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Finance Ministry Paints Gloomy Picture Of Uganda’s Economy

A new report from Ministry of Finance, Planning and Economic Development has painted a murky picture of Uganda’s economy after government reported a Shs200bn revenue collection shortfall in the month of November.

The November 2019 Performance of the Economy Report by Finance Ministry reads in part: “All tax heads registered shortfalls in the month of November 2019. Direct domestic taxes were Shs79.26bn (or 17.7%) short of the targeted Shs449.08bn as Pay As You Earn (PAYE) and withholding tax, two of the largest categories performed poorly during the month.”

The report reveals that domestic Revenues during the month totaled to Shs1.429Trn representing (88.0%) against the projected Shs1.624Trn.

Government through Finance Ministry has blamed the poor revenue collections on the major aggregates of revenue as both Tax and Non-Tax revenue registered shortfalls of Shs189.46bn and Shs26.69bn respectively.

Government also revealed that indirect domestic taxes also performed below the target in November, registering a shortfall of Shs62.17 billion (or 15.4%). Both VAT and excise duty fell short of their targets for the month.

On the other hand, taxes on international trade were affected by lower than projected import demand during the month whose collections amounted to a shortfall of Shs48.78Bn (7.4%) with both import duty and VAT on imports falling short by 12.8% and 11.9% respectively.

The report also indicated that the annual Headline Inflation rose to 3.0% in November 2019 from 2.5% in October which was largely attributed to an increase in Annual Core Inflation (to 2.9% in November from 2.6% in October, 2019).

However, Uganda isn’t the only nation in the East Africa region whose economy is biting; the report indicates that there was a general increase in Annual Headline Inflation for four of the EAC Partner States, for whom data is available.

Rwanda is said to have registered the highest increase in inflation majorly driven by rising prices of food, non-alcoholic beverages, meat, bread and cereal among others. Annual headline inflation for Rwanda was recorded at 11.8% in November 2019 compared to 7.2% registered the previous month.

Annual Headline Inflation for Kenya increased from 4.95% in October to 5.56% in November as prices rose much faster for food and non-alcoholic beverages, transport, housing, water and electricity.

Similarly, Annual Headline Inflation for Tanzania rose from 3.6% in October to 3.8% in November 2019 as prices rose at a faster pace for food.

There was positive outlook to Uganda’s economy in the month of October 2019, after Uganda recorded a trade surplus with the EAC after exporting merchandise worth USD 98.88 million to the region and imported merchandise worth USD 81.46 million, thus trading at a surplus of USD 17.42 million.

At country specific level, Uganda traded at a surplus with all EAC Partner States save for Tanzania.

Kenya took the largest share of Uganda’s exports and, was also the main source of Uganda’s imports. South Sudan was the second largest market for Uganda’s exports in the region while Tanzania was the second largest source of imports.

It is worth noting that recently  the State Minister of Planning, at the Ministry of Finance, David Bahati tabled a motion before Parliament seeking Parliamentary approval to borrow Euros 600M (about Shs2.4Trn) from both Stanbic Bank and Trade Development Bank to finance the 2019/2020 national budget deficit.

Bahati told Parliament that the 20l9/2020 budget is facing a number of constraints including tax revenue shortfall of Shs1.873Trn, additional expenditure pressures of Shs1.432Trn, Non-receipt of World Bank budget support funds of Shs375bn and Non-receipt of capital gains tax of Shs225bn, constraints bringing the total revenue resource shortfall in the FY 2019/2020 to Shs2.473trn.

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