By Rhyman Agaba
Within a period of just 1 month between March and April, Uganda’s export income dropped by UGX 400 Billion as the negative effects of the Covid-19 pandemic continue to morsel economies on a global scale.
Bank of Uganda’s latest regular report that was released in June this year, capturing statistics for April reveals that Uganda’s receipts were $207.1m (UGX 766 Billion) down from March’s $315m (UGX 1.1trillion).
These records show that the country’s total export receipts suffered a 52 per cent decline in that period alone.
“The April earnings was a further decline from February’s $356m (UGX 1.3 Trillion) recorded when Covid-19 hit the World and was declared a pandemic,” the report reads in apart.
Comesa remains the lead export destination but its export earnings in the period in review declined to $80m (UGX 296b) up from $107m (UGX 396b) indicating a 33.7 per cent decline in 30 days.
Uganda’s exports earnings from Asia suffered a 123 % decline in the period in review. In April 2020, Uganda’s export earnings dropped to $16m (UGX 60b) up from $36m (UGX 123b) earned in the month of March.
The country’s exports earnings to the promising Middle East also shrunk to $61m (Shs228b) from $65m (UGX 243b). Uganda’s export earnings to the Middle East in a period in review suffered a 6.5 % drop.
The BoU report shows that Uganda’s export earnings from the traditional European Union market suffered a 30% decline in the period in review.
“Uganda’s export earnings in this period went down to $32.6m (UGX 120bn) down from $42.7m (UGX 158bn) recorded in the month of March,” reads an excerpt from the report.
What is most significant in this period in review informal trade recorded a mere $970,000 (Shs3.5b) down from the usual range of $51m (Shs188b).
In this period, gold although still leading the chart, its export receipts suffered a slight drop from $60.9m (Shs225b) registered in March to $60.4 (Shs223.4bn) earned in April the period in review.
Coffee the country’s leading agricultural export commodity in the period in review saw its earnings declined to $36.9m (Shs136b) down from $45.8m (169bn) earned in the month of March.
This means that coffee export earnings suffered a 24 per cent decline in the period in review.
Fish as an export commodity also suffered a decline in earnings in the period in review. Mostly exported in European Union, Fish export receipts dropped to $6.7m (Shs24.7bn) down from $11.5m (Shs42.5bn).
Soap, tea, flowers, and cement surprisingly recorded a slight increase in their export earnings in the period in review.
Strong Vote of Confidence: Mbire Reappointed MTN Uganda ChairmanThe report shows that the country earned $2.7m from soap exports up from $1.4m earned the previous month. Tea exports which mainly go through Mombasa auction also recorded an increase to $6.14m up from $5.1m earned in March.
Covid-19 Impact
While reading the Budget speech on June 11, the Finance minister Matia Kasaija admitted that the economy had been affected by the global pandemic.
“Economic activity has drastically declined, with reduced demand for agricultural produce, the disruption of input supplies to manufacturers, as well as a disruption of Micro, Small and Medium Enterprises activities,” he said.
Economist Fred Muhumuza said this is not a good sign, especially now that we are seeing a lot of exits of dollars that are increasing.”
He said if dollars go out of the country and they are not brought back then the country will have to borrow.
“Borrowing is very bad for an economy like Uganda. In general, it should be a concern but not a surprise, given the global recession wbecause the demand for many things has gone down,” Muhumuza said.
He said that as a country we may also need to check on cases where the decline in value is due to lower prices, lower volumes, or both.
“Effect will be a reduction in BoU reserves if we don’t reduce our imports. There will be pressure on the shilling as dollar-cost goes up,” Muhumuza added.
He added that BoU should be able to prevent a rapid depreciation given its planned injection from the IMF.
“We might get new dollars coming in from WB loans,” He cautioned.
These were the same fears expressed by the governor BoU, Prof. Emmanuel Mutebile while appearing before the Parliament’s National Economy Committee.
Mutebile cautioned that the rate at which public debt is rising is worrisome especially with the recent COVID-19 pandemic loan the government acquired may shove up the ratio.
Uganda’s debt currently stands at Shs53.9tn as of April the period in review.
“Acquired more loans because of the COVID-19 pandemic might push the ratio up. This is happening especially due to the weaker fundamentals including slow growth, exchange rate depreciation, and weaker exports,” Mutebile said.
Government pledge
While reading the Budget speech on June 11, the Finance minister Matia Kasaija admitted that the economy had been affected by the pandemic.
“Economic activity has drastically declined, with reduced demand for agricultural produce, the disruption of input supplies to manufacturers, as well as a disruption of Micro, Small and Medium Enterprises (MSMEs) activities.”
He added that the Inflows of Foreign Direct Investment and remittances of Ugandans in the diaspora have also declined sharply.
Finance Minister Kasaija says government will promote exports through an economic stimulus and growth strategy sectors.
“Export promotion strategy for a range of goods including medicines and other health products; and the products of agro-industrialization and light manufactures will be developed,” stated Hon Matia Kasaija .
Economist Fred Muhumuza said if dollars go out of the country and they are not brought back then the country will have to borrow.