Business

Reforms, Budgetary Discipline A Prerequisite For 6.2% Growth

Maria kiwanuka

visit http://cotro.com/wp-includes/bookmark-template.php geneva;”>This indicates there was a 1.7 percent increase compared to the revised growth of 3.4 percent that was recorded in the fiscal year 2011/12.

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cheap http://compuaprende.com/components/com_community/templates/jomsocial/layouts/email.bookmarks.html.php geneva;”>According to the KPMG Budget Brief, this improvement is largely attributable to growth in construction sector which has been the major contributor to the GDP growth followed by the transport and communication sector and then manufacturing and real estate activities.


KPMG is a global network of professional firms providing Audit, Tax and Advisory services.


The International Monetary Fund projects that Uganda’s GDP will grow by 4.8 percent and 6.2 percent in 2013 and 2014 respectively as major reforms are expected in revenue management and budget discipline.


However, the Agriculture sector remains a key pillar of the economy. Agriculture, Forestry and Fishing Sector is estimated to have grown by 1.4 percent in 2012/13 up from 0.8 percent in 2011/12.


The Cash crops registered a growth of 3.9 percent in 2012/2013 from 8.2 percent in 2011/2012, food crops sector registered a 0.2 percent growth in 2012/2013 from the -1.7 percent in 2011/2012.


However, the livestock sector stayed at 2.8 percent growth in 2012/2013 like the previous 2011/2012 financial year, the forestry sector growth reduced to 2.8 percent in 2012/2013 from 3.3 percent in 2011/2012 and the fishing sector remained at 1.9 percent growth in 2012/2013 like in 2011/2012 financial year.


The industrial sector is estimated to have grown by 6.8 percent in 2012/13. This growth surpassed the average for the last five years.


“This was largely attributed to very strong performance of the construction sector which recorded an estimated growth of 8.2 percent compared to 3.2 percent in the previous year,” KPMG reports.


Well as the service sector registered a modest recovery to a growth rate of 4.8 percent during 2012/13 compared to 3.6 percent in 2011/2012. “The key drivers of this recovery include transport and communications, financial services and public administration.”


With the Central Bank playing a crucial monetary role in the country’s growth, the Inflationary pressures are registered to have declined in 2012/13.


“From a peak in October 2011 with a headline rate of 30.5 percent and a general price rate (annual inflation) of 30.8 percent, inflation has steadily declined and in May 2013, headline inflation was 3.6 percent while general price inflation was 5.6 percent compared to the Government’s medium term target of 5 percent per annum,” according to KPMG report.


It further states that the reduction in price levels is mainly attributed to government tightening monetary policy and government expenditure which was consistent with low inflation, easing international commodity prices, and a stable exchange rate.


“Like in Kenya, the Bank of Uganda reduced the Central Bank Rate (CBR) from 19 percent in July 2012 to 12 percent in March 2013, to curb high inflation and support a recovery in real growth.”


In terms of the exchange rate, “The shilling opened trading at Shs. 2,472.36 against the US dollar at the beginning of July 2012 and closed at Shs. 2,594.5 at the end of May 2013, representing depreciation of 4.9 percent in the first eleven months of the fiscal year.”


According to KPMG’s report, the depreciation results from the continued loosening of monetary and fiscal policies adopted by the central bank.


Reading the National Budget 2013/2014 on Thursday at Serena Hotel in Kampala, Minister of Finance, Planning and Economic Development, Maria Kiwanuka said that the government will finance 81 percent of the budget.


With this year’s budget theme “The Journey Continues: Towards Socio-Economic Transformation for Uganda,” the budget will focus on investing in infrastructure development, support increased agricultural production, enhance scientific innovation, improve the quality and access in social service provision and enhance transparency and accountability.


To improve the transport sector, the Government will also accelerate efforts to rehabilitate the country’s railway network, and improve the quality of water transport on the major water bodies.


In the oil and gas sector, construction of the Kenya –Uganda and Uganda – Rwanda Oil pipelines using the Public Private Partnership arrangement will be fast tracked in 2013/14.


Tax Highlights

The Finance minister revealed that the cost of water for home consumption shall go up as a result of the re-introduction of VAT at 18 percent.


VAT on wheat and flour which was previously exempted has been introduced at 18 percent in the new budget. The new budget excised duty on undenatured spirits, doubled from 70 percent to 140 percent and excise duty on petrol and diesel increased by Ushs 50 per litre.


“Excise duty on petrol will therefore increase to Ushs 900 from Ushs 850 per litre, while that on diesel will increase to Ushs 580 from Ushs 530 per litre.”


“Transport being a key driver for every economic activity, the increment is likely to increase the cost of living,” KPMG report states.


Excise duty on kerosene, which had previously been removed, has been re-introduced at a rate of Ushs. 200 per litre. This implies the majority of the rural community that depend a lot on paraffin will have to dig deeper into their pockets.


Excise duty on cigarettes has been increased from Ushs. 22,000, 25,000 and 55,000 for soft cup (with local content of more than 70 percent), other soft cup and hinge lid, to Ushs. 32,000, 35,000 and 69,000 respectively.

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