Uganda: Balance of Payments and International Investment Position Concepts, Sources and Methods

Transcription

1 Uganda: Balance of Payments and International Investment Position Concepts, Sources and Methods BANK OF UGANDA August 2011

2 Table of Contents PREFACE... III 1. INTRODUCTION CONCEPTUAL FRAMEWORK DEFINITIONS DOUBLE-ENTRY SYSTEM CONCEPTS OF TERRITORY AND RESIDENCE VALUATION UNIT OF ACCOUNT TIME OF RECORDING CLASSIFICATION SYSTEM CURRENT ACCOUNT Goods Services Income Current Transfers CAPITAL AND FINANCIAL ACCOUNT Capital account Financial account ERRORS AND OMISSIONS OVERALL BALANCE RESERVES AND FINANCING ITEMS Use of Fund Credit Reserves Other financing items DATA SOURCES CUSTOMS DOCUMENTS RETURNS FROM OFFICIALLY AUTHORIZED FOREIGN EXCHANGE DEALERS RETURNS FROM VARIOUS DEPARTMENTS WITHIN BANK OF UGANDA ENTERPRISE SURVEYS GOVERNMENT SOURCES METHODS CURRENT ACCOUNT Goods Services Income Current Transfers CAPITAL AND FINANCIAL ACCOUNT The capital account Financial Account RESERVES AND FINANCING ITEMS THE INTERNATIONAL INVESTMENT POSITION SPECIFIC ITEMS: INTERNATIONAL INVESTMENT POSITION Direct investment Portfolio investment Financial Derivatives Other investment Reserve assets Page ii

3 Preface This document describes the conceptual framework of Uganda s balance of payments statistics, and international investment positions data sources and compilation methods. Its purpose is to assist users understand the Balance of Payments statistics and international investment position statement. This is the third edition of this publication. Uganda s balance of payments statistics and international investment position statistics are compiled based on the IMF s fifth edition of the Balance of Payments Manual (BPM5). However, plans to migrate to the sixth edition (BPM6) are underway. The balance of payments statistics are compiled and disseminated for both calendar and fiscal years in the Bank of Uganda s publication (Annual Report) as well as in the Uganda Bureau of Statistics publication (The Statistical Abstract). The Bank of Uganda also disseminates quarterly balance of payments statement in its quarterly publication (Quarterly Report). Monthly estimates of the balance of payments statistics are compiled for the analysis of external sector developments and to guide the formulation of monetary and external sector policies and are only available for internal use. The international investment position statement is published on a calendar year basis but plans are underway to provide quarterly and fiscal year estimates. The figures in both the balance of payments and international investment position statements are in millions of US dollars. From time to time, particular concepts, sources or methods used in compiling the balance of payments will change or get modified in light of reviews or other developments. Users will be advised of these changes. Page iii

4 Acronyms and Abbreviations BAT BOP BOU BPM5 CDO c.i.f. FDI f.o.b GDP HIPC IDEA IMF KCCL MAAIF MFPED MTTI NGO n.i.e PIP PSD SBE SNA UBOS UCDA UEDCL UIA USAID UTA British American Tobacco Uganda Limited Balance of Payments Bank of Uganda Balance Of Payments Manual 5 th Edition Cotton Development Organization Cost, insurance and freight Foreign Direct Investment free on board Gross Domestic Product Highly Indebted Poor Countries Investment in Developing Export Agriculture International Monetary Fund Kasese Cobalt Company Limited Ministry of Agriculture Animal Industry and Fisheries Ministry of Finance Planning and Economic Development Ministry of Trade, Tourism and Industry Non Governmental Organizations Not included elsewhere Public Investment Plan Payments and Settlements Department Single Bill of Entry System of National Accounts Uganda Bureau of Statistics Uganda Coffee Development Authority Uganda Electricity Distribution Company Limited Uganda Investment Authority United States Agency for International Development Uganda Tea Authority Page iv

5 1. Introduction In Uganda, the Uganda Bureau of Statistics (UBOS) is responsible for the compilation and dissemination of Uganda s macroeconomic statistics as empowered by the Statistics Act However, in a memorandum of understanding signed between UBOS and Bank of Uganda (BOU), the former delegated the latter with powers to collect, compile and disseminate monetary and external sector statistics. The balance of payments (BOP) is one of Uganda s key macroeconomic statistics, which endeavors to measure the economic transactions between Ugandan residents and the rest of the world. Economic transactions in the balance of payments include: Exports and imports of goods; Exports and imports of services; Income flows 1 ; Transfers 2 ; and Financial flows 3. This publication aims at providing a comprehensive understanding of the following issues in Uganda s BOP: The underlying conceptual framework; Classification of transactions; and Data sources, and methods. It provides a guide on Bank of Uganda s compilation methodology of the balance of payments. Given the constantly evolving economic environment, this publication will continuously be revised when the need arises and the users/readers will be kept abreast of changes to data sources and methods that will be reported from time to time by the Bank. The document is divided into 5 chapters. Chapter 2 explains the concepts and terms used in the balance of payments. It explains the double entry accounting system, concepts of territory and residency, valuation, unit of account and time of recording of transactions. Statistics need to be arranged in a coherent structure to facilitate their use and adaptation to multiple uses. Chapter 3, therefore, provides a classification of economic transactions. In chapter 4, data sources used for the compilation of the balance of payments are provided and lastly a comprehensive description of the balance of payments compilation methodology is given in chapter 5. 1 Such as dividends and interest earned by foreigners on investments in Uganda and by Ugandans on their investments abroad 2 comprise foreign official aid, and funds remitted by Ugandans in Diaspora 3 such as investments in shares, debt securities and loans Page 1

