Tuesday, 2 April 2013


The budget of Government is a statement of the revenues the Government expects to collect over the 12 months, and how it plans to spend those revenues.
The main purpose of the budget is to:
1.   Help in increasing the production of goods and services so that the average standard of living improves rapidly and poverty is correspondingly reduced (economic growth).
2.   Macroeconomic Management – promote economic order and stability by encouraging competitive efficiency and controlling inflation (macroeconomic management).
3.   Provide services which are vital to our country and which only Government can do best, namely, security, law and order, infrastructure and disease control (service delivery).
Planning Framework
The national budget is guided by the Poverty Eradication Action Plan (PEAP) Uganda’s national development framework and medium – term planning tool since 1997.
The PEAP was revised and independently evaluated in June 2008 and replaced by the National Development Plan (NDP).  The NDP is a comprehensive plan that articulates clearly the planned strategic interventions of all sectors of the economy.
Sources of Financing the National Budget
The budget is made for a financial year which begins on 1st July each year and ends on 30th June.  The budget is financed from three main sources:
         i.        Taxes: Tax revenues collected by Uganda Revenue Authority (URA) which include income tax, customs duties, consumption taxes;
        ii.        Non Tax revenue: Fees (for example from Passport and Immigration fees) and Licences,
      iii.        Loans and Grants: Loans are Concessional credits provided by multilateral agencies; while Grants are mostly from bilateral development partners.

The Legal framework for the budget process is enshrined in the Uganda Constitution 1995, the Local Government Act 1997, the Budget Act 2001 and the Public Finance and Accountability Act 2003.
Articles 155 – 158, Chapter 9 of the Constitution of the Republic of Uganda 1995 provide the legal basis for the preparation and approval of the national budget.  Articles 190 – 197 on the other hand provide for the finances of the Local Governments.
The Local Government Act, Cap 243 provides the legal basis for local government budget process.  This is supported by the Local Government Financial and Accounting Regulations 2007.
The Budget Act, 2001 on the other hand provides for and regulates the budget procedure.  It explicitly spells out the roles of Parliament, Executive as well as other stakeholders and stipulates the budget calendar and the requisite documentation.
The Public Finance and Accountability Act 2003 provides for the development of fiscal policy framework, regulation of public financial management, prescribes the responsibilities of persons entrusted with financial management and provides for public borrowing, audit of Government accounts, state enterprises and other authorities of state.
The Budget Process
The budget is prepared through an open and transparent and widely participatory process.  The objective of the consultative process is to solicit the views of all stakeholders in the preparation of the Budget and consequently ensure that the national budget reflects the views, aspirations and priorities of all stakeholders.
The budget process is undertaken at the following four key levels:
                     i.        The Ministry of Finance, Planning and Economic Development (MFPED),
                    ii.        Sector Working Groups, Line Ministries and Local Governments,
                  iii.        Cabinet, and
                  iv.        Parliament.
According to the Budget Cycle, the budget process starts in September each year and has six key stages, namely:
      I.        Setting the macro-economic Framework
    II.        Setting National Priorities and Sector Ceilings
 III.        Budget Consultations (Political and Technical)
  IV.        Preparation of the Budget Estimates
     V.        Budget Implementation
  VI.        Budget Monitoring and Evaluation.


Good Governance in the Budget Process
Our budget process may be judged on the four pillars of good governance in public sector management:
    I.        Accountability – capacity to call public officers to task for their actions
  II.        Transparency – low cost access to relevant information
III.        Predictability – laws and regulations that are clear, know in advance, and uniformly and effectively enforced, and
IV.        Participation – general consensus, supply reliable information and provide a reality check for Government actions.

Budget preparation is a very participatory process involving many stages and, many stakeholders within and outside Government. 
1. Determining the Resource Envelop

The Directorate of Economic affairs within the Ministry is responsible for determining the resources envelop in consultation with other Government institutions such as URA and Bank of Uganda.

The budget resource envelope for the medium term is derived from projected domestic revenues (tax and non tax), plus external financing (grants and loans), plus non – bank savings, minus monies required for debt servicing and domestic arrears repayment and plus or minus non bank borrowings /savings.  Fiscal policy must be consistent with monetary policy projections/target on money supply growth, private sector credit and foreign reserves which determine Government borrowing or saving.  

Domestic tax revenue is projected basing on:

1)   Past trends,
2)   Efficiency gains,
3)   Growth in volumes of imports,
4)   Profits of corporations,
5)   Elasticity of tax heads,
6)   Growth in real monetary GDP, and
7)   Changes in prices.

