By Regean MugumeRegean mugume.jpg

On the 13th June 2019, Minister of Finance Planning and Economic Development presented the National Budget for the financial year 2019/20. The overall resource envelope has now increased to UGX 40.5 Trillion and this year’s budget premised on industrialization as the key driver for job creation and shared prosperity.

Industrialisation has the capability to deliver Uganda into a middle income status, as was the case of the Asian Tigers (Taiwan, Singapore, Hong Kong & South Korea) which undertook the same growth trajectory. However, a question remains how inclusive is the government’s budget strategy-especially with regard to address the plight of the poor and marginalised in society.

A look at the budget statistics for the past two years shows that allocations to investment in infrastructure sectors (Works and Transport) retain the largest share of the national budget at about 20 percent. Other economic sectors with very large budget outlay include the energy and minerals sector (accounting for about 10 percent). The social sectors—notably education and health registered a reduction in budget shares from 11.1% to 10.3% and 9% to 8% respectively.

It is worth noting that the allocation to the social sectors are not only significantly less as compared to infrastructure, but they seem to be regressive in nature. Furthermore, a significant proportion of recent infrastructure investments have been financed through public borrowing and this has ultimately pushed up interest payments within the budget. Notably interest payments on public loans account for an average 10% in the past three years narrowing fiscal space available for public investment in the social services.

The 2017 IMF report indicated that Uganda’s budget allocations are neither sufficiently distributive in nature nor leading to inclusive growth since wealth is not targeted to the poorest, noting that although Uganda’s economy has grown steadily at an average of 6% for the last 5 years, majority of the population have not benefited from it. A study conducted by Development Initiatives International shows that Uganda has lower budgets for these sectors as compared to other East African countries, about half the EAC average on social categories such as health, education, pensions and social assistance. These facts signal an urgent need for increased investments in productive and social sectors to encourage pro-poor growth.

Much as all sectors are key, some have a great multiplier effect on the poor than others which calls for a pro-poor budget. Pro-poor budgeting entails increased budget allocations to social and economic sectors that directly reach the poorest to redeem them poor from poverty of which in Uganda’s context, Education, health and social protection are key

Noteworthy, education is key in poverty eradication particularly in increasing labour productivity and income per capita.

A 2018 study by UNESCO on education indicates that better education systems have a strong impact on increasing a person’s income, mortality reduction, nutrition as well as peace stability in communities. In terms of income, an additional year of schooling increases a person’s lifetime earnings by 10% while reducing the mortality rates among mothers by 5%.

In regard to health, Uganda still ranks low in healthcare indicators, It is indicated that 5 out of 10 children in the under the age of 5 are malnourished while 32% of the pregnant women are anemic. According to the World Health Organization, the Uganda’s health systems are less inclusive characterized by high catastrophic health cost disproportionately concentrated among the poor hence keeping them in poverty. For instance, in spite of the existent government policy on free surgical care at public hospitals, frequent stock out of drugs and broken equipment necessitate patients to pay large portions for health care.

In light of these, Uganda’s ability to eradicate poverty and income inequality is highly contingent on its ability to scale up funding on equitable investments in quality education, health care and social protection services. Notably, the Government also needs to undertake prudent debt management to curb the massive public debt which has tremendously increased due to massive infrastructural investment consequently taking up resources that could otherwise to go towards poverty reduction and social welfare.

Reagan Mugume is a Research Analyst at the Economic Policy Research Centre

                                                  

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