6 2. Conceptual Framework 2.1 Definitions Balance of Payments The balance of payments is a statement that provides a record of economic transactions of a particular country with the rest of the world. Despite the connotation, the balance of payments is not concerned with payments, as that term is generally understood, but economic transactions. A transaction itself is defined as an economic flow that reflects the creation, transformation, exchange, transfer, or extinction of economic value and involves changes in ownership of goods and/or financial assets, the provision of services, or the provision of labor and capital. The BOP cover a wide range of economic transactions which include: Transactions in goods, services, income and current transfers (which are shown in the current account); and Capital transactions, such as capital transfers, and financial transactions involving claims on and liabilities to nonresidents (these categories of transactions are shown in the capital and financial account). 2.2 Double-entry system Conceptually, any economic transaction recorded in the BOP has two sides: where something of economic value is exchanged for something of equal value. The double entry-recording system in the BOP reflects this. When an economic value is provided a credit entry is made, and when an economic value is received a debit entry is made. Credits (+) in the BOP statement represent exports of goods and services, income and transfers receivable, reductions in the financial assets abroad, and increases in liabilities to nonresidents. Debits (-) represent imports of goods and services, income and transfers payable, increases in financial assets abroad, and reductions in liabilities to nonresidents. Every credit in the balance of payments has a counterpart debit and vice versa. For example, an export (credit) has a counterpart (debit) financing item (usually an increase in a financial asset). Similarly, an import (a debit) has a counterpart (credit) financing item, which is usually either an increase in a liability to a nonresident or a reduction in a financial claim on a nonresident (both of which are recorded as credits in the balance of payments). Transfers Unrequited transfers are one-sided transactions. To deal with such transactions, which involve no financial compensation in the compilation of the balance of payments, the methodology includes a category called transfers. This convention allows one-sided transactions to be converted to standard two-sided transactions. More generally all transfers with an economic value, when no quid pro quo is involved, give rise to a counter entry either as a current transfer or a capital transfer. Errors and omissions Page 2

7 It follows that in principle, under a double-entry accounting system, the sum of the credit and debit entries must be zero. However, in practice, some transactions are not measured accurately (i.e. errors) and some are not measured at all (i.e. omissions). Data sources used to compile the BOP accounts often measure credit and debit sides from different data sources and may not always do so consistently. To restore the equality of credit and debit entries, a net errors and omissions item is included in the balance of payments accounts. The item net errors and omissions is equal to the sum of all other lines in the account, with the algebraic sign reversed. Flows and stocks The balance of payments accounts record flows and not stocks. The former, are measured for a specific time period, whereas the latter are recorded at a point in time, often end of the year. 2.3 Concepts of territory and residence The concept of residence is an important attribute of an entity in the balance of payments. It is not based on nationality or legal criteria but on center of economic interest or closer association. In compiling the Ugandan balance of payments, the Ugandan economy is seen as comprising economic entities that have a closer association with the economic territory of Uganda than with any other territory. Such economic entities are described as residents of Uganda. Any economic entity, which is not regarded as a resident of Uganda, is described as a nonresident. Sectors of the economy are composed of two types of resident entities: households and legal and social entities To have a closer association with the territory of Uganda than any other country implies that the entity is already engaged in economic activities and transactions in the country on a significant scale for a period of one year or more, or intends to do so. The conduct of economic activities over a period of one year normally implies a center of interest. The one-year period suggested in the balance of payments manual is only for guidance and not as an inflexible rule. The following are residents of their home economies even if they were to stay out or work outside for periods longer than a year: Travelers or visitors, seasonal workers, border workers, staff of international organizations locally recruited staff of foreign embassies and consulates and crews of ships, aircraft, or other mobile equipment operating partly or wholly outside the economic territory. However long they study abroad, students are treated, as residents of their countries of origins so are medical patients. Uganda s economic territory is defined to include geographic territory administered by government, includes islands that belong to Uganda, airspace, and waters. It also includes its territorial enclaves abroad holding embassies, consulates, military bases etc. whether owned or rented by Ugandan governments with the formal political agreement of the countries where they are located. Similarly foreign enclaves located in Uganda are excluded from Uganda s economic territory. 2.4 Valuation In order for the BOP data to be useful in analysis, and to provide meaningful indicators, it is important that the BOP statistics carry values that have economic meaning. It is also important that given the double entry accounting system used that a uniform valuation is used. In addition, the uniform valuation is necessary to sum different types of transactions on a consistent and Page 3

