MINISTRY OF FINANCE PLANNING AND ECONOMIC DEVELOPMENT QUARTERLY MACROECONOMIC REPORT JULY-SEPTEMBER 2017 MACROECONOMIC POLICY DEPARTMENT Q1 FY 2017/18 1
Table of Contents REAL SECTOR DEVELOPMENTS...7 Economic Growth... 7 Inflation... 10 FINANCIAL SECTOR DEVELOPMENTS... 13 Interest rates... 14 Private Sector Credit... 15 Primary Market Yields on Treasury Instruments... 16 EXTERNAL SECTOR DEVELOPMENTS... 18 Exchange Rate... 19 Merchandise trade balance... 20 Merchandise exports... 20 Destination of exports... 21 Imports... 22 Origin of Imports... 23 International reserves... 24 FISCAL SECTOR DEVELOPMENTS... 25 Revenue performance... 27 Expenditure Performance... 28 Domestic Financing (Treasury Instruments)... 28 2
List of Acronyms and Abbreviations BTI CBR CIEA CIF EAC EFU EU FY GDP HIPC HPPs PSC SCT OSBPs URA USD VAT Shs/UGX NPL IMF AIA PAF PTA CFR Business Tendency Index Central Bank Rate Composite Index of Economic Activity Cost Insurance &Freight East African Community Energy Fuel and Utilities European Union Financial Year Gross Domestic Product Heavily Indebted Poor Countries Hydro Power Projects Private Sector Credit Single Customs Territory One Stop Border Posts Uganda Revenue Authority United States Dollars Value Added Tax Ugandan Shilling Non-performing loans International Monetary Fund Appropriations in Aid Poverty Alleviation Fund Preferential Trade Area Charter for Fiscal Responsibility 3
HIGHLIGHTS Economic Activity: The first quarter of the Financial Year 2017/18 exhibited improvement in economic activity as evidenced by the composite index of economic activity (CIEA). Inflation: Inflationary pressures eased during the quarter under review as annual headline inflation declined considerably to a 5.4 percent quarterly average in Quarter 1 of the Financial Year 2017/18 from 6.8 percent in the previous quarter. A decomposition of headline inflation shows that the decline was on account of a reduction in both core and food crop inflation. Exchange Rate: The Uganda shilling remained relatively stable against the dollar recording an official average mid-rate of Shs 3602.48 per US dollar from Shs 3611.1per US dollar in the preceding quarter, representing a marginal appreciation of 0.24 percent. Interest Rates and Private Sector Credit: The stock of outstanding private sector credit (PSC) increased from Shs.12,118.1 billion at the end of the Financial Year 2016/17 to Shs.12,350.7 billion at the end of Quarter 1 Financial Year 2017/18, registering a growth of 2 percent over the quarter. The recovery in PSC is attributed to the sustained monetary policy easing by the central bank and a sound financial system. Both the Central Bank rate and the Commercial Bank lending rates declined in Quarter 1 2017/18 compared to the previous quarter. Merchandise Trade Balance: The merchandise trade deficit narrowed by 14.8 percent on an annual basis, from a deficit of US$ 525.4 million in Quarter 1 Financial Year 2016/17 to a deficit of US$ 447.6 million in Quarter 1 Financial Year 2017/18. This was due to a slow recovery in the import bill coupled with an increase in the value of exports from growth in volumes and prices. 4
Fiscal Sector Developments: The overall fiscal deficit (including grants) for Quarter 1 Financial Year 2017/18 was registered at Shs1,386.55 billion. Total expenditure was below the program by Shs 631.99 billion due to a poor performance in external development expenditure. Additionally, revenue and grants registered a short fall of Shs. 472.29 billion due to both lower disbursements and taxes. 5
REAL SECTOR DEVELOPMENTS 6
REAL SECTOR DEVELOPMENTS Economic Growth The Global economy experienced a recovery towards the end of 2017 and is now expected to grow at 3.7 percent in 2017 and continue strengthening to 3.8 in 2018 compared to 3.2 percent in 2016. Significant recovery in the euro area, Japan, emerging Asia, emerging Europe, and Russia more than offset downward revisions for the United States and the United Kingdom. The stronger recovery in economic activity is supported by growth in investment, trade and industrial production as well as business and consumer confidence. However; it is worth noting that whereas the short-term outlook on global growth is strong, the medium-term outlook is a rather cautious one as growth and inflation in many countries