Uganda’s economy is steadily recovering from the shocks of COVID-19, evidenced by the improved revenue collections.

According to the latest performance of the economy report, which the finance ministry released on Friday, Uganda Revenue Authority (URA) achieved its revenue collection target for last month.

URA has been registering revenue shortfalls in the previous months since the financial year started in July 2021. Huge revenue shortfalls of sh3 trillion and sh2 trillion were registered in the 2019/2020 and 2020/2021 financial years, respectively, mainly due to the effects of COVID-19 on the economy.

SH133.2B SURPLUS The report indicates that domestic revenue collections in May 2022 were to the tune of sh1.75 trillion, which is much higher than the month’s revenue collection target of sh1.62 trillion.

This implies that in May 2022, the Government realized a revenue surplus of sh133.2b. Of the total revenue collection of sh1.75 trillion, sh1,649.60b were tax collections, while sh106.94b were non-tax collections.

More PAYE

The report indicates that there have been higher than planned collections for income taxes, especially Pay As You Earn (PAYE) and corporate tax as profitability and employment levels in the private sector continue to pick up after the lows of the pandemic.

During the COVID-19 lockdowns, many companies came to a standstill and cut salaries, while others had to send their staff on forced leave, which greatly reduced revenues from PAYE and corporate tax.

The significant progress registered in revenue collections in May this year is attributed to the rise in economic activities, increased aggregate demand, coupled with improved enforcement of the digital tracking system and the Electronic Fiscal Receipting and Invoicing System that has resulted in higher than planned collections for consumption taxes.

International trade

Surplus collections on international trade and transactions were registered mainly on account of higher than planned collections on petroleum duty, import duty and VAT on imports during the month.

Whereas revenue collection was sh1.75 trillion in May 2022, the government expenditures within the same period were to a tune of sh2.7 trillion, which was higher than the planned expenditures of sh2.3 trillion.

This was mainly on account of higher than planned spending on non-wage recurrent items as various ministry departments and agencies were availed additional resources in form of supplementary budgets.

Declined exports

Meanwhile, Uganda’s earnings from exports declined to $344.36m in April 2022 from $369.39m recorded in March 2022.

Export items with the largest decrease in value included coffee, cement, beans, sim sim, tobacco, plastic products, and base metals.

Merchandise worth $572.11m was imported in April 2022, registering a decline of 9.9% from the previous month. The drop in the import bill was mainly driven by lower volumes of merchandise imported by the private sector following high commodity prices.

Uganda posted merchandise trade deficits with the regions of Asia, the Middle East, the Americas, and others.

Uganda enjoyed trade surpluses with the East African Community (EAC), the rest of Africa, the rest of Europe, and the European Union.

For the last three years, Uganda has been enjoying a trade surplus with the EAC countries. This means that the value of what Uganda exports to the EAC countries is higher than the value of what it imports from the same countries.

Moses Kaggwa, the director for revenue collection at the finance ministry, attributed the improved revenue collection to economic recovery from the effects of COVID-19 and improved administrative measures for revenue collection.

“The reason we decided not to introduce new taxes was to enable the economy to recover. We are optimistic that in the next financial year, the economy will be growing at a rate of 5.5% and more improvements will be realized,” Kaggwa stated.