8 comparable basis. It is also important for the purposes of comparing statistics from different countries that the internationally recommended standards and practices are adopted. According to the recommended standards and practices the basis of transaction valuations is generally actual market prices 4 agreed upon by transactors (This practice is consistent with that of the SNA). 2.5 Unit of Account The compilation of the BOP is complicated by the fact that the values of transactions in real resources and financial items may be expressed initially in a variety of currencies or other standard value. The conversion of these values into a reference unit of account is a requisite for the construction of consistent and analytically meaningful statements. Further it is important that the unit of account is stable for ease of analysis of BOP developments and that unit of account should also be familiar to most users of the BOP statistics. In Uganda, the US dollar is the unit of account used for BOP purposes. And in accordance with the principles defined in the BPM5 and in the SNA, the exchange rates used for conversion of BOP entries from the various transaction currencies are the market rates prevailing on the transaction dates. In cases where the market rates are not available or when aggregated transactions are collected for a period of time, average mid rates for that particular period are applied. 2.6 Time of recording In the BOP, transactions are recorded when economic value is created, transformed, exchanged, transferred or extinguished. Time of recording is governed by accrual accounting. Claims and liabilities arise when there is change in ownership. The change in ownership may be a legal one or a physical or economic one involving control or possession. Both sides of the transaction should be recorded simultaneously. However due to the practice of getting data from different sources, time of recording will reflect the practices of the different sources. Change of ownership is taken to have occurred when legal ownership of goods changes, when services are rendered and when income is accrued. In case of transfers imposed on one party by another such as taxes or fines, recording should ideally be done at the time when the underlying transactions or other flows occur which give rise to the liability to pay. Other transfers should be recorded when goods, services etc. change ownership. For financial transactions, change of ownership takes place when transactions are entered into the books of the transactors. This is the time when a foreign financial asset or liability is acquired, relinquished by agreement, sold or repaid. The commitment or pledging of an asset does not constitute an economic transaction and no entry should be shown. Likewise, the entries for loan drawings should be based on actual disbursements and not on commitments or authorizations. Entries of loan repayments should be recorded at the time they are due. In Uganda, like elsewhere, trade statistics are generally based on customs documents. This might not be the time of change of ownership but is perceived to be the best practical approximation. As for services, some transactions are recorded when the services are rendered while others are recorded when payments are made. Freight and insurance services on imports are usually 4 Market price is the amount of money that a willing buyer pays to acquire something from a willing seller, when such an exchange is between independent parties and involves only commercial considerations. Page 4

9 recorded in the balance of payments after services are rendered. For investment income, official interest is recorded on accrual basis while those of commercial banks and the privates sector are recorded on cash basis. Dividends which should be recorded as of when they are payable, do not reflect the actual payments but an estimate for any given period. Reinvested earnings are assumed to be recorded in the periods when earned. According to the BOP manual, transactions in financial items are considered to have taken place when both creditor and debtor have entered the claim and liability, respectively in their books. In Uganda, official loan drawings are recorded when actual disbursements are made and loan repayments are recorded when due for payment. Loan repayments not made are recorded as if made and contra entries are recorded for replacements. Private loan disbursements and repayments are recorded when actual disbursements and repayments are made. 3. Classification System Balance of payments statistics must be arranged within a coherent structure to facilitate their utilization and adaptation to multiple purposes which include policy formulation, analytical studies, projections, bilateral comparisons, regional and global aggregation. The structure and classification of the BOP standard components reflects conceptual and practical considerations. It s developed after taking into consideration the views expressed by national BOP experts and the requirement to harmonize concepts, definitions and classifications with other IMF statistical systems (especially the System of National Accounts 1993 (SNA)). The determination (classification) of standard components (also) reflects the separation of components that exhibit different economic behavior, are important in several countries, readily collectable. The standard components consist of two main groups of accounts namely: the current account and the capital and financial account. Transactions in the current account include trade in goods and services, income and current transfers. Within the capital and financial account are recorded capital transfers and the acquisition or disposal of non-produced, non-financial assets and the financial assets and liabilities recorded in the financial account. However some items/components of Uganda s balance of payments in the financial account are regrouped for analytical purposes as indicated in table 1. Page 5

10 Table 1: Analytical Presentation of the BOP 1. Current Account (a) Goods Exports and imports (b) Services Inflows Transportation Travel Other Outflows Transportation Travel Other (c) Income Inflows Compensation of employees Investment Income Direct investment Portfolio investment Other investment Outflows Compensation of employees Investment Income Direct investment Portfolio investment Other investment (d) Current Transfers Inflows General government Other sectors Workers remittances Other Outflows General government Other sectors Workers remittances Other Page 6

