Gov’t expenditure attracts deficit of Shs692b in September as revenue and grants miss targets

By George Mangula

Government operations during the September resulted into a Shs 692 billion deficit which was higher than the programmed Shs 623 billion, the Finance ministry says in its Performance of the Economy Report for September 2019.

The ministry attributes the deficit to shortfalls in revenues and grants which were offset by the underperformance in expenditure and net lending.

“Domestic revenues during the month totalled to Shs 1,381 billion which is an 89% performance against the programme of Shs 1,560 billion since both tax and non-tax revenues registered shortfalls. All major tax categories registered short falls as direct, indirect and international taxes were below their targets by Shs 27 billion, Shs 52 billion and 66 billion respectively,” the report says.

According to the report, the poor performance in international taxes was largely due to lower imports than had been projected for the month. “Non-Tax Revenue (NTR) during the month amounted to Shs 81.68 billion registering a Shs 37 billion shortfall.”

It says expenditure and net lending in September amounted to Shs 2,143 billion which was Shs 213 billion below the program, as recurrent expenditures were above projection by Shs 52 billion as both wages and salaries and other recurrent expenditures performed above their set targets.

However the report says there was lower expenditure in both Development expenditure (Shs 82 billion) and net lending (Shs 183 billion) as both externally financed and domestically financed development projects performed below the projection for the month.

Uganda’s trade balance with the EAC

According to the report, during the month of August 2019, Uganda traded at a surplus with all EAC Partner States save for Tanzania and Kenya. Within the region, Kenya was the main destination of Uganda’s exports, followed by South Sudan.

Over the same period, Tanzania was the largest source of imports. Overall, Uganda traded at a deficit with all EAC Partner States combined, although a trade deficit of US$ 22.7 million was recorded in August 2019 compared to a surplus of US$ 61.09 million recorded a year ago.

Uganda’s exports to EAC declined by 28.2 percent to US$ 88.64 million in August 2019 from US$ 123.47 million recorded a year ago. On the contrary the import bill increased by 78.5 percent from US$ 62.38 million in August 2018 to US$ 111.33 million in August 2019.

Merchandise trade deficit narrows 16.8 percent in August 2019

Uganda`s merchandise trade deficit narrowed both on an annual and monthly basis following growth in export revenues and a reduction in the import bill, the report says. On a monthly basis, Uganda`s merchandise trade deficit narrowed by 16.8 percent (US$ 36.6 million) to US$ 181.43 million in August from US$ 218 million in July 2019. “Compared to August 2018, the merchandise trade deficit narrowed by 33.2% (US$ 36.57 million) from US$ 271.43 million to US$ 181.43 million in August 2019,” the report adds.

The value of merchandise exports increased both on an annual and monthly basis. Export earnings grew by 1% from US$ 318.43 million registered in July 2019 to US$ 321.67 million in August 2019. The report tags the increase to increased earnings from commodities of maize, coffee, fish and sim sim.

“Increased earnings from maize and sim sim follows an increase in the prices, whereas, the growth in earnings from fish and coffee are explained by increases in their respective volumes. Compared to the same month last year, export receipts increased by 9.4% from US$ 293.93 million to US$ 321.67 million in August 2019,” the report says.

Destination of Uganda’s exports

The report says the Middle East was Uganda’s main destination for merchandise exports in the month of August 2019, followed by EAC, then the Rest of Africa. In comparison with the preceding month, exports to EAC and the Rest of Africa increased whereas exports to other regions declined. Within the EAC, Kenya was the main destination of Uganda`s exports, whereas, United Arab Emirates was the top destination in the Middle East.

Uganda’s merchandise imports

The value of merchandise imports declined both on a monthly and annual basis. The import bill reduced by 6.2 percent to US$536.42 million in August 2019 from US$503.1 million in July, primarily driven by a decline in private sector imports (both oil and non-oil imports).

Oil private sector imports declined by 11.8 percent whereas non-oil private sector imports decreased by 6.6 percent. Compared to August 2018, the import bill decreased by 11 percent from US$ 565.36 million to US$549.85 million in August 2019. Both Government and private sector imports declined.

Origin of Uganda’s imports

Asia, EAC and Middle East were the largest sources of imports, contributing 42.5 percent, 22.1 percent and 12.8 percent respectively during the month of August 2019. Of the total Imports from Asia, 86.7 percent were from China, India, Indonesia and Japan. Kenya and Tanzania contributed 95.6 percentof the total imports from EAC region.

Trade balance by region

The country traded at a surplus with the Middle East, European Union, and Rest of Africa, whereas Uganda posted merchandise trade deficits with the regions of Asia, Rest of Europe and EAC. Uganda had the biggest surplus with the Middle East (US$ 25.09 million) and the largest deficit with Asia (US$ 194.78 million). In the month of August 2019, Uganda traded at a deficit of US$ 22.7 million with the EAC an improvement from a deficit of US$ 51.94 million reported the earlier month.