Uganda’s poor were the biggest losers in the 2014/15 budget, which removed tax exemptions in the agriculture sector and introduced a host of new taxes. This runs counter to President Yoweri Museveni’s description in 2005 of what a good national budget is: “Pro-poor, pro-production and pro-exports.”

The government seeks to stimulate productivity in the largely subsistence agriculture sector so as to lift the population out of poverty but it must widen the tax base and generate revenue to meet its budget obligations, hence removal of the tax waivers.

Out of the $6 billion budget, Finance Minister Maria Kiwanuka allocated $177 million to agriculture to provide farm inputs. But she also slammed shut the window of exemptions the sector enjoyed — namely, exemption of interest income on loans to the sector and VAT exemptions on feeds for poultry and livestock as well as on supply of dairy equipment and packaging materials.

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Ugandans who take out agricultural loans as well as those in the livestock and dairy sub-sector are in the commercial farming bracket. But, given the very low penetration of agriculture insurance and financing, a good number of these farmers are not yet ready for the removal of tax exemptions, according to critis of the budget.

“This country is still 76 per cent agrarian,” said Prof Augustus Nuwagaba, an economist and poverty eradication expert. “I know people went into farming but their banana farms were decimated by banana wilt.

“How do you recover from that without agriculture financing and insurance? These are areas where intervention is needed.”

According to Ms Kiwanuka, in the 2013/14 financial year the insurance sector for the first time offered agriculture insurance products but only eight companies out of 26 operating in Uganda are underwriting agriculture-related policies.

Prof Nuwagaba argues that the government should borrow a leaf from countries such as Mauritius and Ghana, which have consistently pursued the strategy of funding one key productive sector where the majority of the population is employed.

This is done for a number of years before moving to the next sector, instead of scattering scarce resources amongst many sectors, including less productive ones, without much impact.

Under this approach, referred to as “strategic flagship,” he said, the government should start with agriculture, which employs 72 per cent of Ugandans according to the 2012/13 Uganda National Household Survey. The survey adds that agriculture is the sector where the majority of Uganda’s 6.7 million poor find it easiest to eke out a living and rise out of extreme poverty.

Ms Kiwanuka’s budget mentions agriculture and agribusiness as a priority for the government to create jobs, improve productivity and expand exports. In 2005, as President Museveni was praising former finance minister Dr Ezra Suruma’s pro-exports budget, the then Southern Sudan market had just opened as a key destination for Ugandan agricultural products, mainly produced by smallholder farmers.

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However, Ms Kiwanuka’s removal of tax exemptions in the agriculture sector will hit these farmers the hardest considering that fertiliser, pesticides, seeds, machinery and hoes, as well as cereals that are grown and milled in Uganda, will now attract VAT.

“[The government will] encourage smallholder farmers, focusing on enterprises that provide high returns to smallholder farmers,” said Ms Kiwanuka. “For medium- and commercial-scale farmers, [the government will] encourage commercial ranching, large-scale crop production and value addition.”

Agriculture contributes about 21 per cent of Uganda’s GDP of $25 billion.

Besides those on agriculture, the Finance Minister announced other taxes on essential goods, which will pile pressure on Uganda’s poor. An increment of $0.079 on the price of a litre of kerosene, one of the the very basic of goods, $0.019 on sugar and $0.019 on fuel do not match the president’s pro-poor budget talk.