11 2. Capital and Financial Account (a) Capital account Capital transfers Non-produced non-financial assets (b) Financial account Direct investment Direct investment abroad Equity capital Reinvested earnings Other capital Direct investment abroad Equity capital Reinvested earnings Other capital Portfolio investment Assets Equity securities Debt securities Bonds and notes Money market instruments Liabilities Equity securities Debt securities Bonds and notes Money market instruments Financial derivatives Assets Monetary authorities General government Banks Other sectors Liabilities Monetary authorities General government Banks Other sectors Other investment Assets Trade credits Loans Currency and deposits Other assets Liabilities Trade credits Loans Currency and deposits Other liabilities 3. Errors and Omissions 4. Overall Balance ( ) Page 7

12 5. Reserves and related items (a) Reserves (b) Use of fund credit (c) Exceptional financing The table gives the classification of both the current and the capital and financial accounts. Each of the broad categories is described briefly below. 3.1 Current Account Uganda s current account of the balance of payments comprises of the categories below: Goods Under the goods are exports and imports of goods. Goods include most movable goods that change ownership between Ugandan residents and non-residents. In Uganda s BOP, we have separate lines to show general merchandise, goods for processing, repairs on goods, goods procured in ports by carriers and non monetary gold. Due to the level of development of the BOP statistics and trade in Uganda some line items such as goods for processing and repairs on goods are still blank due to lack of data Services Services comprise services provided between Ugandan residents and non-residents. The services account is broken into the various components shown in the table 1. A quick glance at Uganda s BOP reveals that imports of services exceed exports by far Income This account covers income earned by Ugandan residents from non-residents and vice versa. It covers compensation of employees and investment income. Compensation of employees shown in Uganda s balance of payments comprises salaries earned by expatriates on short term assignments in Uganda. Currently, our balance of payments does not capture the wages and salaries earned by Ugandans working abroad. Investment income comprises income earned from the provision of financial capital and income payments for financial capital received from abroad. Data is also not available on inflows of income from direct and portfolio investment abroad. Page 8

13 3.1.4 Current Transfers Transfers represent offsets to the provision of resources between residents and non-residents with no quid pro quo in economic value. Current transfers are distinguished from capital transfers, which should be included in the capital account. Current transfers consist of all transfers that directly affect the level of disposable income and consumption. In the case of Uganda s balance of payments, current transfers include grants in form of both cash and kind. Transfers are classified according to the sector of the compiling economy and are divided into two main categories: general government and other sectors. Other sectors transfers are divided into workers remittances and other transfers, which includes transfers to Non Governmental Organizations (NGOs), international aid agencies etc. 3.2 Capital and financial account The capital and financial account of Uganda s balance of payments is divided into two main categories: (i) the capital account and (ii) the financial account Capital account This comprises both capital transfers and the acquisition and disposal of non-produced, nonfinancial assets e.g. trademarks, patents, copyrights, leasing agreements among other items. Capital transfers entries are required where there is no quid pro quo to offset transfer of ownership of fixed assets, or transfer of funds linked to fixed assets (e.g. aid to finance capital works), or the forgiveness of debt. It should also include the counterpart to the transfer of net wealth by migrants, referred to as migrants transfers if information on these is available. The entries in Uganda s capital account are basically counter entries as a result of debt forgiveness Financial account Transactions associated with changes of ownership of Uganda s financial assets and liabilities are recorded in this account. The financial account is divided into four broad categories: Direct investment This refers to capital provided to or received from an enterprise by an investor in another country. This could be an individual, enterprise, or a group of related individuals or enterprises. In Uganda, investment is termed direct if the investor s equity interest in an enterprise resident in the country is 10 percent or more of the ordinary shares. Direct investment covers the initial transaction between the two and all-subsequent transactions between them and among affiliated enterprises both incorporated and unincorporated. Direct investment transactions occurring abroad and in the reporting economy are sub-classified into equity capital, re-invested earnings, and other capital (inter-company loans) Portfolio investment Portfolio investment covers transactions in equity and debt securities. The latter comprise bonds and notes, and money market instruments. Estimates for portfolio investment assets covers data obtained on offshore purchases of shares by residents; and for liabilities, investment in equity securities falls under portfolio investment if the investor s equity interest is less than 10 percent of the ordinary shares. Debt securities mainly comprise of investments by offshore investors in Page 9