remain below expected targets. Additionally; in Sub-Saharan Africa, economic growth has been slowed down by country specific factors in the region s largest economies as well as slow implementation of policy adjustments. Furthermore, fuel exporting countries continue to adjust to significant losses in foreign earnings Subsequently; Uganda s economy grew by 4 percent in the Financial Year 2016/17, higher than the preliminary release of 3.9 percent at the end of the Financial Year 16/17, but significantly lower than the 4.7 percent growth in the previous Financial Year 15/16. By sector, all three sectors of the economy registered slower growth compared to the last financial year. Services sector grew at 5.7 percent down from 5.9 percent, while industry grew at 3.3 percent down from the 4.6 percent and Agriculture, forestry and fishing grew at 1.6 percent compared to 2.8 percent growth registered the previous financial year. By subsector; Trade and repairs, Transport and storage, Financial and Insurance Services contributed to the slowdown in growth of the services sector while Mining and quarrying and construction accounted for the slowdown in growth in industry. 7
Figure 1: Global Economic Growth rates: 2010-2017 10 9 8 7 6 5 4 3 2 1 0 2010 2011 2012 2013 2014 2015 2016 2017 Uganda Sub-Saharan Africa World Source: IMF&MOFPED Economic growth in the Financial Year 2017/18 is expected to pick up after three successive years of slowing down. The economy is projected to grow at 5.0 percent. The return of normal weather conditions as forecast by the Meteorological Authority and improvement in the global and domestic economic conditions are expected to boost growth. Specifically; favourable weather conditions are expected to facilitate recovery in agriculture, forestry and fishing, critical public investments and the current supportive monetary and fiscal policy stance coupled with the reduction in non-performing loans is also expected to encourage commercial banks to lend more to the private sector and rejuvenate economic activity. Relative stability of the exchange rate is also expected to boost trade and manufacturing. Additionally, the first quarter of the Financial Year 2017/18 showed some improvement in economic activity based on the Composite Index of economic activity (CIEA) as well as better prospects for the future based on the Business Tendency Index (BTI 1 ). The CIEA 2 remained positive during the quarter increasing from 203.14 in July 2017 to 204.61 in September 2017 having an average of 203.87 within the quarter. This is an improvement compared to quarter one of the previous financial year where the 1 Business Tendency Index less than 50 implies negative expectations/pessimistic and index greater than 50 implies positive expectations/optimistic 2 The CIEA captures the underlying changes in economic activity in the economy. It is constructed using ten variables which are: currency in circulation; VAT on domestic goods and services; exports; imports; government expenditure on goods and services; sales; cement production; excise taxes; PAYE; and private sector credit. 8
CIEA had an average of 194.2. The CIEA improved mainly due to growth in imports (3.0 percent), exports (16.8 percent), stock of Private Sector Credit (1.9 percent) and a result of the relative stability of the exchange rate within the quarter. This signifies an improvement in economic activities. The business environment also showed positive expectations with the overall BTI remaining positive and above the threshold of 50; increasing from 57.19 in July 2017 to 58.80 in September 2017, an average of 58.01 within the quarter. This is an improvement compared to the same period the previous financial year where the BTI had an average of 55.91. An assessment of key indicators by sector under the overall BTI indicates that Agriculture had the highest average within the quarter (61.4) followed by other services (58.34) and construction (57.37). Other sectors like manufacturing and whole sale trade also had an average of 54.51 and 53.31 respectively. This reflects an improvement in investor confidence Figure 2: Trends in the Business Tendency Index (BTI) and Composite Index of Economic activity (CIEA) 210.0 205.0 200.0 195.0 190.0 185.0 180.0 175.0 60.0 58.0 56.0 54.0 52.0 50.0 48.0 46.0 44.0 Source: Bank of Uganda Composite Index of Economic Activity Business Tendency Indicator Positive Threshold 9
