Govt continues to register more revenue surplus

URA|REVENUE|SURPLUS

Uganda's economy has continued to recover from the financial distress that arose from the COVID-19 lockdown.

The latest performance of the economy report shows that for the fourth month running in this financial year, the Uganda Revenue Authority (URA) has collected more tax revenue than the target it had been given.

The report, compiled by the finance ministry, indicates that government collected sh1.4 trillion in October, against the month's target of sh1.26 trillion.

This implies a revenue surplus of sh147.18b. Of the total amount collected during the month, sh1.3 trillion was tax revenue while sh76.94b was generated from non-tax revenue sources.

URA had also realised revenue surpluses in each of the previous three months of July (sh179b), August (sh343b), and September (sh431.12b).

URA has registered a total revenue surplus of sh1,100.28b for the three months.

Cumulatively, sh5.5 trillion domestic revenue has been collected in the four months.

Gold, coffee top earners 

In spite of the improvements in the level of economic activity following the easing of the lockdown measures, revenue collections are yet to fully recover from the effects of the pandemic, which paralysed many businesses.

Consequently, overall domestic revenue in October declined by 2.3%, compared to the same month last year.

Gold, coffee, and fish have continued to be Uganda's leading foreign exchange earners.

On a year-on-year basis, export receipts increased by 40.85% from $296.73m in September 2019, to $417.93m in September 2020.

This was mainly attributed to the increase in the value of exports of coffee, mineral products, flowers, and tea during this period.

The value of coffee exported increased by 28.8%, largely driven by higher export volumes.

The report indicates that whereas government collected sh1.4 trillion in October, its expenditure more than doubled the revenue collected at sh3.4 trillion.

Inflation

Within the region, Tanzania and Uganda have the lowest infl ation rate at 3.1% and 4.5%, respectively, in the month of October. Kenya's inflation was at 4.8%.

Rwanda's inflation decreased to 9.3% last month, from 10.8% the previous month, following a reduction in the rate of price increases for food and non-food beverages; housing and utilities; transport; alcoholic beverages, and tobacco.

Within East Africa, Tanzania, which did not impose a COVID-19 lockdown, is the only country whose currency did not depreciate against the dollar last month.

Last month, the Uganda shilling depreciated against the dollar by 0.7%, trading at an average midrate of sh3,720 per dollar, compared to sh3,695 the previous month.

The depreciation was largely on account of higher demand for the dollar from the oil and manufacturing sectors that outmatched supply.

Credit 

In September, commercial banks approved sh932b credit for disbursement to the private sector.

Manufacturing received the largest share of credit approved in September, at 25%, followed by trade at 23.4% and personal and household loans at 20.3%.

Experts weigh in 

Commenting on revenue surpluses, Makerere University Business School finance lecturer Dr Sulait Tumwine said: "Certainly, it is an indication that the economy is recovering from the COVID-19 economic depression. It is good news for our economy."

Tumwine predicts that whereas the exchange rate has been stable in the previous months, it will most likely keep worsening in the current period and months to come as a result of the consequences of elections, including the chaos.

"All African countries normally get economic meltdown during elections. There is usually a high tendency for investors to repatriate money, instead of reinvesting it, for fear of uncertainties," Tumwine explained.

Makerere University economics lecturer Dr Fred Muhumuza argues that whereas there are indicators of some improvement, the economy is still doing badly.

"In fact, the situation would have been worse if government had not borrowed some money from the International Monetary Fund.

The prediction from Bank of Uganda is that financial institutions would experience stress from October to December and that is why they are scaling down on lending. The revenue surplus is mainly because the target was reduced from the earlier one."

Revenue target for the 2020/2021 financial year was sh21.81 trillion in the appropriated budget approved by Parliament.

However, due to the effect of COVID-19 on businesses and general economic activity, the revenue target was revised downwards to sh19.878 trillion.