14 treasury bills and treasury bonds in both the primary and secondary market. No data is available on investment in treasury securities abroad Financial derivatives. This category refers to those financial instruments that are linked to a specific financial instrument or indicator or commodity, and whose value is derived from the price of the underlying item. In the case of Uganda s balance of payments, financial derivatives are estimated from data on forward contracts and currency swaps transactions between Ugandan residents and non-residents Other investment This is a residual category that captures transactions not classified under direct investment, portfolio investment, financial derivatives or reserve assets. It generally covers short- and longterm trade credits, loans (including loans associated with financial leases); currency and deposits; and other accounts receivable and payable. In the case of Uganda s balance of payments, which is presented in an analytical format, use of fund credit (a financing item) is recorded below the line under financing items and therefore does not appear under other investment. 3.3 Errors and Omissions In the balance of payments statements, the standard practice is to show a separate line for the net errors and omissions. This is a balancing item intended as an offset to the overstatement or understatement of the recorded components. 3.4 Overall Balance This is the sum of the current and capital and financial account transactions; and the net errors and omissions. Its equal in value (but with the opposite sign) to the financing items below the line. 3.5 Reserves and Financing Items As already mentioned above, Uganda s balance of payments distinguishes between extraordinary and ordinary transactions. Financing items are shown separately and these include: Use of Fund Credit Uganda s purchases of SDRs from the IMF and the repurchases (repayments) of principal affect this item Reserves Reserve assets refer to those financial assets that are available to, and controlled by the monetary authorities;in this case the reserves held by the Bank of Uganda. Reserve assets comprise monetary gold, special drawing rights (SDRs), country s reserve position in the fund and foreign exchange (currency, deposits and securities) held by the monetary authorities. In Uganda s balance of payments this item is classified below the line under reserves and financing items. Page 10

15 3.5.3 Other financing items Other financing items, also known as exceptional financing, include rescheduling of existing debt, which involves replacing an existing contract with one that postpones debt service payments. This affects payments of interest, amortization and could cover arrears of interest or principal. Arrears on debt servicing, which can be either interest or amortization payments that are past due. Debt forgiveness or voluntary cancellation by an official creditor of all or part of a debt specified by a contractual arrangement. 4. Data sources The compilation of the balance of payments is a complex process requiring the use of several data sources. Data for the compilation of the Uganda s balance of payments is derived independently from several sources below are the various sources including: 4.1 Customs Documents Single Bill of Entry (SBE) form This is a customs department s document from which trade statistics data (exports and imports) are obtained. The customs department of the Uganda Revenue Authority (URA) requires that- SBE forms are completed by all importers and exporters. Form F88 This is also a customs document filled by importers/exporters with items of value not exceeding US$1,000= 4.2 Returns from officially authorized foreign exchange dealers These refer to daily and monthly reports from commercial banks and weekly and monthly reports from the foreign exchange bureaux for all current and financial account transactions. The data in these reports are drawn from forms P and R (these are BOU documents), monthly return of transfers through international money transfer operators and other internal documents used by the authorized foreign exchange dealers to record all foreign exchange transactions conducted through the foreign exchange dealers. Forms R capture all inflows of foreign exchange while outflows of foreign exchange are captured using forms P. This category of documents also comprises commercial banks balance sheets and their profit and loss statements. 4.3 Returns from various departments within Bank of Uganda These returns include: - Monthly reports of receipts and payments of foreign exchange through the Bank of Uganda prepared by the Payments and Settlements Department (PSD) of Bank of Uganda. Page 11

16 - Monetary Authority balance sheet prepared by the Accounts Department of Bank of Uganda. - Returns from the Statistics Department of Bank of Uganda providing details on disbursements of budget support funds by various creditors/donors, and repayments of principal and interest on public and publicly guaranteed debt. 4.4 Enterprise surveys Surveys of communication providers, insurance companies, foreign embassies and consulates, international organizations, transport providers are conducted to capture service transactions. Surveys of enterprises and financial institutions are used to obtain capital flows. 4.5 Government sources 5. Methods 5.1 Current Account Goods (a) Exports of goods All trade statistics are compiled using the customs data, except for coffee, cobalt and electricity which are obtained from the Uganda Coffee Development Authority (UCDA), Kasese Cobalt Company Ltd. (KCCL) and Uganda Electricity Transmission Company Ltd. (UETCL) respectively. In principle, exports are valued f.o.b., but in practice a mix of valuations 5 (of ex-factory, free on rail and truck) is used. Adjustments are made to the export data on account of informal/cross-border trade. In 2003, an indication of the magnitude of informal trade was obtained using the estimates provided by Uganda s Investment in Developing Export Agriculture (IDEA), a project funded by United States Agency for International Development (USAID). The numbers from IDEA were then doubled to give a better estimate of the magnitude of informal trade since IDEA was only estimating informal trade on one main frontier of the country - the eastern border. With effect from March 2004, informal cross-border trade estimates are based on Joint BOU and UBOS Survey estimates. (b) Imports of goods As already indicated above, the main source document for import data is the SBE (customs document). However, returns from the authorized foreign exchange dealers and BOU records are also used. In the balance of payments tables, import data are sub-divided into the following categories: 5 Plan to improve on valuation Page 12

