BY SAMSON OKWAKOL
KAMPALA, Uganda—the performance of the economy report for May 2018 released by the Ministry of Finance has indicated continued improvement in Uganda’s economic activity.
The report indicates that Composite Index of Economic Activity (CIEA) increased by 0.2% from 212.5 in March 2018 to 212.9 in April 2018, reflecting continued improvement in economic activity.
IT highlights that investors’ sentiments about doing business in Uganda for the next three months remained positive as illustrated by the Business Tendency Index of 55.74 in May 2018 which is above the threshold of 50.
According to the report, the stock of outstanding private sector credit increased by 0.8% from UShs12,827.96 billion in March 2018, to UShs12,925.98 billion in April 2018. This compares unfavourably against a growth of 1.5% registered in March 2018. Likewise, the value of loans approved in April 2018 reduced by 34.7% from UShs. 1096 billion in March to UShs. 715.8 billion.
However, it highlighted that, although the overall trend of loans approved to loan applications has been upward over the last one year (April’17 to April’18), there was a decline in April 2018 from 78.6% in March to 63.1%. The limited growth in credit is partly attributed to the continued risk aversion by the commercial banks, which is reflected through the reduction of the proportion of loans approved out of the total loan applications received.
Yields on Treasury Bills slightly edged upwards across all tenors largely due to an increase in Government’s borrowing requirements. The average weighted yields to maturity for May were 8.8%, 9.5%, 10.1% for the 91, 182 and 364 day tenors respectively. This compares with 8.7%, 9.3% and 9.7% in April 2018. All tenors were over-subscribed; the average bid to cover ratio6 for the month was 1.5 a decline from 1.63 registered the previous month.
Export earnings increased on an annual basis but declined on a monthly basis. Compared to the same period last year, export earnings increased by USD 5.14 million (2%) in April 2018 to USD 264.61 million from USD 259.46 million. This performance is mainly explained by increases in the earnings of gold, flowers, tea, fish & its products.
Nonetheless, coffee which is the main export commodity registered a 16.6% drop in its earnings following a fall in both the volume and international prices. Coffee volumes declined by 9.5% whereas the prices fell by 7.9%.
Government collected a total of UShs. 1,204.3 billion in domestic revenues against the target of UShs. 1,237.4 billion for the month which translated to a performance of 97.3%. This lower than projected performance originated from the performance of tax revenues (91.7 percent) as non-tax revenue performed above its target for the month (104.8 percent).
Non-tax revenue collections amounted to UShs 36.8 billion against a target of UShs. 35.1 billion. This was due to the continued efficiency gains being realized from the collaboration between Uganda Revenue Authority and other MDAs in the collection of this revenue.
Tax revenue, on the other hand, amounted to UShs. 1,167.6 billion against a target of UShs. 1,202.3 billion, resulting into a shortfall of UShs. 34.7 billion. This shortfall originated from domestic taxes; both direct and indirect taxes posted a combined shortfall of UShs. 57.2 billion which offset the UShs. 18.8 billion overage registered in taxes on international trade.
Direct taxes posted a shortfall of UShs. 9.7 billion largely from withholding tax and was partly due to lower profitability and hence payment of less dividends during the month.
Indirect taxes registered a shortfall of UShs. 47.6 billion from a target of UShs. 301.1 billion, mainly due to shortfalls in Value Added Tax (VAT) as a result of lower sales of manufactured products such as beer, cement, sugar and bottled water among others.
Excise duty also contributed to the shortfall in indirect taxes; shortfalls were recorded in collections on phone talk time, resulting from the increasing data transactions (social bundles) at the expense of phone talk time. Increased importation of malt beer which led to reduction in local production also contributed to the shortfall.
On the upside, international trade tax collections amounted to UShs. 552.8 billion. This was UShs. 18.8 billion above the target of UShs. 533.9 billion. (Performance of 15103.5%). VAT on imports largely accounted for this performance. Petroleum duty on the other hand registered a shortfall due to less than anticipated volumes of fuel imports.