Inflation The quarter ending September 2017 registered a decline in inflation, with annual headline inflation slowing down to a quarterly average of 5.4 percent from 6.8 percent in the previous quarter. The slowdown in annual headline inflation during Quarter 1 of the financial year was driven by declines in both Core and food crop inflation. Figure 3: Quarterly inflation trends in Q4 FY2016/17 and Q1 FY 2017/18 SOURCE: Uganda Bureau of Statistics. Average annual core inflation dropped to 4.3 percent in Quarter 1 of the financial year from 5 percent in the previous quarter. This decline is attributed to a return to stability of the exchange rate and subdued domestic demand. Food crop inflation declined to a quarterly average of 11.4 percent from 21.0 percent in the previous quarter. This was on account of increased food supplies to markets as the negative effects of the recent drought on agricultural production receded. In the same period, EFU inflation rose to an 8.8 percent average from 6.0 percent the previous quarter, nonetheless this increase was not enough to offset the decline in both food crop and core inflation. The increase in EFU inflation was mainly due to an increase in prices of solid fuels (charcoal and firewood). The two fuels registered respective average annual price increases of 8.4 percent and 9.7 percent during the quarter from 0.3 percent and 4.5 percent the previous quarter. Liquid Energy Fuels 10
(paraffin, diesel, petrol) however registered lower inflation rates during the quarter at 5.9 percent on average compared to 8.2 percent the previous quarter. Annual Headline inflation is projected to remain low and stable in the Financial Year 2017/18 expected at an annual average of 4.9 percent. This is on account of projected low food crop and core inflation rates. Food crop inflation is expected to remain low on account of increased food supply as a result of a return to favourable weather conditions. Core Inflation as well is projected to remain stable owing to low demand pressures and stability in the exchange rate. Accommodative monetary policy is likely to gradually increase demand pressures and hence push core inflation slightly upwards towards the end of the financial year. Nonetheless, the average annual core inflation shall remain within the Central Banks Medium term target of 5 Inflation across the East African Region Regionally, there was a decline in annual headline inflation across all six partner states. This was mainly on account of a decline in food crop inflation as most of the partner states recovered from the effects of the wide spread drought that reduced agricultural output in the Financial Year 2016/17. Recovery from the drought largely was experienced in the final quarter of the Financial Year 2016/17, food supplies gradually increased across the region leading to the general decline in food crop inflation during the quarter under review. Nonetheless, inflation in South Sudan remained highest. The country has grappled with insecurity since the civil war broke out in 2013; this has hampered food production and disrupted markets across the country hence leading to hyperinflation. 11
Figure 4: Inflation rates across the east African region 20.0% 350.0% 18.0% 16.0% 14.0% 12.0% 10.0% 300.0% 250.0% 200.0% 150.0% 8.0% 100.0% 6.0% 4.0% 2.0% 0.0% Burundi Kenya Rwanda Tanzania Uganda 50.0% 0.0% Q4-FY 2016/17 Q4-FY 2016/17 Q1-FY 2017/18 Q4-FY 2016/17 Q1-FY 2017/18 Q1-FY 2017/18 Source: Respective Country Central Statistical Organisations 12
FINANCIAL SECTOR DEVELOPMENTS 13
MONETARY AND FINANCIAL SECTOR Interest rates Over the quarter, the Central Bank Rate (CBR) was reduced to 10.0 percent from 14 percent prevailing through most Quarter 4 Financial Year 2016/17. The continued easing of monetary policy was mostly influenced by reduced inflationary pressures in the economy during the quarter and the need to support a recovery in private sector credit to spur economic activity. Figure 5: Movements in key interest rates 30 25 20 15 10 5 0 CBR(%) Lending rate(%) Source: Bank of Uganda Though lending rates remain sticky downwards, they are gradually responding to the monetary policy easing, falling from 23.7 percent at the end of