There was a fall in the value of demand for and subsequent payout of retirement benefits by Ugandans over the last year, at least according to the National Social Security Fund.
There had been increasing payout amounts over the last three years, in addition to the change in the laws to allow people to get part of their benefits at an earlier age of 45, as opposed to the previous provision that only allowed a lump sum after the beneficiary clocked 55 years.
NSSF accounts for more than 80 percent of the retirement benefits market in Uganda, excluding the public service pension scheme, the major social protection for earners outside the public service.
According to the 2023/2024 results, benefits paid reduced to 1.12 trillion from the 1.2 trillion shillings paid out in the previous year, as the number of claimants fell from 48,115 to 44,250 over the same period.
Mid-term benefits paid out also dropped from 272 billion to 176.6 billion shillings. Historical data shows that in 2019/2020, the year the Covid 19 broke out in the country, 450 billion shillings were paid out and increased to 645 billion the following year.
There was then a spike in 2021/22 when the amount paid out hit 1.189 trillion shillings and almost stabilized to a record 1.199 trillion in 2022/2023.
An analysis of the trends shows a relationship between the data and other economic indicators some of which relate to the changes in the economic environment and personal incomes. These could tell why there is reduced demand for money in the form of benefits
For example, the Purchasing Managers’ Index (PMI), which indicates perceptions about doing business shows a steady improvement in business activities, boosted by a rise in orders over the last 20 months, save for March this year when there was a decline in the index.
New orders signify that the public is willing and able to spend more on their needs, a sign of improved personal income or lower need to spend.
This came with a belief that the economic situation was also easing along with more jobs becoming available.
“Optimism in the outlook for output over the coming year was also recorded, as firms raised their workforce numbers again in line with upbeat growth forecasts and greater new sales,” says the PMI for June 2024, adding, “The uptick in new orders encouraged firms to hire additional staff in June, as employment continued to grow. Ugandan companies reportedly recruited permanent and temporary staff to build capacity.”
Over the last year, inflation has also dropped from 6.2 percent in May 2023 to 3.9 percent at the end of June 2024.
The fall in inflation also reflects the ability of people to save more as the prices of goods move closer to stability, meaning that the need to seek financial bailouts like NSSF savings is lowered.
The ability to save also increases the capacity of the people to invest using the available resources in the form of savings.
There was also some stability in the foreign exchange rate, with the shillings depreciating against the dollar at a marginal 0.8 percent which made the economic environment more predictable and kept imported inflation in check.
The Bank of Uganda says the pressures in the economic environment have eased and continue to improve, as the country further rises out of the Covid 19 effects.
In August, for example, BOU lowered its base interest rate (Central Bank Rate) from 10.25 to 10 percent following a decline in inflation over the year, attributing the decision in part to the improving situation.
“This adjustment was further prompted by the diminishing effects of global shocks such as the war in Ukraine and COVID-19, as well as the relative stability of the Shilling against the US dollar,” said Deputy Governor, Micheal Atingi-Ego.
According to the 23rd Uganda Economic Update by the World Bank; economic activity in Uganda has remained resilient despite multiple successive shocks, with the real gross domestic product (GDP) accelerating from 5.3 percent in the financial year 2022/23 to an estimated 6 percent in 2023/24, a new World Bank report notes.
“Per capita income, according to the Bank, reached about 980 in 2022/23, and continued growth will push Uganda closer to the lower-middle-income threshold,” says the Bank.
However, official statistics from the Uganda government show that GDP per Capita increased from 1,025 in the previous financial year to 1,071 dollars.
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