17 General merchandise Goods for processing Repairs on goods Goods procured in ports and Non monetary gold General merchandise imports are further sub divided into government imports, other sectors imports and estimated imports. Imports by government 6 and BOU financed through the BOU cashflow are captured from a monthly return on receipts and payments prepared by the Payments and Settlements Department of BOU. Government project imports are currently obtained from the URA data. For the earlier period (before 1996/97), government project import numbers were derived from the expected total project support obtained from the Aid Co-ordination Unit (Ministry of Finance Planning and Economic Development) 7. It was then assumed 8 that 50 percent of total project aid inflows was spent on imports. However, in 2001, after a study carried out by UBOS on project imports cleared by the customs department, the proportion of project support spent on imports was revised downwards to 35 percent for the years 1996/97 to 1998/99. Therefore in the balance of payments series, project imports are 50 percent of project support from 1992/93 to 1995/96, and 35 percent from 1996/97 to 1998/99. From July 1999 to January 2004 project imports are as given by customs department (URA). Due to unavailability of project import numbers from the customs from February 2004, project imports are assumed to account for 30 percent of total project aid. Oil imports and other private imports are obtained from customs department of URA. Oil imports are grouped into two categories namely: solid fuel and liquid fuel. The solid oil imports are derived from the SBE forms while the liquid oil imports 9 are captured as and when fuel is taken out from the oil depots to the various fuel distributors for sale. However customs data is not entirely accurate owing to (i) under-declaration of the value of the imports by some importers, (ii) smuggling, and (iii) omission of classified imports (mainly military hardware and equipment). As a result the Statistics Department of BOU has to adjust the import numbers on a monthly basis. The adjustment is done as follows: It is assumed that total sales of foreign exchange, by the commercial banks and the foreign exchange bureaux less sales of foreign exchange for domestic transactions, result in outflows of foreign exchange to settle transactions between residents and nonresidents. On a daily basis, commercial banks submit to the BOU returns giving their total foreign exchange transactions. These daily transactions are aggregated to give a total turnover for any given month. In addition, the foreign exchange bureaux submit on a weekly and monthly basis their total foreign exchange transactions to TEDD. The total foreign exchange transactions by both the commercial banks 6 Imports by government are largely financed through the BOU. 7 The total project support figure would latter be revised when actual total disbursement figure of project support became available. This could be anytime during the following financial year when the actual inflows are got from Aid Co-ordination unit. 8 This assumption was based on a study done in the early 1990s on the composition of project support. 9 Note that this is different from the other imports provided by URA whereby the values of imports are captured when the goods enter the country at the customs. Page 13

18 and the foreign exchange bureaux are aggregated to obtain total inflows and outflows of foreign exchange in a given month. Total foreign exchange outflows for the entire private sector including parastatals are taken as an indicative total for all debit transactions of any given month. From the control total, all identified outflows 10 of foreign exchange of properly classified transactions are deducted to obtain the unidentified outflows of foreign exchange. The identified outflows include imports of goods and services, income, transfers and financial transactions. For the period 1992/93 to 1995/96 the practice was to allocate the difference between imports of goods and services in a ratio of 65:35 percent. However, since 1996/97 the monthly foreign exchange returns from the commercial banks are used to impute the ratios used to allocate the unidentified sales of foreign exchange amongst the various uses as follows: On a monthly basis, commercial banks submit monthly foreign exchange position returns to Bank of Uganda. In these forms, commercial banks indicate the source or purpose of foreign exchange transactions through the banks. For each fiscal year beginning with the year 1996/97, the average percentage share for each outflow category is computed from the total outflows reported in the monthly returns from the commercial banks. These ratios are then applied to the control total. The identified outflows are then deducted from the different amounts obtained for the various categories of debit items, to arrive at the unidentified amount for each category of transactions. These have been referred to as estimated outflows. This holds for fiscal years 1996/97 to 2000/01. From years 2001/02 to February 2004 the ratios used in year 2000/01 were maintained pending improvement in the reporting (in terms of comprehensiveness and proper classification) of foreign exchanges transactions by foreign exchange authorized dealers. With effect from March 2004, informal cross-border trade estimates are based on Joint BOU and UBOS Survey estimates Import data from URA is on a c.i.f. basis. In order to break down these data into cost, freight and insurance, a study was undertaken in 2001/02 on figures provided by a pre-shipment company (Intertek Testing Services). The results of that study indicated that on average, 15 percent of the c.i.f. import value is freight, 1.5 percent for insurance and 83.5 percent cost. The ratios were adopted as rough estimates to be used to present imports on an f.o.b. basis 11. From 2009, the c.i.f. import ratios were revised to 18.6 percent for freight, 4.4 percent for insurance and 77.0 percent cost, based on a survey on major importers that BOU carried out Services (a) Transport services Transportation services (for passenger air transport, rail transport and road transport) are based on a survey done in 1993/94, which was able to give only the credits. Estimates of these services up to December 2002 are extrapolations using assumed annual growth rates and some other information on the developments in the sector. Thereafter, transportation services for passengers have been derived as follows: For road transportation, there are both resident and nonresident bus companies providing transportation services. The UBOS provides data on monthly arrivals and departures according to residency and destination for each border point. Through a telephone survey of the different bus companies, the average fares to different destinations in neighboring countries are obtained. 10 Note that these outflows are obtained from different sources 11 The pre-shipment company is no longer operative. URA has been requested to endeavor to provide BOU with information on freight, insurance and cost since importers are expected to provide these on the SBE form. Page 14