2.   Setting National Priorities and Sector Ceilings
Once the resource envelop has been determined, the broad allocations of Government resources between sectors is then determined based on:
                I.        Priorities which have a direct bearing on poverty and growth;
              II.        The party manifesto, and;
           III.        Constraints faced during implementation.
The Sector Ceilings for Government of Uganda (GOU) resources are set as follows:
1)   The current financial year is used as a base;
2)   All one – off expenditures undertaken in the previous year are deducted from the sector ceiling and made available for reallocation to identified priorities;
3)   The projected additional resources over and above the current year’s resource envelope are then allocated among the policy priorities with the higher priority areas and commitments receiving the first call on these resources.
This then becomes the basis for the preparation of the indicative MTEF which details the respective sector ceilings.  These indicative ceilings are given to the sectors in October under a Budget Call Circular.  These are revised in March after the submission of Sector Budget Framework Paper (BFP), in May after receiving comments from Parliament on the National BFP and finally in June just before reading the budget.
3.   Budget Consultations

a)  Cabinet Retreat (October)
The Budget process commences with a Cabinet Retreat held during the month of October.  The retreat provides an opportunity for the Minister to present the Budget Strategy Paper that spells out the major economic developments and re-casts Government priorities that need to be addressed in the following year.
The retreat is meant to guide on the following:
1)   The Budget Strategy and priorities for the following financial year;
2)   The Indicative Medium Term Fiscal Framework (MTFF) and Medium Term Expenditure Framework (MTEF); and
3)    Budget implementation issues for the current financial year.

b)  First Budget Call Circular (October)
Once Cabinet has approved the Budget Strategy and Priorities, the agreed MTEF is communicated to sectors in October through the First Budget Call Circular.  The main objective of the Circular is to communicate the budget strategy for the following financial year and request Sectors to prepare and submit their Budget Framework Papers (BFP).
The specific objectives of the Circular are to:
       i.        Communicate the Budget Strategy, Priorities and Indicative 5 year Medium Term Expenditure ceilings, the first year of which is the basis for financial allocations of the expenditure estimates for the next financial year;
      ii.        Emphasize the policy and administrative guidelines for the development of the budget for the coming financial year; and
    iii.        Request the Sectors to prepare their Budget Framework Papers, clearly linking sector ceilings to sector priorities and their vote functions.  

c)  Local Government Workshops (October/November)
The Local Governments’ Budgets and Plans form an integral part of the National Budget.  A series of local government consultative workshops are held to launch the preparation of the Local Government Budget Framework Papers (LGBFPs).  The workshops which are facilitated by the Ministry together with representatives from relevant sectors are attended by political leaders and heads of departments from the local governments.  The purpose of these workshops is to:
       i.        Disseminate Government priorities for the next financial year;
      ii.        Disseminate the Indicative Planning figures for Central Government transfers to local governments;
    iii.        Identify and discuss policy issues which affect the operations of local governments.

Each District and Municipal Local Government prepares a Local Government Budget Framework Paper (LGBFP).  The LGBFPs are guided by the long term Local Government Development Plans as well as any emerging issues and priorities of the communities within the Local Government.  Different departments in each Local Government contribute to the LGBPF, just as they do contribute to the preparation of their budget estimates.  The consultations enable the development of a report which summarizes the key issues that affect service delivery in the local governments.  The consultations also are the basis for preparation of LGBFPs, which all Local Governments submit to the Ministry of Finance and inform the National Budget Framework Paper.  Each District and Municipal Local Government prepares a Local Government Budget Framework Paper (LGBFP).    
d)  First Budget Consultative Workshop (October/November)

The first Budget Consultative Workshop is held to officially launch the beginning of the budget preparation process.  The key participants at this workshop include Cabinet Ministers, Members of Parliament, technical officials from the Central Agencies, Local Government Officials, Development Partners and Civil Society and Private Sector Organizations.

The specific objectives of the Workshop are to:

                             i.        Communicate the economic outlook for the country and the challenges encountered in budget execution.
                            ii.        Discuss the Budget Strategy and Priorities in light of the poverty eradication targets.
                          iii.        Discuss the Medium term Expenditure Framework; and
                          iv.        Disseminate the Budget Guidelines for the preparation of the Budget for the following Financial Year.