Quarter 1 Financial Year 16/17 to 20.9 percent in Quarter 1 Financial Year 17/18. This reduction in the cost of credit is expected to encourage increased borrowing. In addition, the ratio of Non-performing loans to gross loans reduced from 10.47 percent in Quarter 2 Financial Year 16/17 to 7.24 percent in Quarter 1 Financial Year 2017/18. This improvement in loan performance will most likely improve willingness to extend credit by commercial banks. Furthermore, the banking system remained strongly capitalized, with a core capital adequacy ratio of 21.54 percent as of September 2017 compared to 19.83 percent as of September 2016 as a result of growth in retained earnings; this ratio is far higher than the statutory minimum of 8 14
percent. The robust capital levels offer a high degree of resilience against systemic distress. Private Sector Credit Subsequently, the stock of outstanding private sector credit (PSC) increased from Shs.12.1 trillion at the end of Financial Year 2016/17 to Shs.12.3 trillion at the end of Quarter 1 Financial Year 2017/18, registering a growth of 2 percent over the quarter. The distribution of the stock of outstanding PSC at the end of Quarter 1 Financial Year 17/18 by sector shows that Trade accounted for the largest share of outstanding credit at 21 percent, followed by the building, mortgage, construction and real estate sector at 20 percent and Personal Loans and Household loans at 18 percent. Other notable holders of PSC by sector include; manufacturing (13 percent) and agriculture (12 percent). Figure 6: Share of Total PSC at the end of Q1FY17/18 by Sector. Community, Social & Other Services 3% Business Services 4% Personal Loans and Household Loans 18% Other Services 0% Agriculture 12% Mining and Quarrying 1% Manufacturing 13% Building, Mortgage, Construction and Real Estate Electricity and 20% Water 2% Source: Bank of Uganda Trade 21% Transport and Communication 6% There was growth in PSC for all sectors in Quarter 1 Financial Year 17/18 except, other services which declined by 32.8 percent, Transport and Communication which declined by 9.4 percent and Electricity and Water which declined by 2.0 percent. These sectors however together only accounted for 9.3 percent of the total stock of 15
outstanding credit at the end of Quarter 4 16/17, and therefore did not have a significant impact on the overall growth of PSC for the quarter under review. Table 1: Growth in PSC in key sectors for Q1 FY2017/18 SECTOR Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18 Agriculture 0.50% 5.00% 8.70% 3.10% 3.70% Mining and Quarrying -21.00% 0.20% 17.90% 13.50% 4.60% Manufacturing -4.20% 2.90% -5.80% 4.20% 0.30% Trade 4.60% 3.80% -0.20% 3.60% 4.80% Transport and Communication 4.50% 6.50% -8.20% -1.00% -9.40% Electricity and Water -0.70% 2.50% -21.80% 24.80% -2.00% Building, Mortgage, Construction and Real Estate 0.40% 4.30% -10.00% 1.40% 1.20% Business Services 1.10% 7.30% 16.20% -10.10% 5.40% Community, Social & Other Services 3.20% 6.80% -8.00% 1.00% 3.40% Personal Loans and Household Loans 5.40% 3.50% 4.50% 3.80% 4.50% Other Services -31.00% -8.70% 67.40% -45.80% -32.80% Total 1.20% 4.10% -1.50% 1.90% 1.90% Source: Bank of Uganda Primary Market Yields on Treasury Instruments The primary market was characterised by a decline in yields across all tenors. The average weighted yields to maturity for Quarter 1 2017/18 were 9.9 percent, 10.2 percent and 11.1 percent compared to 15 percent, 15.9 percent and 16.7 percent in Quarter 1 2016/17 for the 91, 182 and 364 day tenors, respectively. The yields edged downwards due to excess liquidity in money market and high demand for government paper. 16
Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 % Quarter 1 Macroeconomic Report FY2017/18 Figure 7: Primary Market Yields of Treasury Bills 19.0 17.0 15.0 13.0 11.0 9.0 7.0 91 Days 182 Days 364 Days Source: Bank of Uganda 17
EXTERNAL SECTOR DEVELOPMENTS 18
