Uganda’s Finance Minister Matia Kasaija
The month of July 2020 registered improvement in economic activity following a downturn caused by the COVID-19 pandemic as the Government of Uganda continued to ease some of the containment measures that were instituted to prevent spread of the virus, the July 2020 performance of the Economy report released by Ministry of Finance, Planning and Economic Development has revealed.
This was reflected by the performance of the key indices of economic activity that is; the Purchasing Managers Index (PMI), Composite Index of Economic Activity (CIEA) and the Business Tendency Index (BTI), which improved in July compared to the previous month.
Additionally, international trade improved as reflected by an increase in the value of both exports and imports.
According to the report, export earnings increased for the second consecutive month to US$ 337.19 million in June 2020 from US$ 290.93 million in May 2020, while the value of imports increased to US $543.6 million in June 2020 from US $ 435.6 million in May 2020.
The monetary policy actions implemented by Government since April 2020 have also supported this improvement.
Specifically, Bank of Uganda maintained the Central Bank Rate at 7 percent in July 2020 and continued to provide liquidity support to the banking sector.
Te report adds that to continue supporting economic recovery during the COVID-19pandemic, Government plans to implement various fiscal measures in FY 2020/21 such as: recapitalising Uganda Development Bank; increasing funding to Uganda Development Corporation to facilitate public-private partnership investments as part of the import substitution and export promotion strategy; and expediting payment of arrears owed to the private sector in order to address liquidity constraints faced by suppliers of Government.
The report shows that the Uganda shilling continued to strengthen against the US Dollar in July 2020,registering an appreciation of 0.9% on account of increased inflows amidst subdued demand. UgShs traded at average midrate of Shs 3,703.5/ USD during the month compared to Shs 3,737.9/USD in June 2020.
It adds that Annual headline inflation rose to 4.7% from 4.1% in June 2020 due to an increase in annual core inflation which rose to 5.8% from 4.9% recorded in June 2020.
“The average lending rates for both shilling and foreign currency denominated credit edged upwards in June 2020 as banks are more risk averse because of the COVID-19 pandemic. Lending rates for shilling denominated credit rose to 19.3 percent in June 2020 from 18.8 percent recorded the previous month,” the report reads in part.
Similarly, it adds, lending rates for foreign currency denominated credit increased to 5.5 percent in June 2020 from 4.2 percent the previous month.
“The stock of private sector credit grew by 4.1 percent to Shs 16,980.9 billion in June 2020 from Shs16,316.4 billion in May 2020. New credit approved and extended in June 2020 amounted to Shs 770.3 billion which was higher than the Shs 589.5 billion that was extended the previous month,” the report says, adding: “Yields(interest rates)on T-Bills edged upwards for all tenors with the 91, 182 and 364-day recording values of 8.94percent, 10.48percentand 12.27percentrespectivelyfrom 8.69 percent, 10.31 percent and 12.13 percent respectively in June 2020.”
It reveals that Uganda’s merchandise trade deficit widened in June 2020 registering a deficit of US$ 206.4million compared to a deficit of US$ 144.7 million in May 2020.
“The overall fiscal deficit amounted to Shs1, 723.31billionin July 2020, which was lower than the programmed deficit of Shs2,289.81billion. The lower deficit was a result of less expenditure during the month coupled with higher revenue collections compared to what was programmed for the month,” the report says, adding: “Domestic Revenue collections amounted to Shs1,201.52billion against a target of Shs1,022.49 billion for the month, registering a surplus of Shs179.03 billion in July 2020. Government expenditure amounted toShs2,988.50billion in July 2020 which was 13.6 percent lower than what was programmed for the month.”