e)  Sector Working Group Consultations (December)
Government introduced the Sector – Wide Approach (SWAp) to planning in 1999/2000.  Each sector is required to set – up a Sector Working Group composed of key stakeholders to coordinate the planning process.  After the national budget consultative meeting, each Sector Working Group organizes discussions with spending agencies within the sector and agree on sector priorities ad the financing required.  Each Sector Working Group is made up of representatives from all Ministries within the sector, the Ministry of Finance, Planning and Economic Development, Departments and Agencies within the sector, representatives from civil society and the private sector, Local Government representatives of the development partners.
Sectors in 2008/2009 Financial Year included:
                         i.        Accountability
                        ii.        Agriculture
                      iii.        Education
                      iv.        Energy and Mineral Development
                       v.        Health
                      vi.        Information and Technology
                    vii.        Justice Law and Order
                   viii.        Lands, Housing and Urban Development
                      ix.        Legislature
                       x.        Public Administration
                      xi.        Public Sector Management
                    xii.        Social Development
                   xiii.        Tourism, Trade and Industry
                  xiv.        Water and Environment
                    xv.        Works and Transport
                  xvi.        Security
An example of the membership of a SWG is the Agriculture Sector.  The SWG is composed of representatives from, among others;
1)   Ministry of Agriculture, Animal Industry and Fisheries
2)   Ministry of Finance, Planning and Economic Development
3)   Ministry of Water and Environment
4)   National Agricultural Research Organization (NARO)
5)   National Agricultural Advisory Services (NAADS)
6)   Cotton Development Organization (CDO)
7)   Uganda Coffee Development Authority (UCDO)
8)   Uganda National Farmers’ federation (UNFF)
9)   CARE Uganda (NGO)
10)             Action Aid Uganda (NGO)
11)             Environment Alert (CSO)
12)             Agriculture Funding Donors
13)             Faculty of Agriculture, Makerere University.
Each sector Budget Framework Paper spells out the following for the financial year and the medium term:
                          I.        Sector Objectives
                        II.        Past performance and future plans, including the outputs each Government institution intends to achieve with its resources.
                     III.        Proposed expenditure allocations setting out major expenditure areas, and highlighting major changes to resource allocations and key funding priorities.
Key Challenges
As part of the budget reforms, in 2008/2009, Output – Oriented Budgeting (OOB) was introduced as a means of relating budget allocations to outputs.  Sectors identified their core vote functions and budgeted for them accordingly.  Vote functions also enable Government to show what spending institutions have done with past expenditures, and what they intend to achieve with future budgetary allocations.  This is intended to enhance both transparency in the allocations of funds, and accountability in the use of scarce budgetary resources. 
f)   Inter – Ministerial Consultative Meetings (February)
Inter – ministerial consultative meetings take place between Sector Ministers and the Minister.  These meetings are held to discuss sector budget priorities and allocations at the political level and to resolve any outstanding policy issues.
g)  Mid – term Expenditure Review (March)
The main objective of the review is to assess the half budget performance with a view of identifying areas that need corrective actions to enhance the efficiency and effectiveness of delivery of public services.  A workshop of key stakeholders is held to discuss the half year budget performance report and agree on the way forward.  
h)  Consultation within East African Community (May)
In line with the programme for achieving deeper economic and political integration in EAC, the National Budgets of Partner States are read on the same day by 15th June.  The Ministers of Finance hold annual pre – budget and post budget consultations with the view to harmonize tax policies, monetary and relevant fiscal affairs.

4. Preparation of the Budget Estimates

a)  National Budget Framework Paper
According to Section 4 (1) and (2) of the Budget Act 2001, the President shall cause to be prepared and laid before Parliament, by 1st of April, a three years macroeconomic plan and programmes for the economic and social development, and indicative preliminary revenue and expenditure framework of Government for the following financial year.  To fulfill this requirement, the Ministry prepares the National Budget Framework Paper.  This is consolidated from the Sectors’ and Local Governments’ BFPs.
Specifically the BFP highlights:
          I.        Government’s macroeconomic policies, recent macroeconomic performance and future plans, and
        II.        Government’s priorities and how resources have been allocated to achieve the national objectives.

b)  Background to the Budget
Each year and prior to the Budget Speech, the Ministry of Finance, Planning and Economic Development publishes the Background to the Budget (BTTB), which presents both a retrospective context for the budget of the coming Fiscal year.  The BTTB provides background information on the factors that influence key budgetary decisions during a current financial year, together with a comprehensive report on the effects of such decisions on the Ugandan economy and the Government’s quest to eradicate poverty.
c)  Budget Estimates (End of May)
The procedure for preparation and consolidation of the Budget Estimates is as follows:
    I.        Votes receive ceilings from the Sector Working group
  II.        Votes set priorities derived from the Sector Investment Plan
III.        Accounting officers set programmes (departments) cost their activities based on the chart of accounts
IV.        The programme budgets are consolidated into the Vote budget.
According to Section 5 (1) of the Budget Act 2001, all spending agencies must submit their Budget estimates for the following year by 15th February each year.