EXTERNAL SECTOR Exchange Rate During Quarter 1 of the Financial Year 2017/18, the shilling remained relatively stable against the dollar recording an official average mid-rate of Shs 3602.48 per US dollar compared to Shs 3,611.1 per US dollar in the preceding quarter representing a marginal appreciation of 0.24 percent. The stability of the exchange rate during the quarter was driven by matched demand and supply conditions amidst a stable macroeconomic environment. Relative stability of the exchange rate promoted increased activity in the trade and manufacturing sectors. The table below shows the Official Mid exchange rates for July, August and September, 2017. Table 2: Official mid-exchange rate over the Quarter Official Midexchange rate Q4 FY 2016/17 average Jul - FY 2017/18 Aug- FY 2017/18 Sept- FY 2017/18 Q1 FY 2017/18 average 3,611.1 3601.53 3606.03 3599.87 3,602.48 Source: Bank of Uganda Exchange Rates in the EAC Region The Kenyan shilling and Tanzanian shilling registered a marginal depreciation of 0.16 percent and 0.22 percent respectively. The Rwandese and Burundian Franc demonstrated a slightly higher depreciation rate at 0.7 percent and 1.28 percent, compared to the previous quarter. The weakening of currencies against the dollar for most of the partner states is partly due to the global strengthening of the dollar coupled with significant domestic dollar demand pressures. 19
<--Depreciation Appreciation --> Quarter 1 Macroeconomic Report FY2017/18 Figure 8: Quarterly Changes in exchange rates in EAC Partner states 0.4 0.2 0-0.2-0.4-0.6-0.8-1 -1.2-1.4 0.24 0.03-0.16-0.22-0.37-0.44-0.61-0.70-1.15-1.28 UGANDA KENYA RWANDA TANZANIA BURUNDI Q4 2016/17 Q1 2017/18 Source: Respective Central Banks Merchandise trade balance The merchandise trade deficit narrowed by 14.8 percent on an annual basis from a deficit of US$ 525.4 million in Quarter 1 of the Financial Year 2016/17 to a deficit of US$ 447.6 million in Quarter 1 of the Financial Year 2017/18 as a result of slow recovery in the import bill coupled with an increase in exports. Merchandise exports The total value of exports grew by 16.8 percent during the quarter to US$ 791.10 million compared to US$ 677.11 the same quarter the previous financial year; this was largely attributed to a rise in the value of exports of coffee (68.9 percent), maize (55.3 percent), beans (221.4 percent) and electricity (139.5 percent). This performance is explained by an increase in international coffee prices and improvements in the export volumes of coffee 3 (54.5 percent), beans (281.1 percent) and maize (66.7 percent). Coffee was the major export, contributing about 17.1 percent of total 3 The increase in the volumes of coffee is on account of newly planted coffee that has started yielding and the biennial cycle of Arabica coffee production. 20
exports an improvement from the 11.8 percent in Quarter 1 2016/17, followed by gold at 9.3 percent. Comparing Quarter 1 Financial Year 2017/18 with Q4 Financial Year 2016/17, exports declined by 6.6 percent mainly due to a fall in the exports of gold, and cotton. Table 3: Performance of Exports (US$ million) Q1 2016/17 Q4 2016/17 Q1 2017/18 Annual percentage change Total Exports 677.11 846.79 791.10 16.8% Coffee (Value) 80.01 136.43 135.14 68.9% Volume ('000,000 60-Kg bags) 768,491 1,165,251 1,187,383 54.5% Av. unit value 1.74 1.96 1.90 8.8% Non-Coffee formal exports 503.96 580.13 527.93 4.8% Olw gold 91.95 93.17 73.89-19.6% Flowers 12.81 15.62 15.40 20.3% Beans 7.10 20.61 22.83 221.4% Fish & its products 26.07 35.82 30.92 18.6% Maize 16.77 18.59 26.05 55.3% Electricity 5.36 13.81 12.85 139.5% Cotton 6.61 15.24 2.77-58.2% ICBT Exports 93.15 130.24 128.03 37.4% Source: Bank of Uganda Destination of exports The East African Community remained the major destination for Uganda s exports, followed by Rest of Africa, and the European Union during Quarter 1 of 2017/18. Exports to the EAC region increased with South Sudan recording the largest increase of 68.2 percent in Q1 FY 2017/18 when compared with Q1 FY 2016/17 as relative calm returns to the nation. However exports to Rwanda and Tanzania declined by 4.6 percent and 39.6 percent respectively over the same period. 21
