Uganda’s merchandise trade deficit widened by 50% from USD 269.25 million in April 2021 to USD 322.17 million in May 2021, reflecting stronger import demand.
Compared to May 2020, the deficit widened by 123%.
This is according to the June 2021 performance of the economy report released by the Ministry of Finance Planning and Economic development.
The report says the wider deficit reflects a recovery in the flow of imports during May 2021 as compared to a year ago when the global economy was in lockdown.
Imports expanded by 11.7% to USD 777.39 million during May 2021 and outmatched the 6.7% growth in exports.
External Sector
In the fiscal Sector, operations in June 2021 resulted into an overall deficit of Shs 1,257.84 billion which was higher than the planned deficit of Shs 164.28 billion for the month. This was on account of revenue shortfalls and the higher than planned spending during the month.
The report also shows that Collections on revenues and grants amounted to Shs 2,176.25 billion, representing a shortfall of Shs 424.67 billion or 16.3% against the target for the month.
Total Government expenditure amounted to Shs 3,434.09 billion representing a performance rate of 124.2% against the target for the month and was driven by
authorised supplementary spending undertaken.
Real Sector
The report states that the Annual Headline inflation slightly increased to 2.0% in June 2021 from 1.9% the previous month, largely driven by increases in prices for food and non-alcoholic beverages during the month.
At the same time, the report says economic activity weakened in June 2021 largely on account of the implementation of restriction measures to curb the resurgent spread of Covid19 during the month.
Anastacia Tshesane to become PwC SA CEOSimilarly, sentiments about doing business, as measured by the Business Tendency Index (BTI), turned pessimistic in June 2021. The pessimism followed implementation of a second phase of the lockdown measures to mitigate the spread of Covid-19.
Financial Sector
On a good note, the Ugandan shilling continued to appreciate against the US dollar. The shilling traded at an average mid-rate of UGX 3,540/USD in June 2021 compared to UGX 3,553/USD in May 2021, translating into a 0.3% appreciation.
“Weighted average lending rates for both the shilling and foreign currency denominated credit increased in May 2021 and was recorded at 19.8% and 6.8% from 18.1% and 6.5% in April 2021, respectively,” the report says.
Annualised yields edged downwards with 91, 182 and 364-day tenors registering 7.01%, 9.31% and 10.06% in June 2021 compared to 7.15%, 9.86% and 11.05% in May 2021. This is mainly due to a reduction in Central Bank Rate
Government auctioned securities worth Shs 1,046.17 billion (at cost) during June 2021, out of which Shs 265.25 billion was for the refinancing of maturing domestic debt whereas Shs 780.92 billion was for financing other items in the budget. For FY 2020/21, domestic borrowing, on net basis amounted to Shs. 6,795.17 billion.
The stock of outstanding private sector credit declined by 0.2% from Shs 17,829.5 billion in April 2021 to Shs 17,792.2 billion in May 2021. This decline was mainly due to a 2.7% drop in the stock of foreign currency denominated credit in May when compared to April 2021.
East African Community
In the East African Community, Kenya and Tanzania registered increases in annual headline inflation from 5.9% and 3.3% in May 2021 to 6.3% and 3.6%, respectively in June 2021 while Rwanda’s inflation declined from 0.4% to 0.1%.
Except for the Tanzanian shilling that remained unchanged for the month, the Kenyan shilling, Rwandan and Burundi francs all registered depreciations of 0.3% against the USD.
Uganda traded at a deficit of USD 105.31 million within the EAC region during May 2021, with Tanzania accounting for the largest share of the trade deficit. The large deficit with Tanzania more than offset the trade surpluses recorded with South Sudan, Rwanda and Burundi.
Kenya was the largest destination of Uganda’s exports, while the bulk of imports during May 2021 were sourced from Tanzania.
