Uganda’s trade imbalance with the rest of the world has narrowed by 32.2% both on a monthly and annual basis, the Ministry of Finance has reported.
The Ministry’s monthly economic performance report for July 2023 shows that this is on account of a boost in export earnings that exceeded the growth in import expense.
“Between May and June 2023, the merchandise trade deficit narrowed by 12.3% from USD 282.08 million to USD 247.43 million. Year-on-year, the merchandise trade deficit narrowed by 32.2% from USD 365.11 million in June 2022 to USD 247.43 million in June 2023,” the report reads in part.
In June 2023, Uganda exported merchandise worth USD 650.57 million. This represented an 11.1% increase when compared to USD 585.81 million exported during May 2023. This increase was mainly on account of higher export earnings from beans, simsim, cotton and gold registered during the month.
Coffee export receipts during the month amounted to USD 90.56 million, a 23.6% increase from USD 73.26 million in May 2023. This growth was mainly attributed to the rising international price of Robusta coffee which prompted exporters to off-load coffee from their warehouses for sale. In comparison to the same month the previous year, merchandise exports grew by 78.2% from USD 365.13 million in June 2022 to USD 650.57 million in June 2023. This was largely attributed to increased export earnings from maize, simsim, gold and hides and skins.
Destination of exports
In June 2023, the East African Community (EAC) remained the top destination of Uganda’s exports, accounting for 33.9% of the total market share. Within the EAC region, the top three destinations for Uganda’s exports were Kenya, South Sudan, and Democratic Republic of Congo, taking up 31.4%, 25.7%, and 24.7% of the total exports respectively.
Asia and the Middle East emerged as the second and third top destinations for Uganda’s exports, accounting for 32.8% and 13.8% respectively. It is worth noting that Uganda’s export earnings from Asia significantly increased from USD 28.12 million in June 2022 to USD 213.53 million in June 2023, owing to the increase in gold exports to the region.
The value of merchandise imports increased by 3.5% from USD 867.89 million in May 2023 to USD 898.0 million in June 2023. This growth was largely attributed to higher private sector imports, particularly animals and animal products, petroleum products, vegetable products, beverages, fats & oils, as well as textiles and textile products.
Comparison with the same month last year shows that merchandise imports grew by 23.0% from USD 730.24 million in June 2022, to USD 898.0 million in June 2023. This increase was mainly driven by increased import volumes for mineral products (excluding petroleum products), vegetable products, animals, beverages, and fats & oils, among others.
Origin of imports
In June 2023, Asia remained Uganda’s largest source of imports, accounting for 36.9% of the total imports. Within Asia, China and India were the major contributors, accounting for 74.4% of the imports from the region.
Other notable regions included the EAC, the Middle East, and the Rest of Africa, which accounted for 26.9%, 15.3%, and 10.5% of the total imports respectively. Within the EAC region, Tanzania and Kenya emerged as the lead sources of Uganda’s merchandise imports, accounting for 62.5% and 33.5% of the total imports, respectively.
Trade balance by region
In June 2023, Uganda traded at deficits with Asia, Rest of Africa, the Middle East, the EAC and Rest of Europe at USD 117.72 million, USD 69.59 million and USD 48.28 million, USD 21.03 million and USD 1.74 million respectively.
Trade balance with EAC
During June 2023, Uganda registered a trade deficit with the EAC amounting to USD 21.03 million. This was higher than the USD 6.63 million deficit recorded in May 2023. The increase in the trade deficit was on account of a decline in export receipts during the month. Total export receipts to the EAC amounted to USD 220.70 million in June 2023 down from USD 239.50 million the previous month. The import bill also slightly dropped from USD 241.73 million in June 2023 from USD 246.13 million the previous month.
The significant narrowing of Uganda’s trade deficit by 32% reflects a notable positive shift in its international trade dynamics. A trade deficit reduction of this magnitude suggests that Uganda is experiencing an improvement in its trade balance, wherein the value of imports has decreased relative to exports.
The narrowed trade deficit has positive implications for Uganda’s overall economic health, potentially leading to increased GDP growth, employment opportunities, and currency value. However, sustained efforts are required to ensure that this improvement is not merely a short-term fluctuation and to maintain a stable and balanced trade position in the long term.