Finance makes gains amid Covid-19

The Ministry of Finance, Planning and Economic Development plays a pivotal role in the co-ordination of development planning, mobilisation of public resources and ensuring effective accountability for the use of such resouarces for the benefit of all Ugandans. In line with the NRM 2016-2021 Manifesto, the Finance ministry is a key enabler for Uganda to achieve economic transformation.

1    Sustainable financing of Local Governments (LGs) through increase in the central government transfers to LGs and promoting the Local Economic Development (LED) programme

Performance
A total of Shs2, 352.7 billion (annually averaging at Shs588.17 billion) shall have been transferred from Central Government agencies to Local Governments by end of FY2021/22 as detailed below:
FY2017/18 –Shs493.86b 
FY2018/19 –Shs554.9b
FY 2019/20 –Shs358.2b
FY 2020/21 –Shs370b 

2    Restructure the Microfinance Support Centre to give more focus on lending to the urban poor
Performance

Following a study that was conducted on the urban ghettos, Microfinance Support Centre Ltd (MSCL) has increasingly been lending to enterprises in the urban ghettos targeting the urban poor.
In order to reach the urban poor, MSCL established satellite contacts in downtown areas where on given days, staff are deployed to respond to the needs and facilitate credit services to the urban poor

3    Target consistent economic growth of more than 7% per annum
Performance

Economic growth averaged 4.4 per cent between FY 2011/12 and FY 2016/17. The economy attained higher growth between FY 2017/18 and FY 2018/19, registering an average growth of 6.5 percent. Unfortunately, the outbreak of COVID-19 negatively impacted economic activity with real GDP growth declining to 2.9% in FY 2019/20. 

The average real GDP growth between FY 2016/17 and FY 2019/20 was 4.9% which is below the growth target of 7% as stipulated in the manifesto. 

The economy is however expected to gradually improve over the medium term with real GDP growth being projected at 3.1 percent in FY 2020/21 and to further increase to the potential of 6%-7%.
 

4. Sustain effort towards production, productivity and value-addition in order to enhance incomes, industrialisation and job-creation
Performance
Production
Government undertook the following measures and interventions to upscale production:

• Distributed improved seeds and breeding materials under Operation Wealth Creation (OWC) and National Agricultural Advisory Services (NAADs) to the District Local Governments (DLGs). These seeds include coffee, maize, beans, Cassava Cuttings, Banana suckers, Irish Potatoes, tea, Citrus, Mangoes, grafted apples, pineapples suckers, cocoa, and rice. This resulted in increased volumes in production and exports as follows:

i)    Increased coffee production from 5.7 million 60-kg bags to 7 million bags between 2017 and 2019;
ii)    Fish catches grew from 391,000 Metric Tons to 561,000 Metric Tons between 2017 and 2019 while fish export volumes have increased by 27%.
iii)    Increased Oil palm production in Kalangala in 2018 by 55% to 37,800 Tons valued at Shs. 21.4 billion compared to the 2016 production of 24,300 Tons valued at Shs. 13.4 Billion. 
iv)    Increased milk production in 2018 by 19% from 2.1 billion litres in 2015 to 2.5 billion litres in 2018. 
v)    A total of 13,800 acres of sugar cane have also been established at the Atiak Sugar Factory in Northern Uganda and more is planned when the Amuru project starts. 

• Established and rehabilitated water for production facilities such as valley dams, valley tanks, irrigation schemes, and small-scale irrigation demonstrations and water harvesting sites to increase availability of water for agricultural production at farm level. Among the irrigation schemes that were completed and commissioned include: -

i)    1,178 hectares at Doho II in Butaleja District, 480 hectares at Mubuku II in Kasese District, 1,000 hectares at Wadelai in Nebbi District, 500 hectares at Torchi in Oyam District, and 880 hectares at Ngenge in Kween District among others.

ii)    Completed construction of 50 small scale irrigation demonstrations and water harvesting sites in selected districts under 9 Zonal Agriculture Research and Development Institutes; small scale solar powered Irrigation Schemes in the districts. 

