“With inflation now tamed, the Ugandan economy can expect to jump back to life ,” said Bank of Uganda Governor Emmanuel Mutebile while announcing the new Central Bank Rate early this month.
The CBR was cut to 13% from 15% the previous month after Uganda Bureau of Statistics announced that headline inflation dropped to 5.4% from 11.9% in August, hitting single digits, the first time this has happened since February 2011. “A substantial decrease in prices was recorded for some fresh vegetables, fruits, maize flour, maize grains, rice, fish and fresh milk,” said Chris Mukiza, UBOS director for macro-economic statistics in a statement. “This was primarily attributed to increased supplies to the market. However, there was an increase in the prices of matooke (staple green bananas), irish potatoes and sugar in most centres,” he added. Uganda has one of the world’s top 20 fastest growing economies. Over a 10 year period, it was ranked as number 19, behind African leaders Equatoria Guinea, Angola, Ethiopia, Nigeria, Rwanda and Mozambique.
However, despite that the country has won the battle against inflation, the economy is still grappling with shortfalls hindering growth in different sectors. According to a monthly report from Ministry of Finance, Planning and Economic Development, government financial operations were more expansionary than planned during the month of August, recording a deficit (including grants) of Shs 211.2bn which was Shs123.6bn or 141% above the programmed level. The ministry said this was largely on account of shortfalls in revenues, lower than programmed Budget Support grants and higher than programmed expenditures during the month. The deficit was financed from both domestic and external sources.
The trade balance in July, recorded a deficit of USD 292723.5 as the goods imported exceeded exports. The stability in the Uganda Shillings supported growth in imports and was on account of petroleum products, road vehicles, machinery and telecommunications equipment. Total goods imports for the month were estimated at USD 522m compared to goods exports of USD229.3m hence recording the above deficit.
Coffee exports declined in August compared to the corresponding month last year. The reported noted that total coffee exports recorded in August was 233,151 60-kg bags worth USD31.5m representing decline of 24.6% and 28.9% in volume and value respectively. The decline was due to lower demand on the international market and the end of harvesting period. it was also revealed that cumulative coffee exports still fell short of last year’s production explaining that total coffee production in 2011/12 amounted to 2.55 million 60-kg bags worth USD369.1m compared to 2.81m 60-kg bags worth USD399.3m in 2010/11. The weaker global growth and expected bumper harvest from Vietnam explains the slowdown in the coffee exports.
The total debt service in August amounted to USD2.68m against the target of USD2.96m, lower than programmed on account of lower payments to multilaterals such as BADEA and IMF. The interest payments to IDA also surpassed the projections for the month by about USD36,011. The highest debt payments were made to India. This was on account of principle payments amounting to USD1.6m. This was closely followed by payments of both principle and interest to IDA amounting to USD1.05m. During the month, interest payments amounting to USD0.03m were also made to BADEA.
Total resources available for budgetary operations amounted to Shs858.7bn, representing a performance rate of 115% against the month’s target. The resource envelope for August 2012 was largely constituted by domestic resources with tax revenues (60%) playing a key role. The bank and non‐bank financial sectors and external financing contributed 20% and (19%) respectively to the resources available.
Uganda Revenue Authority Net revenue collections for August 2012 amounted to Shs516.15bn against a target of Shs540.81bn, registering a deficit of Shs24.66bn. This was mainly contributed by the deficit in international trade taxes of Shs22.01bn. Compared to August 2011, net revenue collections grew by 6.35% (Shs30.83bn). On a cumulative basis, net revenue’ collections for the period July – August 2012 amounted to Shs1,039.95bn against a target of Shs1,054.18 bn, registering a deficit of Shs14.23bn. However compared to the same period July – August 2011, there was a growth in net revenue of 17.18% (Shs152.48bn). Net Domestic tax collections for August 2012 amounted to Shs279.39bn against a target of Shs282.25bn, registering a deficit of Shs2.86bn. and a growth of 14.19% (Shs 34.72bn) as compared to August 2011.
Direct Domestic Taxes (DDT)
DDT collections amounted to Shs. 516.15 billion falling short of the months target by about 4 billion shillings. The achievement rate for this month at 97.3% was lower than for the corresponding month last year. DDT collections on the incomes of individuals (PAYE) and corporations (corporate tax) were below the expectations of the Authorities as the collections registered achievement rates of 94.8% and 70.3% respectively. Tax on bank interest and casino tax were the only tax subheads that exceeded the targets at 246.8% and 104.6%. These however accounted for about 13% of total DDT collections in August thus could not offset the weak performance from the other subheads.
Fees and Licenses
Fees and Licenses collections amounted to Shs8.79bn against a target of Shs10.95bn representing achievement rate of 80.26%. Motor vehicle fees that accounted for 65% of the total fees & licences collections fell short of the month’s target posting achievement rate of 91.3%. Stamp duty & embossing fees and Drivers’ permits which made up 35% of total month’s fees and licenses collections posted achievement rates of 57.04% and 83.67% respectively.
Total external financing inflows where recorded at USD75.0m in August. This was USD 9.7 m or 15% above the programme target for the month. This performance was largely attributed to higher than programmed project support grants, which registered a surplus of 101% against the month’s target.
Total budget support disbursements were at USD12.9m, representing a shortfall of USD2.1m against the month’s target, this despite an unexpected loan disbursement of USD9.0m from the World Bank. The shortfall was largely a result of underperformance of Budget Support grants, which were USD11.1m below programme. USD 7.2m was realised under the HIPC debt relief initiative during the month.
Project Support disbursements amounted to USD48.1m, representing a surplus of USD11.8m above the programmed target.Project Support disbursements were mainly towards the sectors of Public Sector Management (42%), Security (29%) and Roads and Works (11%).
Disbursements to Public Sector Management amounted to US$D20.0m. Inflows were mainly towards Rebuilding Community for Promoting Return & Resettlement of Internally Displaced Persons in Acholi Sub-Region in Northern Uganda (US$ 14.7 million), Markets and Agricultural Trade Improvement (US$ 3.3 million), Community Agricultural Infrastructure Improvement Programme (US$ 2.4 million) and Farm Income Enhancement and Forest Conservation (US$ 2.2 million). Disbursements to Security in support of AMISOM were US$ 13.8 million whereas a total of US$ 5.2 million was disbursed towards the Road Sector Support Project.
Total spending (excluding domestic arrears repayments) increased by 6% in August to Shs861.7bn compared to the Shs814.2 billion recorded in July 2012. With the exception of domestic development and wages and salaries, all expenditure aggregates exceeded their programmed level.
Current expenditures formed the bulk of Government outlays accounting for 42% of the total spending for the month. Domestic interest payments had the largest call on interest costs, which partly reflects the increased issuances of Government securities. By sector, spending was largely concentrated around Public Sector Management (16.3%), Roads and Works (16.1%), Education (14.1%), Security (13.7%), and Interest payments (10.1%). In support of the decentralisation of service delivery, Local Governments received Shs187.2bn equivalent to 21.9% of the resource envelope for August. This was largely in respect of salaries and development transfers.