Report: Govt borrowing, expenses reduce in July

The Ministry of Finance, Planning and Economic Development said in its performance of the economy monthly report July 2024 that government operations in the first month of the fiscal year 2024/25 resulted in less borrowing of Shs29.95 billion.

The development shows that the government appears to be tentative about borrowing, with the country’s public debt rising.   

“Fiscal Development net borrowing (fiscal deficit) for July 2024 was projected to amount to Shs975.55 billion. However, government operations during the month resulted in a net borrowing of Shs29.95 billion,” the ministry noted in the report released on August 20.

The Finance ministry said this was due to a combination of higher-than-targeted tax revenue and lower-than-projected expenditures. There is, however, no looking away from Uganda’s public debt stock. The Uganda Economic Outlook report for August put together by Price WaterHouse (PwC) revealed that the country’s public debt grew by five percent from Shs93 trillion ($24.69 billion) as at December 31, 2023 to Shs98 trillion by June 30, 2024.

In regard to revenue performance during July 2024, the Finance ministry said total revenue for the month amounted to Shs2.233 trillion against the programmed target of Shs2.181 trillion. “This was largely due to tax performance which registered a surplus of Shs124.3 billion,” the July State of the Economy report reads in part. 

The report shows that taxes on income, profits and capital gains registered a surplus of Shs21.00 billion while taxes on goods and services registered a surplus of Shs2.40 billion.

 “Similarly, international trade taxes were above the target by Shs34 billion. The surplus under international trade taxes was largely due to the good performance of import duty during the month. Preliminary data shows that grant disbursements amounted to Shs12.10 billion against a target of Shs74.09 billion, while other revenue registered shortfalls of Shs10.06 billion,” the Finance ministry divulged in the report.

Expenditures

Concerning government expenses during the month, the Ministry of Finance said these amounted to Shs2.198 trillion against the programme of Shs2.846 trillion. All expense categories performed below their respective targets except social benefits.

“Only 61 percent of the compensation to employees was paid during the month, with delays arising from payroll system challenges accounting for this underperformance,” the ministry further noted.

The report indicates that during July the purchase of goods and services was slower than planned. This, it added, was due to longer than anticipated budget processes at the beginning of the financial year. This red tape delayed spending by government agencies.

The report states that Shs505.2 billion was released to Local Governments (grants). Of this, Shs279.3 billion was for wages, Shs128.9 billion was for recurrent expenditure, and Shs96.9 billion was for development expenditure.

Net acquisition of non-financial assets—totalling Shs65.18 billion—was used to acquire non-financial assets during July 2024. This was against a target of Shs310.44 billion. The report offered that this was due to longer-than-anticipated procurement processes at the beginning of the financial year and lower-than-expected external disbursements.

EAC trade balance

The report states that in June 2024 Uganda traded at a surplus of $45.26 million with the rest of the East African Community (EAC) Partner States, a shift from the deficit of $72.20 million registered the previous month. This was majorly on account of a substantial decline in the imports from Tanzania, which dropped by 56.8 percent from $236.12 million to $101.90 million in June 2024.

On a country-specific level, Uganda traded at surpluses of $61.85 million, $48.47 million, $25.94 million, and $8.61 million with the Democratic Republic of the Congo (DRC), South Sudan, Rwanda, and Burundi, in that order. However, trade deficits were recorded with Tanzania and Kenya, amounting to $90.44 million and USD 9.17 million, respectively.

A year-on-year comparison showed that exports to the EAC increased by 9.7 percent from $213.02 million in June 2023 to $233.61 million in June 2024. Conversely, imports from the region decreased by 22.1 percent from $241.80 million to $188.35 million over the same period.

Economic activity

The report also noted continued improvement in the level of economic activity as shown by the high-frequency indicators of economic activity—the Composite Index of Economic Activity (CIEA) and Purchasing Managers’ Index (PMI).

Similarly, perceptions about doing business, as shown by the Business Tendency Index or BTI, remained positive and optimistic. The Composite Index of Economic Activity (CIEA) grew by 0.97 percent from 166.61 in May 2024 to 168.22 in June 2024, partly in response to growth in coffee exports, and higher Private Sector Credit to trade and building, mortgage, construction and real estate sectors, which supported economic activity during the month.

The Purchasing Managers’ Index (PMI) also improved to 53.7 in July 2024 from 51.9 in June 2024, explained by sustained expansions in new orders and output. Business Perceptions about doing business as shown by BTI remained optimistic and positive. The Ministry said the BTI was recorded at 59.03 in July 2024, way above the 50-mark threshold, indicating continued optimism within the business community. Higher optimism in the business community was observed in wholesale trade and other services sectors.

The Ministry of Finance, Planning and Economic states in the report that the EAC Exchange Rates in July 2024 was a dampener. All the currencies of the EAC Partner States depreciated against the US Dollar, except for the Ugandan Shilling, which appreciated by 1.1 percent. The Tanzanian and Kenyan Shillings depreciated by 1.2 percent and 0.5 percent respectively, while the Rwandan and Burundian Francs weakened by 0.5 percent and 0.2 percent respectively.