Productivity
In regard to productivity, government undertook the following:

Finalised and rolled out an e-voucher system to enable farmers access free farm-inputs supplied by OWC through a digital coupon. The distribution of seedlings and fertilizers are supplied to farmers through mobile delivery services that are directly linked to their specific names and national registration card numbers. 

• Cabinet approved the Fertilizer Policy and Strategy for Uganda in 2016. Sukulu fertilizer factory was constructed through a Public Private Partnership and launched in 2018. 
• Ministry of Defence and Veteran Affairs engaged in production activities under National Enterprise Corporation (NEC) with the following subsidiaries: NEC Katonga Farm, NEC tractors, Luweero Industries Ltd, NEC Construction, Works and Engineering Ltd, NEC Tractor Hire scheme and NEC Uzima. 

Value Addition
To promote value addition under various chains, the following interventions were undertaken:

• Passed UDC Act in 2016 and strengthened UDC to spearhead the establishment of strategic industries to enhance value addition for the various value chains for sustained growth. Progress has been made on the following:

i)    UDC partnered with Kigezi Highland Tea Limited and completed construction of two tea factories in Kabale and Kisoro. UDC has also extended financial support to tea factories in Western Uganda through a 10-year equipment lease financing for Kigezi Highland Tea Co. Ltd, Kayonza Growers Tea Factory and Mabale Growers Tea Factory Limited
ii)    Established a fruit processing in Teso (Teju-Soroti fruit factory) and Luweero;
iii)    Commissioned Yumbe mango fruit factory in January 2021; 
iv)    Dairy industry in Ankole; and
v)    Vegetable Oil industry in Kalangala. 

• Through UDC, the government acquired 32 percent stake in Atiak Sugar Factory which has a nucleus farm and an Out Growers’ Scheme that is potentially viable in job creation and agro-industrialisation. 
• UDB launched its 5-year Strategic Plan for 2018-2022 with key sector intervention strategies in agriculture, manufacturing, tourism, infrastructure, human resource capital development, mineral, oil and gas sectors. 
• Launched the Public Investment Management in Agro-Industry (PIMA) Strategy that prioritises nine commodity value chains for investment. These products include coffee, cotton, tea, cassava, maize, oil palm, fisheries, dairy and beef.  
• Launched Agriculture Insurance Scheme and low-cost agriculture machinery. The Agricultural Credit Facility and Micro Finance Support Centre have been facilitated to offer low-cost credit.

5    Introduce targeted incentives for the private sector-led value-addition and industrialisation
Performance
Introduced power subsidy of US$5 cents for manufacturers who qualify as extra-large industrial consumers. However, government intends to upscale this tariff to benefit all manufacturers in the long-term.

Streamlined tax incentives by embedding them in tax laws to promote transparency and predictability. 

To further operationalize the 2015 BUBU Policy, the Public Procurement and Disposal of Public Assets Authority (PPDA) guidelines of 2018 on reservation schemes were enacted to promote local content in public procurement. 
 

6    Address constraints that sustain high lending rates in financial institutions
Performance
1.    Government undertook reforms in the Financial Institutions (Amendment) Act, 2016 to promote the legal and regulatory efficiency in the financial sector
The following reforms have been undertaken;

i.    Agent banking to reduce on the operational costs of financial institutions, 

ii.    Islamic banking an alternative form of financing without charging interest,
 
iii.    Reforms in the Credit Reference Bureau (CRB) to prevent over indebtedness but also provide credit history about a borrower among others. 