Figure 9: Destination of exports in July - August 2017 Rest of Europe 1% Middle East 11.7% Asia 6.3% Americas 2.3% Unclassified 0% EAC 39% European Union 18.3% Rest of Africa 21.6% Source: Bank of Uganda Imports The total value of merchandise imports in Quarter 1 Financial Year 2017/18 grew by 3 percent compared to Quarter 1 Financial Year 2016/17. In the period under review, the total value of merchandise imports grew to USD$ 1,238.7 million from USD$ 1,202.55 million. The growth in imports was mainly driven by the increase in private sector imports which grew by 7.5 percent amidst higher import prices4 and higher oil import volumes5 as a result of a relatively stable exchange rate and increased demand within the economy. Whereas the value of Government imports declined by 29.3 percent, the increment in private sector imports more than offset the decline. 4 Change over same period last year: -Non-oil import prices rose by 4% (Bank of Uganda) -Oil import prices rose by 9.4% (Bank of Uganda) 5 Change over same period last year: -Oil import volumes increased by15.9% (Bank of Uganda) 22
Table 4: Quarterly Performance of Merchandise imports (Million $ USD) Q1 FY 2016/17 Q1 FY 2017/18 Quarterly Performance Comparison Total Imports (fob) 6 1202.55 1238.71 3% Government Imports 148.01 104.62-29.3% Project 134.60 102.30-24.0% Non-Project 13.41 2.33-82.6% Formal Private Sector Imports 968.78 1052.39 8.6% Oil imports 154.51 195.82 26.7% Non-oil imports 814.28 856.57 5.2% Estimated Private Sector Imports 85.76 81.69-4.7% Total Private Sector Imports 1054.54 1134.09 7.5% Source: Bank of Uganda Origin of Imports Asia was the largest source of Uganda s imports, contributing nearly a half of the total merchandise imports in Quarter 1, with the Middle East and the EAC contributing 18 percent and 14 percent respectively. Notably, China and India contributed 61 percent of the total imports from Asia while Kenya and Tanzania contributed 87 percent of the total imports from EAC. Figure 10: Origin of imports in Q1, 17/18 by percentage share Asia 44% Unclassified 3% EAC 14% Middle East 18% Rest of Africa 8% European Union 10% Rest of Europe 1% Source: Bank of Uganda 6 FOB stands for Free On Board 23
International reserves International reserves held by the Central bank stood at 5.2 months of imports of goods and services as at the end of Quarter 1 Financial Year 2017/18 compared to a reserve cover of 5.3 months of imports held at the end of Quarter 1 Financial Year 2016/17. This is largely in line with the targeted reserve cover as stipulated by the EAMU protocol. 24
FISCAL SECTOR DEVELOPMENTS 25
FISCAL SECTOR The overall fiscal deficit for Quarter 1 Financial Year 2017/18 was Shs 1,386.55 billion compared to the programmed target of Shs 2,018.54 billion. The deviation is largely attributed to lower external development expenditure as externally funded projects performed below their expected levels. Table 5: Fiscal Operations Q1 FY 2017/18 Q1 Fiscal Operations 2017/18 Source: MFPED FY 16/17 Outturns FY 17/18 Budget FY 17/18 Outurns FY 17/18 Deviations Year on Year performance Total revenue and grants 2,922.40 3,716.05 3,243.76 (472.29) 11.0% Revenue 2,834.93 3,279.29 3,162.92 (116.37) 11.6% Tax revenue 2,752.47 3,192.45 3,068.26 (124.19) 11.5% Non-tax revenue 82.45 86.84 94.66 7.82 14.8% Oil revenues - - - - Grants including HIPC 87.48 436.76 80.84 (355.92) -7.6% Budget support(exc. HIPC) 1.68 - - - 0.0% Project grants 85.79 436.76 80.84 (355.92) -5.8% Expenditures and net lending 4,633.19 5,734.60 4,630.31 (1,104.28) -0.1% Recurrent expenditures 2,606.49 2,751.52 2,688.86 (62.66) 3.2% Wages and salaries 841.19 887.24 891.20 3.96 5.9% Other Recurrent 1,126.97 1,165.48 1,155.87 (9.61) 2.6% Statutory - Interest payments 638.33 698.80 641.79 (57.01) 0.5% o/w: foreign 186.63 113.80 105.35 (8.45) -43.6% o/w: Domestic 1 451.70 585.00 536.44 (48.56) 18.8% Development expenditures 1,776.35 2,505.72 1,528.24 (977.48) -14.0% External 611.73 1,475.23 637.38 (837.84) 4.2% Domestic 1,164.62 1,030.49 890.85 (139.64) -23.5% Net lending and investment 181.26 327.35 293.72 (33.62) 62.0% o/w GoU 15.40 7.66 7.66-50.2% o/w Exim 165.86 327.35 286.06 (41.29) 72.5% o/w Recapitalisation - - - - o/w other recapitalisation - - Others 69.09 150.01 119.49 (30.52) 72.9% Overall balance (1,710.78) (2,018.54) (1,386.55) 631.99-19.0% Excluding grants (1,798.26) (2,455.31) (1,467.39) 987.92-18.4% Financing 1,710.78 2,018.54 1,386.55 (631.99) -19.0% External financing (net) 638.97 1,291.06 1,035.05 (256.01) 62.0% Disbursement 684.08 1,357.56 1,102.71 (254.85) 61.2% Budget support - - - Concessional project loans 353.71 491.78 675.55 183.77 91.0% Non-concessional loans(hpp) 165.86 319.09 286.06 (33.03) 72.5% Non-concessional loans(other) 164.51 546.69 - (546.69) -100.0% Revolving credit - - 141.10 141.10 Amortisation (-) (45.11) (66.50) (67.66) (1.16) 50.0% Exceptional Financing - - - Domestic financing (net) 837.48 727.98 (59.63) (787.61) -107.1% Bank Financing 237.78 637.98 (134.98) (772.96) -156.8% Bank of Uganda (293.09) 338.00 (279.80) (617.80) -4.5% Commercial Bank 530.87 299.98 144.82 (155.17) -72.7% Non Bank financing 599.70 90.00 75.35 (14.65) -87.4% Errors and Ommissions 234.34 (0) 411.13 411.63 26
