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Uganda

 
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Uganda

Budgets

Uganda registered a substantial budget deficit for every year of the 1970s except 1977, when world coffee price increases provided the basis for a surplus. Deficits equivalent to 50 to 60 percent of revenues were not unusual, and the deficit reached 100 percent in 1974. Although declining levels of production and trade, smuggling, and inefficiency all eroded revenues, the Amin government made only modest efforts to restrain expenditures. Amin increased government borrowing from local banks from 50 percent to 70 percent during his eight-year rule.

The budgets of the early 1980s were cautious. They set limits on government borrowing and domestic credit and linked these limits to a realistic exchange policy by allowing the shilling to float in relationship to other currencies. Between 1982 and 1989, current revenue increased continuously in nominal terms, in part because of revisions and improvements in the tax system and depreciation of the shilling. In FY 1985 and FY 1986, export taxes--primarily on coffee--contributed about 60 percent of the total current revenue. Export taxes then declined, contributing less than 20 percent of revenues in FY 1989. The share of sales tax remained roughly constant at 20 percent from FY 1983 to FY 1986 but increased to about 38 percent by 1989. Income tax increased its share of the total revenue from about 5 percent in FY 1986 to about 11 percent in FY 1989.

Government expenditures increased during the early 1980s, and the rate of increase rose after 1984. In 1985 civil service salaries were tripled, but in general, the Ministries of Defense, Education, and Finance, and the Office of the President were the biggest spenders. In 1988 and 1989, the Ministry of Defense spent roughly 2.9 percent and the Ministry of Education about 15 percent of the current budget. The percentage share of the Ministry of Finance declined from about 30 percent in 1985 to about 22 percent in 1989. The 1987 budget ended with a deficit amounting to 32 percent of total spending. This deficit was reduced to about 19 percent in 1988 and rose slightly in 1989 to just over 20 percent.

The government implemented measures to reform the tax system in FY 1988 and FY 1989. A graduated tax rate, with twenty-five grades, rose from a USh300 minimum to a USh5,000 maximum to account for all classes of income earners. Overall income tax rates were raised in order to gain revenue for local authorities and to allow them greater self-sufficiency in rendering public services. The government also called upon local governing bodies, or resistance councils (RCs) to spearhead the war against tax evaders and defaulters by assuming responsibility for assessing and collecting taxes and monitoring the use of public funds (see Local Administration , ch. 4). Despite all measures to balance the economy, however, the budget deficit in FY 1989 reached USh38.9 million or nearly one-third of total spending, a substantial increase over the government's original target.

The FY 1989 budget sought to reduce current spending in several government departments, including cuts of 25 percent in the Office of the President and 18 percent in the Ministry of Defense, but defense spending in FY 1989 exceeded budget estimates. At the same time, total government expenditures increased to accommodate civil service wage hikes and infrastructural rehabilitation. The government sought to meet these increased expenditures in part through a major revenue collection effort and increased external aid. To help secure this assistance, it implemented reforms, including cuts in executive spending, advocated by the World Bank (see Glossary) and the IMF. The FY 1989 budget also included agricultural producer price increases ranging from 100 percent to 150 percent. But at the same time, its reduced government subsidies for gasoline and sugar prices resulted in substantial price increases for those products.

In FY 1990, total government expenditures amounted to USh169.3 billion, of which USh105.5 billion was for current expenditures and USh63.7 billion for development expenditures. Total receipts came to USh111.4 billion, of which USh86.5 billion was current revenues--only 82 percent of anticipated receipts-- leaving a deficit of USh57.9 billion or about 34 percent of total spending. As in earlier years, the ministries that consumed the bulk of current expenditures were Defense (39 percent) and Education (14 percent), together with Foreign Affairs (4 percent) and Health (4 percent).

Uganda operated under a separate development budget during the 1980s. This budget consisted of domestic revenues and expenditures on development projects, but it excluded revenues from foreign donors. The development budget increased from FY 1981 to FY 1988, primarily because of inflation, but was trimmed slightly in FY 1989. The Ministry of Finance and Ministry of Defense consumed most of the development budget, however, in part because agricultural and livestock projects were often funded by foreign donors. The Ministry of Housing also received nearly 17.3 percent of FY 1988 development allocations, and much of this amount was earmarked for renovations on government-owned tourist hotels.

Data as of December 1990

Uganda - TABLE OF CONTENTS

  • The Economy

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    Information Courtesy: The Library of Congress - Country Studies


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