Bank of Uganda has confirmed that the provisional total public debt stock at nominal value as at end March 2023 stood at Shs 86,352.6 billion which is approximately 47.7 percent of GDP.
In the April statement of the economy report released by the central bank, the total public debt increased by 8.1 percent relative to the June 2022 number at cost and the increase was observed for both domestic and external debt where as External debt maintained the lions share at 59.9 percent.
In the nine months of FY22/23, fiscal operations fell short of programme by a big margin. Total government expenditure in the period amounted to Shs24,936.4 billion, which was Shs2,239.8 billion lower than programmed mainly due to an underperformance in development expenditure of Shs3,525.2 billion.
The report reveals that excluding interest payment on domestic debt which continue overshoot the programmed amount by 29 percent on account of the tight financial conditions, recurrent spending was above programme by 2.6 percent.
“Synchronous global monetary policy tightening has hardened both domestic and international financial conditions, which has increased the cost of servicing debt for the country and thus curtailing the fiscal space. Moreover, government revenues have also undershot the programme by Shs1,337.6 billion, partly due to underperformance of the grants and tax revenues. So far, grants have registered a shortfall of Shs882.1 billion, against the Shs1,741.0 billion targets. The resultant fiscal deficit amounted to Shs6,325.8 billion which was much lower than the programmed deficit by shs902.2 billion,” reads the report in part.
According to the report, relative to the Uganda Revenue Authority (URA) targets, the cumulative outturns for net tax and Non-Tax (NTR) collections for the nine months of FY22/23 amounted to Shs.17,752.0 billion, Shs.455.3 billion below the target.
“Net URA tax revenue amounted to Shs16,434.7 billion, undershooting the target by Shs581.1 billion while NTR amounted to Shs1,317.3 billion, an over performance of Shs125.9 billion. The shortfall in tax revenues was largely on account of underperformance of indirect taxes and international trade taxes which posted respective shortfalls of Shs389.4 billion largely and Shs283.9 billion,” reads an excerpt.
Additionally, direct taxes over performed by Shs143.4 billion mainly due to higher than target collections in PAYE. On an annual basis, net tax revenue registered a growth of 12.7 percent in the four months of FY22/23 compared to 9.6 in the same period last year while NTR increased by 30.0 percent in the period compared to a 3.2 percent decline in the previous year.
Reflecting the continued pressure exerted by interest payments on the domestic revenues, BOU reveals that the ratio of total interest payments to domestic revenues increased to 23.5 percent in a year’s period to March 2023 from 20.6 and 21.3 percent in the periods to March 2022 and March 2021 respectively.
Domestic debt interest payments as a percentage of domestic revenues also increased to 18.2 percent from 17.7 percent and 15.7 percent in the same periods, breaching the 2018PDMF threshold of 12.5 percent by a big margin. This signifies the mounting liquidity pressures on the domestic revenues to finance the domestic debt liabilities at the expense of other priority budgetary items.
Exchange rate
Bank of Uganda notes that the Uganda shilling remains stronger relative the pre-Covid-19 levels and compared to the other currencies in the EAC region save the Tanzania shilling.
“Save for March 2023 in which the Uganda Shilling weakened due to a stronger dollar as the Fed tightened monetary policy and volatility in global financial markets heightened due to turbulence in the banking Sector in US and EU, the shilling has been stronger than expected.”
The shilling has been on appreciating path since August 2022 and gained 1.3 percent in quarter to March 2023, supported by the tight monetary policy stance which has lessened the outflow of short-term capital, a relative improvement in the terms of trade leading in temporal improvement in exports earnings, the trade balance and ultimately the current account of the balance of payments.
The report further indicates that strong foreign direct investment inflows, especially in the oil sector and increase in forex receipts from tourists coupled with stable inward remittances from workers have also favored a stronger shilling.
“Other currencies in the East African Community (EAC) continued to depreciate during the period under review. For instance, the Rwandan Franc and Kenyan Shilling depreciated against the US dollar by 3.1 percent and 3.6 percent in the quarter to March 2023 staying on the depreciation trajectories treaded for some years. This depreciation was mainly attributed to increased import bills resulting from high international commodity prices and the strengthening of the US dollar. The Tanzanian Shilling remained stable with a marginal depreciation of 01 percent in the review quarter. In real terms, the shilling has been steadily appreciating since September 2022 offering support to the disinflation process domestically through declining imported inflation.”
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