2.    The Ministry of Finance has developed the Financial Sector Development Strategy (FSDS) to integrate, synergize and anchor all efforts for financial sector development in Uganda in a single national strategy, with a vision of “achieving a sound and integrated financial sector that supports sustainable and inclusive economic growth. One of the strategic interventions under the FSDS is addressing the high cost of finance and the measures under this broadly include: 

i.    Addressing the risk profile of borrowers and information asymmetries

ii.    Reducing operating costs for service providers
iii.    Increasing competition and strengthening consumer protection

3.    The Ministry spearheaded the development of the Tier 4 Microfinance Institutions and Moneylenders Act, 2016, for which implementation became effective in July, 2017. 
7    Increase capitalisation of public financial institutions to finance priority sectors and ease access to affordable credit
Performance

1. Government increased the capitalization of Uganda Development Bank from Shs58.3B in FY 2019/20, to Shs103B in the FY 2020/21. 
2. Government capitalization of the Microfinance Support Centre (MSC) has increased overtime, from 4.9 billion in FY 2016/17 to 341 billion in FY 2020/2021.

8    Strengthen the social security sector policy and legal frameworks to enhance national savings
Performance

• Developed the URBRA strategic Plan 2015 – 2021. The strategy aims to improve regulation, supervision, understanding and promoting development of the retirement benefits sector
• The National Social Security Fund (Amendment) Bill 2020, was passed by the Parliament. The Bill extends coverage by lifting of minimum employer mandatory eligibility criteria and enabling informal sector workers make voluntary contributions to the Fund. 
• Developed a 10 year NSSF Strategic Plan 2015 – 2025. The objective of the Strategic plan is strengthening the social security sector and legal frameworks to enhance national savings.
• Regulatory framework for extending coverage to self-employed and informal sector workers has been finalized. 

9.  Increase access to medium and long-term development finance
Performance
Government has and continues to invest in Uganda Development Bank (UDB), the Agriculture Credit Facility 

10. Enhance integration between Foreign Direct Investments (FDIs) and Local Business Firms
Performance
Policy
The following were policy frameworks have been developed to facilitate both foreign and local investors:

• To complement the BUBU Policy of 2015, government finalized the Public Procurement and Disposal of Public Assets Authority (PPDA) guidelines of 2018 on reservation schemes. 
• Developed Policy paper on development of industrial parks. Government also commenced issuing free land in industrial parks to both local and foreign investors.

Strategy

• The National Strategy for Private Sector Development (2017/18-21/22) was formulated. It is anchored on four key objectives that includes among others, fostering competitiveness of Ugandan markets and attracting increased domestic investment and FDI. 
• Cabinet approved the National Export Development Strategy 2017/18-2021/22 

Legal and regulatory

• Updated the Investment Code Act 2019 that specifies key investment areas. 
• President Museveni sent the Local Content Bill back to Parliament to ensure it is well aligned to the EAC provisions on the same. This Bill seeks to implement the BUBU Policy.

12    Promote sound public investment management systems by strengthening capacity in Local Governments and ministries for project preparation and appraisal to ensure value for money in all public investments, including putting in place a procurement policy
Performance
Government has committed a remarkable amount of resources in the Third National Development Plan (NDP III) towards public investments with the view to support the delivery of key public services, connect citizens and firms to economic opportunities
Over the last five years, the Ministry has undertaken a number of PIMS reforms aimed at improving public investment efficiency.  The key milestones include the following;

• Standardised project preparation and appraisal. The Ministry developed standard methodologies and tools to guide key stakeholders involved in the identification, appraisal, selection, implementation, monitoring and evaluation of public investment projects. 
• Developed the Integrated Bank of Projects (IBP)
  The Ministry also developed an online central repository of information on all public investments. The system, tracks information on all projects right from identification, appraisal, selection, implementation, monitoring and evaluation.  
• Developed the draft National Investment Management (NIMP) policy
  The Ministry developed the draft policy to provide overall guidance for the key PIMS processes, methodologies, roles and responsibility of the various stakeholders in all the stages of the project cycle. 
• Capacity building on Public Investment Management System (PIMS) Government has also undertaken capacity building trainings for Officers involved in the various stages of the PIM. These trainings have targeted officials in the planning departments/units, monitoring and evaluation and senior officers in administration of MDA’s. Over 500 Officers have cumulatively been trained. 

