Prime
State of the Nation Address: Will it really address the economy?
President Museveni. PHOTO/ PPU
What you need to know:
- Among the raft of taxes that you will have to deal with in the next financial year, about three weeks away, are taxes on mineral water, bottled water, and other water purposely for drinking with a levy of 10 percent or Shs 75 per liter, whichever is higher.
- The President in his address last year, promised to ensure low inflation as a foundation for economic stability, establish more manufacturing plants, and intensify implementation of the Parish Development Model.
- Uganda's inflation, according to the Bank of Uganda, remains among the region's lowest with an average of 3.2 percent in the twelve months to May 2024.
In the 2023 State of the Nation Address, President Museveni said over the next five years, which includes this financial year 2024/2025 – ending in the next three weeks, that the economy will grow faster than the projected average growth rate of between 6.5 to 7 percent per year anticipated by the Ministry of Finance.
Although the economy remains resilient, recent economic indicators have been mixed, according to the Monetary Policy Statement for June 2024.
READ: Museveni's 2023 State of the Nation address - PDF
According to the Bank of Uganda, economic growth, meaning an increase in the amount of goods and services produced over some time by the population, hovered in the range of 6 percent in FY 2023/24 which is consistent with the Ministry of Finance projection, but not the Head of State assertion of more than 7 percent growth in average.
“Indeed, the composite index of economic activity suggests a slowdown, with growth at 0.9 percent quarter-on-quarter and 5.3 percent year-on-year in the quarter to April 2024. Nevertheless, economic growth for FY2024/25 is projected between 6 percent and 6.5 percent rising above 7 percent in subsequent years,” reads in part the Monetary Policy Statement for June 2024 published yesterday.
Inflation
On inflation, the President in his address last year, promised to ensure low inflation as a foundation for economic stability, establish more manufacturing plants, and intensify implementation of the Parish Development Model. This is in addition to supporting Small and Medium-Scale Enterprises through Emyooga SACCOs, and the Youth and Women funds among other initiatives.
However, according to Central Bank data, domestic inflation has risen moderately, lower than previously projected, largely due to the exchange rate stabilising with a bias towards appreciation since March 2024.
Importantly, the relative stability of the shilling against the US dollar has benefited from recent Central Bank Rate (CBR) increases and inflows from robust coffee exports owing to favorable international coffee prices. CBR are charges upon which domestic banks base to borrow money.
Further, Uganda's inflation, according to the Bank of Uganda, remains among the region's lowest with an average of 3.2 percent in the twelve months to May 2024.
Nonetheless, annual headline inflation (raw inflation figure) rose to 3.6 percent in May 2024 from 3.2 percent in April 2024, while core inflation, which is the change in the costs of goods and services, excluding those from the food and energy sectors, increased to 3.7 percent from 3.5 percent.
The rising cost of healthcare, education, and transportation service continues to drive inflation, coupled with higher prices for solid such as wood/charcoal and liquid fuels like petrol, diesel, kerosene and jet fuel.
Bank of Uganda data as well as the Uganda Bureau of Statistics Consumer Price Index's most recent findings also indicate services inflation which looks only at the service-related categories like education, hospitality and culture, has climbed to 6.2 percent from 5.4 percent.
Similarly, electricity, fuel and utilities (EFU) inflation has risen to 9.5 percent from 7.4 percent, reflecting recent increases in international energy prices and lagged effects of the shilling's past depreciation.
In an attempt to mitigate the effects, the Central Bank has deployed tight monetary conditions, and with the help of declining global inflation, and a favourable domestic food supply, inflationary pressures as President Museveni presents another state of the nation address, will be partially diminished.
Taxes and their effects
Among the raft of taxes that you will have to deal with in the next financial year, about three weeks away, are taxes on mineral water, bottled water and other water purposely for drinking with a levy of 10 percent or Shs 75 per liter, whichever is higher
Cement, adhesives and grout, have all been taxed another Shs 500 per 50 kilogram. And Fuel will attract Shs 1550 per liter up from Shs 1450 per liter – an addition of Shs100. The ripple effect will be felt in increased pump prices, and hiked transport fares which will in turn result in increased cost of goods and services reverberating across the economic sector at a time when the economy is trying to stabilise after enduring two years of the Covid-19 pandemic disruption. In short brace for an enduring time.
Public Debt
Public debt is now in the range of Shs Shs 96 trillion. This means that each of the 45 million Ugandans, including those born last night, will have to raise not less than 2 Million each to clear the public debt, which President Museveni last year said part of which was recklessly accumulated.
By the time President Museveni presented the State of the Nation Address last year, domestic debt interest payments contribute the lion's share at 18.2 percent of government revenues breaching the 2018 Public Debt and Other Financial Liabilities Framework (PDMF) threshold of 12.5 percent and is clouding out other priority budgetary items.
The provisional total public debt stock as at the end of March 2023 stood at Shs. 86.3 trillion approximately 49.6 percent of GDP. With estimated 52 percent growth in the public debt stock, a threshold beyond the 50 per cent safe mark, means Uganda is in danger of defaulting on its repayment obligations
And whereas programmes such as Emyooga, OWC, and PDM continue to be the government's flagship initiative, their implementation has been described as haphazard by some quarters.
