done in 2014, health and education are great weapons to address poverty and economic inequlaity. Below is a summary of the allocations to the three sectors by comparing the current ( FY 2022/23) allocations to the last financial year( 2020/21). Source: MoFPED, 2022

Education Sector: 3675.6 BN (8.21%) in FY21/22 and 4140BN (8.60%) in FY 22/23

Health Sector: 1988.2 BN (4.44%) in FY21/22 3722BN (7.73%) in FY 22/23

Agriculture Sector: 914.8BN (2.04%) in FY21/22 564.39BN (1.17%) in FY 22/23

Total Budget: 44778.8 BN in FY21/2248130.68BN in FY 22/23

Even though the three sectors are instrumental in reducing poverty and inequality, the current allocations are still low and below 10% of the total budgetary share. Among the three sectors, agriculture for years has been underfunded yet employs the greatest percentage of the population. Fininacing for helath is still low and unpredictable, below the country's international commitments such as Abuja declaration ie 15% health sectorial allocation as percentage of the national budgt and the needed amount if a country is to achieve Universal Health Coverage. The education sector is still underfunded to provide the needed quality of education to the students as per the President Kenyatta’s Declaration requiring countries to allocate atleast 20% budget to eduction sector as a percentage of the national budget. Low government spending, especially on health, hurts citizens the most and results in high out-of-pocket spending and an inequitable health system that only guarantee access to those who are able to pay.

Recommendations

  1. Implement interventions that have higher multiplier effects and dependencies, especially those that directly linked to addressing household poverty and food security. Whereas the Parish Development Model is fronted as a "magic bullet" to achieving faster social-economic transformation, the criteria on the resources allocated to parishes need to be revised. Providing UGX 17 million to each subject irrespective of population figures is not feasible. The allocation should therefore commensurate to the number of people in a given subcounty
  2. Further, strategies to raise/mobilize more revenue need to be implemented. For stance, a follow-up on the Double Taxation Agreements (DTA) Uganda has signed with various countries such as Mauritius, France, Netherlands, United Kingdom, Italy, South Africa, among others.[2] These not only constrain the country's potential to raise the needed revenue but also undermines the country's fiscal sovereignty. Renegotiation of these agreements, just as other countries such as Rwanda, and Ghana, among others, have done, is necessary[3]. The availability of enough resources increases the government fiscal space to finance the essential poverty and inequity-reducing sectors rather than borrowing from external agencies and institutions.
  3. Addressing the increasing commodity prices through providing relief food to the most affected. This should however follow a feasible strategy that can ensure that vulnerables solely benefit Given the fact that increasing prices are attributed to imported inflation. Strategies aimed to import subsitution, especially of the key inputs, are necessary. This should be in addition to fast-track the refill of oil reserves that can accommodate oil supply deficiencies.

Overall, efforts aimed at improving the socioeconomic status of Ugandans is essential, and a budget is a great tool Uganda can use to achieve this goal.

 

[1] National poverty rate was estimated at 21.4% in 2017-UBOS, 2018

[2] Finalize the renegotiations of the DAT between Uganda & Netherland

Need one on tax expenditure Governance

[3] https://uganda.actionaid.org/publications/2014/double-taxation-treaties-...