13    Promote insurance penetration and awareness in the country
Performance

1. Developed 17 sets of Insurance Act regulations. Seven sets have been gazetted. 
2. Developed National Insurance Policy (NIP) for Uganda with the main purpose of enabling all Ugandans to access affordable insurance for sustainable incomes and livelihoods.
3. Established the Uganda Agriculture Insurance Scheme (UAIS). 
4. Developed the National Health Insurance Scheme (NHIS) Bill
5. Motor Third Party is now payable using a digital platform

14    Strengthen the capital markets for resource mobilisation
Performance

• Development of the Capital Market Authority Amendment Act regulations. As part of the process of having a facilitative regulatory frame wok that drives issuance and innovation. 
• Development and Launch Capital Markets Development Master Plan. 
• Sensitisation of potential issuers. During the period under review, public education efforts continued aimed at creating awareness about the capital markets among the public to drive market activities. A cumulative total of 66,599 individuals were reached. 

15    Maintenance of macro-economic stability through continued pursuance of prudent monetary policies that support growth and low inflation
Performance
Macroeconomic stability
Government through Bank of Uganda (BoU) continued to implement the inflation targeting monetary policy framework and succeeded in keeping inflation low and stable, consistent with our medium-term target of 5%. 

Inflation 
Average annual headline inflation for the period of 2016 to 2020 remained low at 4.3%. This was due to prudent macroeconomic policy adopted by government, as well as increased supply of agricultural produce to the market which brought down food prices. 
17. Increase resource mobilisation and access to credit by merging Post Bank and Pride Micro-Finance limited into a recapitalised fully-fledged commercial bank and recapitalise Housing Finance Bank to enable it play its core role in financing mortgages
Performance
Post Bank Uganda and Pride Micro Finance Limited continue to effectively operate independently serving their respective client Base with their respective models of operation.

18. Increase Microfinance Fund from sh44b annually to sh180b. 
Performance
 Government started implementation of the Presidential Initiative on Wealth and Job Creation (EMYOOGA) in FY 2019/20 with the overall objective of facilitating socio-economic transformation of households under subsistence production to market-oriented production.

The beneficiary categories are 18 and they include: Boda boda riders, women entrepreneurs, carpenters, saloon operators, taxi drivers, restaurant owners, welders, market vendors, youth leaders, Persons with Disabilities, mechanics, tailors, journalists, performing artists, veterans, fishermen and elected local leaders. 

19. Enforcement of critical reforms and innovations, including capitalisation of institutions to match the delivery of Operation Wealth Creation and Vision 2040
Performance
Government has increased capitalization of MSC over the years as follows:
FY 2016/17 – 4.29bn
FY 2017/18 – 4.27bn
FY 2018/19 – 19.29bn
FY 2019/20 – 79.47bn (30m for EMYOOGA)
FY 2020/21 - 341bn (260bn for EMYOOGA)
20    Continue investment in infrastructures such as roads, railways, power generation and transmission, which will bring down the cost of doing business in Uganda
Performance

• In line with the budget performance for FY 2016/17 to FY 2020/21;
• Under the Energy Sector, Shs8.909 trillion was released against a cumulative approved budget of Shs10.476 trillion 
• Under the Works and Transport Sector, Shs22.549 trillion was released against the budgeted Shs28.216 trillion over the 5 year period. This accounts for 78.6% budget outturn over the period. 

22    Operationalise the legal requirement for accountability for non-tax revenue collected by universities and other tertiary institutions
Performance
All revenue by Universities and Other Tertiary Institutions are now remitted to the Consolidated Fund and spending is done on the Integrated Financial Management System (IFMS) in line with the PFM Act 2015
23    Recapitalise Housing Finance Bank to enable the bank to offer affordable mortgages
Performance
In FY 2019/20, Government capitalized the Housing Finance Bank (U) Ltd with Shs30n for mortgage improvement.

This story is sponsored by the Government of Uganda.