Ministry of Finance, Planning and Economic Development Uganda

Government through the Ministry of Finance, Planning and Economic Development has signed a bilateral financial cooperation agreement with the Federal Republic of Germany.The cooperation agreement covers two projects that government of Uganda intends to carry out in the Energy sector. These include; Mbale- Bulambuli Transmission Line up to EUR 40 Million and Mbarara- Masala Transmission Line up to EUR 35 Million.Government was represented by the State Minister for Finance, David Bahati and the Germany Ambassador, Peter Glomeyers signed at the Ministry Headquarters.“The Agreement we have signed covers two projects in Energy, these projects are in line with government priorities and objectives as laid out in the NDP II,” said Bahati.“One of the objectives under the Energy sector is to expand the electricity transmission lines to evacuate power from generation plants; this is what the two projects are set to achieve,” Bahati observed.Bahati has appealed to the Ministry of Energy and UETCL who are the implementers of the projects to speed up preparatory work including compensation of people affected by the projects to ensure that the projects take off in earnest.

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Uganda’s taxation policy does not require any new tax proposals to increase collections but rather a compliance with the existing law.Speaking to Daily Monitor on the sidelines of the World Economic Forum on Africa in Kigali, Rwanda, Mr Keith Muhakanizi, the permanent secretary in the Ministry of Finance, blamed the 13 per cent tax-to-GDP ratio on the low tax compliance.“Still, we are collecting below 14 per cent of GDP, which is still very low. So, how do we get to 15 per cent, 16 per cent, 17 per cent, 20 per cent of GDP as revenue for the government to enable us to invest in those critical sectors?“Compliance is still a big problem. We are not saying the rates are low but rather here (Uganda), the rates are competitive globally,” he said.

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Commercial banks in Uganda can now offer Islamic banking products. This is after the legal restrictions that made it difficult to have such an alternative model of banking were amended.According to the Ministry of Finance and the Central Bank senior technocrats, regulations to allow the smooth operation of the Islamic banking have also been finalised. This means that Islamic banking products can now be offered within the premises of the existing commercial banks or even a fully-fledged bank providing purely Islamic finance (in this case Islamic banking) can be established uninterrupted.Islamic banking model is different from the conventional model of banking. Whereas charging of interest is at the heart of conventional banking, in Islamic banking model that is not allowed. Instead it shares the profits or losses that accrue, if any, with the clients.

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Uganda is projected to pay Shs250b in interest payment for the country’s external debt.The amount, according to the Parliament Finance Committee, will rise from the Shs170b government paid this financial year.This means that each of the 34 million Ugandans – many of whom earn less than Shs300,000 monthly – would have to, figuratively pay Shs440,000 to repay Uganda’s Shs14.915 trillion external debt.The committee does not explain how it arrived at the Shs250b projection, however, according to the National Budget Framework Paper, Uganda will borrow Shs6.7 trillion – up from Shs5.6 trillion to finance the Shs21.2 trillion Budget.According to Finance ministry estimates, Uganda’s total public debt is $7.6b (Shs24.9 trillion).Of that, 60 per cent or Shs14.915 trillion is owed to external lenders such as the Export Import Bank of China, which has loaned Uganda $2b for large hydroelectricity projects.

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After several months of negotiations and complaints from telecom companies, the government has now proposed that excise duty on incoming international calls be scrapped. In the Excise Duty (Amendment) Bill, the ministry of Finance is proposing the removal of the 9 US cents per minute duty on incoming international calls.“The complete removal of the duty was necessary due to unregulated operators routing incoming international calls via One Network Area countries and other routing mechanisms, which had led to a significant reduction in the volumes of inbound traffic and interconnect fees for the resident telecom operators. This had a corresponding negative impact on the tax revenues generated by the resident operators,” the bill reads. According to the telecom companies, incoming calls to Uganda had been diverted to countries such as Kenya and South Sudan before getting routed to Uganda.

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The high-interest environment and low demand for some government debt instruments have forced the Ministry of Finance to cut back on borrowing in this financial year. In the Budget speech, government was expected to borrow Shs1.4 trillion; however it t made the decision to slash the figure to Shs900 billion.“We are on track on the domestic borrowing front. However, there was a revision from Shs1.4trillion to Shs900b. This was a decision that was made due to market developments,” Ms Jennifer Muhuruzi, the commissioner debt management ministry of Finance, told reporters at the award ceremony of the Best Primary Dealer at Bank of Uganda (BoU) in Kampala.Interest rates on debt issued have all gone up and are hovering above the 20 per cent mark. 

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The Finance ministry has directed companies to publish their audited annual financial reports on time for proper analysis of the country’s financial situation by regulators and the public.Many companies take more than one year to produce their annual financial results while some companies do not at all.This leaves regulators, policy makers and the public in the dark as far as financial status of companies are concerned. The directive comes at a time when multinational companies are pressured to analyse and deliver results more quickly and thoroughly than ever before following the global financial crisis  that saw many big international companies running into bankruptcy.Among them was the Lehman Brothers, a 158-year investment bank in USA that was allowed by the US government to go bankrupt. 

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Peter Lokeris, state minister for energy and mineral development has officially opened the energy week. Lokeris flagged off a march from Amber House, Kampala, the head office of the energy ministry. The march which consisted of stakeholders from the energy sector was accompanied by the Police band and proceeded to the UMA Showgrounds, Lugogo. Lokeris said with plenty of sunshine in Uganda, solar power has emerged as the market’s most viable option. He said the solar penetration rate was now at 27% but needs to be increased.He also opened an energy exhibition at the show grounds where over 100 exhibitors are showcasing different products for clean energy and energy efficiency technologies over one week.”Uganda has a vision to meet the energy needs of every Ugandan in an environmentally sustainable way. Only 17% of the population has access to electricity and the traditional models of grid alone cannot make us reach our targets. More people can access energy through the renewable energy sources,” Lokeris said. 

They are the biggest bilateral lenders to Uganda, according to information from the finance ministry. Uganda also owes Tanzania over $58.2m, of which $23m is accumulated in interests.The money owed to Tanzania accrued from the Kagera war, which President Idi Amin instigated.The World Bank, however, remains the leading institutional creditor accounting for 58% followed by the African Development Bank (AfDB— 20%).The total public debt stock has risen from $5.6b to $7.0b. This is about 30% of the total economic output (GDP).Over 60% of the public debt is external debt while 40% is domestic debt.“However, because of the low absorption capacity, significant amounts of committed funds remain undisbursed,” says the Report on Public Debt, Grants and Guarantees.The bulk of Uganda’s external debt is contracted mainly from multilateral creditors, who account for 82.7% of the total external debt portfolio. The remaining 17.3% of the external debt portfolio is divided among bilateral creditors.