19 Information on the number and ownership of buses that ply a specific route is used to estimate ratios of resident and nonresident owned buses. For arrivals migration statistics the number of residents arriving on nonresident-owned buses (i.e. passenger transportation debits from arrivals), and nonresidents arriving on residentowned buses (i.e. passenger transportation credits from arrivals) are computed using average bus fares and shares of non-resident and resident owned buses to the total number of buses respectively. For departures the number of residents departing on nonresident-owned buses (i.e. passenger transportation debits for departures), and nonresidents departing on residentowned buses (i.e. passenger transportation credits for departures) are also computed using average bus fares and shares of non-resident and resident owned buses to the total number of buses respectively. These passenger transportation credits for arrivals and departures are summed to derive total passenger transportation credits by road. Similarly, passenger transportation debits for arrivals and departures are summed to obtain total passenger transportation debits by road. For air passenger transportation, Uganda had no operational resident-owned airlines prior to 2008, and thus it was assumed that all residents departures on international flights were on nonresident owned airlines, and are thus used to derive debits for passenger transportation by air. These estimates were however effected starting in January The UBOS provides a breakdown of resident departures by country of destination Passenger fares to different destinations are obtained through a telephone survey of travel agencies. Where several airlines go to a particular destination (e.g. Cairo, Dubai, Johannesburg, Hong Kong etc), a simple average fare of all airlines is used. The passenger transport debits are then calculated as a product of the fares and number of departures With effect from 2008, credits for air passenger transportation are captured using the same methodology given above i.e. they are calculated as the product of the fares and the number of non-resident arrivals on the operational resident-owned airlines in the country. Transportation services debit 12 in lieu of freight and auxiliary services are obtained by adjusting the import data from the c.i.f. valuation to f.o.b. The mode of transportation is inferred from the port of entry indicated in the Trade Statistics obtained from the Customs Department. From 2011 onwards, freight transportation credits are obtained from a quarterly enterprise survey of resident transporters carried out by the Statistics Department and the Foreign Private Capital Project office of Bank of Uganda (b) Travel services Travel services (credits) are based on a survey done in 1993/4 and estimates for the years before 1999/2000 are extrapolated using estimates of assumed annual growth rates of the travel service industry. Figures from 1999/2000 onwards are based on results from surveys conducted by the Ministry of Trade Tourism and Industry (MTTI) in year 2001 and 2003 and data on travel (departures of non-residents) from UBOS. According to the MTTI survey results, total nonresident travelers can be divided into two groups i.e. package tourists and independent tourists. Average expenditure by the two categories is obtained from the MTTI survey results. The MTTI 12 Plan to include other transportation services (debits) as reporting and data capturing improves Page 15

20 survey is also used to derive ratios for classifying travel statistics by purpose (business and personal). A further classification of personal travel into education and all other personal travel with effect from 2003 is obtained by a countrywide sample survey of institutions providing education services in which the costs incurred by non-resident students on education are established. The number of tourists into the country is obtained from UBOS compiled using the data from the Immigrations Department. The total expenditure figures have been up-rated to cater for the expenditure by those travelers who enter through other border posts not considered by the MTTI survey. In the medium term, MTTI intends to conduct similar surveys once every two years for both the high and low seasons. There are no travel debits for the period prior to With effect from 2004, travel debits are based on results from surveys conducted by the Bank of Uganda on resident s travel expenditures abroad and data on travel (arrivals of residents) from UBOS. The BOU survey is also used to derive ratios for classifying travel statistics by purpose of travel (business and personal). No additional classification is provided. (c) Communication services Communication service transactions are based on surveys of the communication providers. A survey of communication providers was initiated in 2001 and is done on a quarterly basis. The communication providers give data for both credits and debits. Communication services are broken into postal and courier services and telecommunication services. (d) Government services n.i.e. Estimates of government services n.i.e. (credits) are based on a survey of embassies and other international institutions conducted in 1993/94. Debit entries are obtained from the ministry of finance Planning and Economic Development (MFPED).With effect from 2010, government services n.i.e. are obtained from reporting forms submitted by commercial banks bi-annually with data on debits, credits and balances on local currency accounts of foreign missions. (e) Insurance and Reinsurance services Both debits (with exception of freight insurance) and credits are based on surveys of the insurance companies. Freight insurance debits are obtained by adjusting imports from c.i.f. values to f.o.b. (see section on imports). (f) Other services For financial (other than insurance), estimates are obtained on a quarterly basis from the noninterest income item in commercial banks profit and loss accounts. Using phone calls to individual banks, an estimate of the proportion of non-interest income receipts and payments from/to non-residents is obtained which is then applied to the reported amounts of non-interest income received and paid during the quarter. To this estimate is added the fees earned by stock brokers for the purchase and sales of equity shares held by non-residents. This estimate is obtained by applying an estimate of 2% of the value of the security. Other services (credit and debit entries) including computer and information, royalties and license fees, and other business services are obtained from monthly reports submitted to the BOU by authorized foreign exchange dealers (commercial banks and foreign exchange bureaux). Bank of Uganda introduced a Quarterly Enterprise Survey with effect from the quarter ended March 2011, from which estimates for computer and information services, personal, cultural and Page 16

