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COVID-19: Government registers sh3.1 trillion revenue deficit

By Mary Karugaba

Added 19th September 2020 05:03 PM

COVID-19: Government registers sh3.1 trillion revenue deficit

A medical worker dressed in personal protective equipment (PPE). Muhakanizi said sh89b has been provided for the purchase of PPE and to increase ICU beds

As the COVID-19 pandemic continues to ravage world economies, Uganda has not been spared either.

The Government has registered a revenue shortfall of sh3.1 trillion, a case which the finance ministry permanent secretary, Keith Muhakanizi, has described as "the worst ever."

"This year has been extremely difficult. Due to the COVID-19 outbreak, the budget for the financial year 2019/20 was greatly affected by a number of things, which in the end had a great impact on domestic revenue mobilisation.

‘‘The financial year 2019/20 registered a deficit of sh3.1 trillion and also limited household incomes," Muhakanizi said.

He revealed that preliminary estimates of real Growth Domestic Product (GDP) indicated that the economy grew by 3.1% in the financial year ended June 30, slower than the average growth rate of 5.4% in the previous four years.

"In nominal terms, Uganda's GDP was estimated at sh138.6 trillion," Muhakanizi said in a four-page brief to Parliament on the performance and implementation of the financial year 2020/21 budget and the effects of COVID-19 on the budget for the financial year 2019/20.

Finance minister Matia Kasaija in June last year presented to Parliament a sh40.5 trillion budget for the financial year 2019/20, revealing that Uganda would finance 74.5% of the budget.

It was expected that Uganda Revenue Authority (URA) would collect sh18 trillion, of which sh14 trillion would be raised from non-tax revenue, sh445b from the petroleum fund, sh201b from local governments, sh8.5 trillion from domestic borrowing, while sh10 trillion would come from external financing.

Muhakanizi noted that the pandemic continues to test the resilience of the economy as the effects have been keenly felt through key sectors, such as tourism and hotels, while disruptions to supply chains have affected manufacturing, construction and trade activities.

In addition, he said the slowdown in the pace of global economic activities had negatively impacted on inflows from exports, remittances and foreign direct investment, which in turn affected the performance of the budget.

Budget implementation 

Regarding the implementation of the budget for the financial year 2020/21 in relation to Matia Kasaija

COVID-19, Muhakanizi said sh89b has been provided for the purchase of personal protective equipment and to increase Intensive Care Unit beds at national and regional referral hospitals.

This is in addition to sh130b to create jobs for the vulnerable but able-bodied persons affected by the coronavirus.

He also indicated that the finance ministry has disbursed sh458b to Uganda Development Bank to offer low interest financing to manufacturing, agribusiness, and other private sector firms.

Muhakanizi said the ministry has also disbursed sh100b to Uganda Development Corporation for public-private partnership investments to facilitate imports substitution and export promotion strategy.

"The Government continues to pay arrears to its suppliers in order to address liquidity constraints for these firms. We are committed to the delivery of government programmes and services in a timely and efficient manner and continue to focus policies as well as actions to stimulate the economy to safeguard livelihoods, jobs, businesses and industrial recovery," he said. 

COVID-19 mitigation measures

When COVID-19 broke out in Uganda in April, the Government took several measures to mitigate the spread of the virus.

These included a lockdown and closure of all borders and airport, among others.

The lockdown majorly affected the domestic transport, schools, informal trade, and tourism sectors.

The pandemic came at a time when the Government was grappling with the challenges of the locust invasion, further constraining the budget.

 "Low domestic revenues and the additional expenditure requirements to support the health and the vulnerable population further dented public finances, leading to an expansion in the budget deficit," Muhakanizi said.

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