LUCAS MUSISI
Ramathan Ggoobi, the Permanent Secretary/Secretary to the Treasury, delivered an insightful analysis on Friday, April 12, at the Ministry of Finance headquarters, providing an update on the state of the economy and the expenditure limits for Quarter 4 FY 2023/24. Ggoobi highlighted the sustained trajectory of economic recovery in the first half of the year, attributing it partly to the continued implementation of growth-enhancing government programs and a rise in private sector activity.
During the period under review, the economy exhibited notable resilience, as evidenced by the GDP growth rates of 5.3% and 5.5% in the first and second quarters of FY 2023/24, respectively. “In the first half of this year, economic activity remained on a recovery path, partly supported by continued implementation of growth-enhancing government programs and an increase in private sector activity. The economy registered GDP growth of 5.3% and 5.5% in the first and second quarter of FY 2023/24, respectively,” he said, identifying the primary growth drivers “as increased production in the industrial sector, sustained growth in agriculture, forestry and fishing, and rises in services, household consumption, investments, and exports.”
Ggoobi said that the agriculture sector is poised for a 6.0 percent growth this fiscal year, up from 4.8 percent the previous year. This increase is largely attributed to enhanced “production of food crops, cash crops, livestock, and fish, spurred by government interventions such as the provision of quality seedlings, extension services, and water for production, alongside affordable credit through the Parish Development Model (PDM) and favorable weather conditions.”
He noted significant increases in export volumes, with key food crops like maize up by 79 percent, and substantial growth in the exports of fruits and vegetables (134 percent), other pulses (11%), coffee (10%), cotton (56%), tobacco (4%), and cocoa beans (79%) in the first seven months ending January 2024 compared to the same period the previous year.
In the industrial sector, he said, there is a continued recovery in manufacturing and construction activities as inflation stabilizes below the central bank’s target. “This low inflation rate is anticipated to bolster recovery in consumption and investments, supporting robust growth across trade, communication, hotel and tourism services, and ongoing recovery in transport and financial services,” he added.
The high-frequency indicators of economic activity, including the Purchasing Managers Index (PMI), which averaged 51.67, and the Composite Index of Economic Activity (CIEA), suggest an increase in economic activity and improving business sentiments within FY 2023/24. Despite a slight decline in the PMI in March 2024, the Business Tendency Index (BTI) recorded at 55.54 in the same month indicates strong investor confidence and positive economic sentiments, according to Ggoobi.
The permanent secretary said the economy is projected to grow from Shs184.895 trillion ($49.251 billion) in FY 2022/23 to Shs204.9 trillion ($55 billion) in FY 2023/24. Inflation has moderated significantly, with annual headline inflation averaging 2.9 percent in the first half of FY 2023/24, a decrease from 8.0 percent in the latter half of FY 2022/23, due to improved food supply and supportive monetary and fiscal policies. Inflation was recorded at 3.3 percent in March, slightly down from 3.4 percent in February 2024.
The exchange rate has remained stable, according to Ggoobi, though it experienced some weakening against the US dollar due to the high-interest rates on Government Treasury bonds issued in Kenya, which attracted some portfolio investors away from Uganda. However, this impact was temporary, and stability is returning. The shilling traded at an average mid-rate of Shs 3895.8/USD in March 2024.
In the external sector, tourism inflows, foreign direct investment, and remittances have all shown strong increases, contributing to a 68.5% growth in total export receipts in the first half of 2023/24 compared to the previous year. Looking ahead, the Ugandan economy is projected to grow at 6.4% in FY 2024/25, driven by growth in services, agriculture, industry output, and a rise in aggregate demand and investments. This growth will be supported by efficient implementation of government programs and infrastructure, increased oil and gas sector activities, tourism, and growth in regional trade and exports.
The Ministry of Finance also disclosed the financial allocations for the fourth quarter of FY 2023/24, designating Shs 7,687 trillion, which constitutes 30.4 percent of the Government of Uganda’s (GoU) budget. This distribution aims to support various sectors through strategic funding focused on enhancing operational capabilities across government institutions.
Wages and Salaries: The government has allocated Shs 1.872 trillion to cover wages and salaries across all government sectors, ensuring timely payment to public servants.
Non-Wage Recurrent Expenditure: This includes Shs 529.7 billion for the Parish Development Model (PDM), accumulating the fiscal year’s total to Shs 1.059 trillion. Additionally, allocations have been made for pensions and gratuities amounting to Shs 312.291 billion and Shs 239.91 billion to local governments for critical needs like education and infrastructure. The Uganda Road Fund will receive Shs 189.74 billion to ensure road maintenance, while the National Medical Stores is allocated Shs 90.211 billion for essential medical supplies. Various health institutions have received specific allocations to support their operations, totaling Shs 87.495 billion across different services and facilities.
Security and Governance: Significant funding has also been directed toward security institutions including the Ministry of Defense and Veteran Affairs, Uganda Police Force, Uganda Prisons Services, and intelligence organizations, totaling over Shs 498.798 billion. The Parliamentary, Judicial, and Auditor General’s offices have been allocated funds to ensure smooth operation and governance, emphasizing accountability and efficiency in public service.
Development Sector: The Ministry of Defense and Veteran Affairs leads the development allocations with Shs 629 billion, followed by substantial investments in infrastructure and energy, with the Uganda National Roads Authority (UNRA) receiving Shs 364.807 billion and the Ministry of Works and Transport (MoWT) Shs 146.141 billion. The focus extends to agriculture, health, and urban development, reflecting a balanced approach to national development priorities.
Economic Impact: This financial distribution is critical in supporting Uganda’s economic stability and growth, especially in sectors directly impacting the populace such as agriculture, health, and infrastructure development. By strategically allocating funds, the government aims to stimulate economic activity, enhance service delivery, and maintain fiscal health in alignment with national development goals.
In light of these allocations, the Ministry has issued strict guidelines for the management of the wage bill and recruitment, emphasizing accountability and prudent financial management. With the fourth quarter critical in closing the fiscal year, the Ministry urges all Accounting Officers to prioritize outstanding obligations and avoid any actions that would lead to financial discrepancies, ensuring that the budget serves its intended purpose without leading to future fiscal burdens.