21 recreational services, operating leases and mining services, and construction services are obtained Income (a) Compensation of employees Compensation of employees (debits) captures technical assistance attributed to government projects financed by inflows of project aid. The estimates on project aid inflows are obtained from MFPED. It is assumed that about 90 percent of the budgeted amount for technical assistance in the Public Investment Plan (PIP) in any fiscal year is spent and of that amount, 90 percent is spent on expatriates on short-term assignments. Expatriates on long-term assignments are considered residents. There are no credit entries of compensation of employees. Starting from 2009, additional data on compensation of employees is obtained from the private sector investment survey. (b) Investment income Investment income is divided into direct investment, portfolio investment and other investment income. (c) Direct investment income There are no estimates for income credits on direct investment income. Debits (outflows) on account of dividends, distributed branch profits, and earnings re-invested are recorded. These are obtained from monthly returns submitted to the BOU by authorized dealers. Re-invested earning estimates are based on the results of the annual private sector investment surveys conducted jointly by BOU, UIA and UBOS.. Currently income payments on account of inter-company loans are not recorded 13 (d) Portfolio investment income There are no credit estimates for portfolio investment income. Debit estimates for portfolio investment income are obtained from the Central Depository System for interest earned on money market instruments and government bonds. (e) Other investment Other investment income covers interest receipts and payments on all other resident claims on and liabilities to non-residents, respectively. Other investment income is classified by sector (monetary authorities, general government, banks and other sectors). For the monetary authorities, credit entries are obtained from a monthly return on receipts and payments through the BOU from PSD(Bank of Uganda) while debits are from Statistics Department (Bank of Uganda). There are no credit entries made for general government. Debit entries are obtained from a monthly report on public debt payments prepared by Statistics Department. 13 With the anticipated improvement in data compilation and reporting estimates of this will soon be available Page 17

22 Commercial bank interest claims (credits) and liabilities (debits) are obtained from the Profit and Loss Statements of the commercial banks submitted to the Bank of Uganda on a quarterly basis. There are no credit entries made for other sectors. Interest debits for the other sectors are obtained from the monthly reports on foreign exchange transactions submitted to the BOU by the authorized foreign exchange dealers Current Transfers These consist of all transfers that directly affect the level of disposable income and consumption and they are classified according to the sector of the compiling economy into two main categories: general government and other sectors. General government inflows (credits) are received in three forms: budget aid, project aid and grants arising from the Heavily Indebted Poor Countries (HIPC) Initiative. Disbursements of budget support and project aid are available from Statistics Department and PSD (BOU) Grants provided by multilateral institutions as a result of the HIPC initiative are obtained from MFPED. In 2010/11 capital gains taxes on the sale of shares in oil exploration companies were included as official current transfer inflows in the BOP. General government outflows include annual or other regular contributions paid to international organizations. These are obtained from the PSD (BOU) and the MFPED. Other sector s transfers comprise workers remittances and other transfers mainly those received from NGOs and international aid agencies. Transfers to NGOs were estimated by applying ratios derived from the monthly foreign currency reports of all authorized dealers to the total estimate for private transfers. The total estimate for private transfers was a residual number arrived at by taking total inflows as reported by the authorized foreign exchange dealers, less identified inflows for the period to Starting 2005, NGO transfers are estimated using the returns from commercial banks submitted on a monthly basis. The returns provide for reporting on foreign currency deposits made on accounts held by NGO s with commercial banks. With effect from 2006, estimates for workers remittance inflows are derived from the remittances survey conducted by BOU and UBOS. The product of the average remittances received per household and the estimated number of households that receive remittances as obtained from the survey responses provides the estimated amount of remittances. Estimates for debit items of other sectors are derived from commercial bank records Capital and Financial Account The capital account Information on debt forgiveness under general government is available from MFEPD and Statistics Department (BOU). There are no entries under other sectors as this information is currently not available. No entries are made for acquisition/disposal of non-produced, non-financial assets Financial Account (a) Foreign direct investment into the country 14 These are transactions associated with tangible assets that may be used or needed for production of goods and services but have not themselves been produced (e.g. land and subsoil assets), transactions associated with nonproduced, intangible assets (e.g. copyrights, trademarks, franchises, etc. and leases or other transferable contracts. Page 18