Govt realizes fiscal deficit of Shs1.7 trn as domestic revenue collections eclipse target

By George Mangula

Government operations resulted into a fiscal deficit of Shs 1.7 trillion in July 2020 which was lower than the programmed deficit of Shs 2.3 trillion, according to the latest Performance of the Economy Report released by the Ministry of Finance.

“This was on account of lower spending than planned, coupled with higher than projected revenues for the month,” says the report.

Domestic revenue collections

Domestic revenue collections during July 2020 amounted to Shs 1.2 trillion which was higher than the target by 17.5 percent or Shs179.03 billion.

Of the total revenue collections, Shs 1,146.02 billion was tax revenue while Shs 55.5 billion was non- tax revenue.

According to the report, tax collections were 21.0 percent higher than the Shs 947.29 billion target for the month, resulting into a surplus of Shs 198.73 billion. “This performance was explained by the payment of some taxes that were supposed to be paid in FY 2019/20 but spilled over into July 2020 due to; delays in filling for taxes of imported goods as movement was restricted during the lockdown –which explains the performance of international trade taxes; and Government’s policy of tax deferment in a bid to support businesses during the Covid-19 lockdown.”

The report says  all the three tax heads registered surpluses compared to their respective targets for the month, with taxes on international trade and transactions registering the biggest surplus. Performance in domestic taxes also benefited from the pick-up in economic activity in July following easing of lockdown restrictions.

Non-Tax Revenue (NTR) collections, on the other hand, were lower than the target for the month. NTR was Shs 55.5 billion in July 2020 against a target of Shs 75.20 billion as most of the MDAs that offer services on which NTR is generated had not yet resumed operations to full capacity.

The July 2020 revenue target was derived from the target of Shs 20,809.7 billion for the financial year as passed by parliament in the approved budget. Monthly revenue collections were higher than the target for the month partly because of spillovers from the previous financial year.

Govt expenditure

According to the report, government expenditure during July 2020 amounted to Shs 2,988.50 billion which was 13.6 percent lower than what was programmed for the month mainly on account of lower expenditure on recurrent items. Expenditure on recurrent items was Shs 1,572.59 billion against a plan of Shs 2,035.50 billion for the month. This is because some MDAs received their funds later in the month and could not fully absorb hence pushing some of the planned expenditures from July to August 2020. On the other hand, development expenditure was higher than the plan for the month by 11.8 percent as absorption for domestically financed expenditure was higher than what was anticipated for the month.