Revenue performance Tax collections during Quarter 1 Financial Year 2017/18 posted a shortfall of Shs.124.19 billion. This was largely due to an under performance in indirect domestic taxes which performed at 94 percent; and taxes on international trade and transactions which performed at 97 percent of their respective programs. The shortfalls in indirect taxes were realized in both VAT and Excise duty. Excise duty was mainly affected by performance of sugar, cigarettes, phone talk time, cement and beer. Phone talk time declined due to, increased use of data over airtime to make calls and deactivation of un-registered sim-cards. Sugar on the other side was affected by strikes among sugar growers over low prices offered by the sugar companies which resulted into reduction in sugar production. The performance of international trade taxes was attributed to decline in taxable imports during the quarter such as rice, footwear, ethyl alcohol, tiles. However, it should be noted that there has been growth in imports volumes in the country in Quarter 1 Financial Year 2017/18 compared to the same period in the previous financial year, though most of these imports originate from within the EAC boundaries and are duty free because of the trade integration agreements. Although direct taxes performed below target, withholding tax performed higher than the target due to more securities maturing within the quarter. Never the less, the tax performance for the first quarter of 2017/18 was higher compared to the performance in the first quarter of 2016/17 by 16 percent. This was partly due to the introduction of new measures and strengthening of tax administrative measures which raised Shs 47.65 billion by end of the first quarter of 2017/18. The tax measure of reinstating VAT on wheat grain at 18 percent raised Shs 27.7 billion in the first quarter. Grant disbursements during the first quarter of the financial year amounted to Shs80.84 billion against the programmed Shs 436.76 billion. Project grants performed at only 19 percent of the program due to low project absorption. This is an 8 percent 27
decline from the grant disbursements received during the first quarter of the Financial Year 2016/17 Expenditure Performance Total expenditure and net lending in Quarter 1 Financial Year 2017/18 amounted to Shs 4,630.31 billion which is lower than planned by Shs 1,104.28 billion. This performance was attributed to lower than anticipated external development expenditure which performed at only 43 percent and domestic development which performed at 86 percent respectively. Recurrent expenditure performed below the planned program level of Shs 2,751.52 billion by Shs62.66 billion. This was due to lower than anticipated interest payments and other current expenditure. Salaries on the other hand were higher than the program by Shs 3.96 billion due to additional cash limits provided to Universities. External disbursements amounted to Shs 1,102.71 billion against the program of Shs 1,357.56 billion in the period. Of this Shs. 286.06 was received for Hydro Power Projects (Karuma). A total of USD 39.1 million from the PTA loan that was previously budgeted for in the Financial Year 2016/17 was received in this quarter. Domestic Financing (Treasury Instruments) In Quarter 1 Financial Year 2017/18, Shs. 1661.9 billion (at cost) was raised. Of the total amount raised, Shs. 1,048.1 billion was from Treasury Bills while Shs. 613.8 billion was from Treasury Bonds. Shs. 1271.5 billion was used for refinancing maturing securities whilst Shs 390.5 billion went towards financing the Government budget. Table 6: Details for Domestic Financing for FY 2017/18, Shs.bn UGX Total issuance Net domestic financing Refinancing July 2017 494.4 198.2 296.3 August 2017 666.7 133.9 532.8 September 2017 500.8 58.4 442.4 Total 1661.9 390.5 1271.5 Source: Auction results, MoFPED 28
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