Gov’t operations in June register deficit of Shs1 trillion

By George Mangula

Fiscal overview During June 2020, Government operations resulted into a fiscal deficit of about Shs 1.1 trillion against the planned deficit of about Shs279 billion, according to Performance of the Economy Report June 2020.The report attributes the deviation to the impact of the measures introduced to deal with the COVID-19 pandemic on both revenue collections and Government expenditure.

The report puts revenues at 26.7 percent below projections for the month. In addition, expenditures were 4.9 percent higher than planned, as the government spent more on Covid-19 related activities.

Revenue and Grants In June 2020

According to the report,  the government registered revenues and grants worth Shs 1,868.25 billion against a target of Shs 2,597.96 billion, resulting into a shortfall of 729.71 billion. The bulk of this shortfall was attributed to the performance of domestic revenues (tax revenues), says the report.

Meanwhile, domestic Revenues collected in June 2020 amounted to Shs 1,794.14 billion against a target of Shs 2,448.19 billion. Of the total collections, Shs 1,532.42 was tax revenue while Shs 261.73 billion was non-tax revenue.

All the major tax categories registered shortfalls against their respective targets for the month as collections continued to be affected by the measures put in place by the Government to contain coronavirus pandemic. Direct domestic taxes registered the highest shortfall (Shs 337.16 billion) having performed at 69.4 percent, as corporate tax, PAYE, rental income tax and withholding tax collections fell below their targets for the month.

Similarly, Indirect domestic taxes performed below target, by 42.0 percent, posting a shortfall of Shs 190.12 billion. Taxes on international trade transactions performed at 69.5 percent, registering a shortfall of Shs 218.40 billion, on account of lower than projected volumes of taxable import goods.

Non-Tax Revenue (NTR) collections, on the other hand, were above target for the month. NTR amounted to Shs 261.73 billion in June 2020 against a target of Shs 194.92 billion, implying a performance of only 134.3 percent. This followed the partial easing of the lockdown that enabled MDAs offering services on which NTR is collected to resume operations.

Expenditure

Overall government spending during June 2020 amounted to Shs 3,017.94 billion which was 4.9 percent or Shs 140.67 billion higher than planned for the month. There was higher spending on re-current activities which more than offset the underperformance by capital development activities. “There were additional expenditures undertaken to mitigate the economic and social impacts of the COVID19 pandemic which had not been planned at the start of the financial year. Development expenditures, performed at 86 percent during the month and was attributed to slower execution of the externally financed development projects. Domestically financed development spending, on the other hand, was above projections for June 2020, boosted by improvements in execution capacities.”

Synopsis fiscal operations for FY2019/20

According to the report,  FY2019/20, domestic revenues registered a shortfall of Shs 3,360.61 billion, with collections amounting to Shs 17,285.86 billion against a target of Shs 20,646.47 billion. Total tax collections for the financial year amounted to Shs 15,912.21 billion against a target of Shs 18,877.30 billion. This translates into a performance of 84.3 percent and a shortfall of Shs 2,965.10 billion. Similarly, overall non-tax revenue collections amounted to Shs 1,373.65 billion against a target of Shs 1,571.43 billion, implying a performance of 87.4 percent.

Total Spending performed at 83.0 percent, with this underperformance mostly explained by externally financed development projects whose expenditure performed at only 40.1 percent of its budget. Government expenditure (excluding debt repayments and Appropriation in Aid for Local Governments) was Shs 27,473.66 billion against a plan of Shs 33,110.82 billion.

Expenditure on recurrent items was Shs 15,229.87 billion against a budget of Shs 15,127.43 billion (performance of 100.4 percent). Similarly, domestically financed development expenditure was above planned spending by 2.4 percent, having totalled Shs 8,055.78 billion against a plan of Shs 7,870.27 billion. These preliminary estimates show that the overall fiscal deficit (including grants) as a percentage of GDP for FY2019/20 is 6.7 percent which is lower than the 7.5 percent projected at the start of the financial year.