5. Presentation and Approval of the Budget

a)  Cabinet Approval of National BFP (By March 30th)
The National BFP is the document in which Government specifies its policy stance for the following year.  The Minister submits the draft Budget Framework Paper to Cabinet on the Government strategy for the next financial year.
The BFP spells out the major national priorities and how the resources have been allocated to achieve the national objectives.   It incorporates the inputs of the consultative process and covers, among others, sector inputs specifying sector priorities for the year, and in view of the resource constraints, proposes the necessary trade – offs which Cabinet endorses before the national Budget Framework Paper is submitted to Parliament.
b)  Parliamentary Approval of National BFP (By 15th May)
In line with Section 4 (i) of the Budget Act 2001, The National BFP is submitted to Parliament by 1st of April.  This is followed by discussions of the BFP by Sessional Committees of Parliament which submit their reports to the Parliamentary Budget Committee by the 25th of April.  Between 1st April and 25th April, there is a lot of consultation between the different Committees of Parliament, spending agencies and the Ministry.  When these consultations are complete, Parliament consolidates their recommendations and submits them to His Excellency the President by 1st of May for consideration.  
c)  Budgets of Statutory Bodies (By April 30)
In line with Section 5 of the Budget Act 2001, Heads of Self Accounting Bodies are required to submit their budget estimates of revenue and expenditure to the Ministry on behalf of the President, during the budget preparation stage.  These estimates are laid before Parliament by the Minister during the presentation of the budget without any amendments.
d)  Cabinet Approval of the Budget (Early June)
The Minister holds consultations with His Excellency the President in the process of finalizing the Budget Speech.  During the consultations, the recommendations of the Parliament on the budget are discussed and the President gives his input into the budget.  
This is followed by a final cabinet meeting at which the Minister presents the budget proposals for the following Fiscal Year, the revenue measures and the draft Budget Speech.  Once discussed and endorsed by Cabinet, the Budget Speech is ready for Presentation to Parliament.
e)  Presentation of the Budget Speech (By June 15)
The Minister presents the Budget Speech at a seating of Parliament by the 15th day of June in accordance with Article 155 (1) of the Constitution and the Budget Act 2001.  It is an agreed practice that the Budgets of the five East African Community (EAC) countries are read on the same day.
The Budget Speech is presented to Parliament by the Minister of Finance on behalf of His Excellency the President.  The Budget Speech articulates:
        I.        Highlights of Economic and Fiscal Performance in and the Outlook for Financial year.
      II.        Emerging Trends in the domestic, regional and international economy.
   III.        Strategy for expanding Employment and Growth Opportunities.
    IV.        Proposed Taxation Measures and the way forward.

The presentation of the Budget Speech in Uganda is covered live by the electronic media, signifying the fact that the budget belongs to all Ugandans.  The Budget Speech is made available to the print media who reproduce it in different languages and different news papers across the country.

f)   Report of loans and Grants (By June 15)
In line with the Budget Act 2001 (13), the Minister on behalf of the President presents to Parliament a report of the total indebtedness of the State in the financial year showing the following:
     i.        The total principle and sources of loans
    ii.        The accumulated interest on each loan
  iii.        The status of servicing and repayment of each loan and debt
  iv.        The utilization and performance of each loan including the extent to which the objectives of the loan or debt have been met.
g)  Ministerial Policy Statements (By June 30)
In line with Section 6 (1) of the Budget Act 2001 every Ministry is expected to prepare and submit a Ministerial Policy Statement each financial year with detailed information on the planned expenditure and outputs for the following financial year to Parliament.  The Ministerial Policy Statements forms the basis for Parliament’s scrutiny and debate of the budget of each Ministry and provides a link between the Ministry’s strategic priorities and the proposed Budget allocations.
h)  Vote on Account (By June 30)
In line with Article 154 (4) of the Constitution, once the Budget Speech has been read, the Ministry of Finance prepares the Vote on Account for Parliamentary approval that allows public spending of up to one third of the budget before the budget is approved by Parliament. 
i)   Parliamentary Sessional Committee Discussions (August 31)
The Parliamentary Sessional Committees scrutinize the Ministerial Policy Statements Vis a vis the proposed budget allocations and the National BFP.  The Chairperson of each Committee presents a report to the Plenary of Parliament.
j)   Approval of Budget Estimates (By September 30)
Once Parliament has concluded debate on the budget and their concerns incorporated, the Minister thereafter seeks the appropriation and approval of the Budget Estimates through the Appropriation Bill.  The Parliamentary Budget Committee scrutinizes the Bill and presents a report to the Plenary of Parliament for discussion.  The Bill must be passed into law by 30th September as per the Budget Act.

6.   The Local Government Budget Process
A Local Government budget is the detailed costed plan of how a local government plans to allocate and utilize available resources in line with its objectives, needs and priorities.  Local Governments have discretionary planning and budgeting powers, but their plans and budgets need to national priorities and policies.  Consequently the local government budget cycle has to fit into the national budgeting cycle, and starts in October and ends in June. 


  1. GOOD narrative and helpful for scholars. make a narrative of performance analysis.
    some have argued that too much time is taken but no due care in implementation.

  2. this is good. I only wish to know whether it is the latest as adjusted lately?

  3. Thanks Bill, this is great information.