Trade Balance and Economic Performance

Uganda's Economic Outlook ;

The global Corona Virus pandemic has, without exception, impacted lives and economic activity across the world. The pandemic has worsened the effects of climate change and the locust invasion that Uganda and the region had already been grappling with. Uganda has been reasonably successful in dealing with these emergencies.

These emergencies have adversely impacted the economy. The livelihoods of many Ugandans have been negatively affected with declining household incomes, and in some cases the loss of jobs and food insecurity. 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. Inflows of Foreign Direct Investment and remittances of Ugandans in the diaspora have also declined sharply.

The crises we have recently faced cannot, however, distract us from our long-term development strategy. These emergencies, indeed, present several lessons and opportunities that we have drawn on to craft the Economic Stimulus and Growth Strategy. These opportunities include the following:

1. The acceleration of our import substitution and export promotion strategy for a range of goods including medicines and other health products; and the products of agro-industrialization and light manufactures, which Uganda can produce with a comparative advantage;

2. Digitalization of many aspects of socio-economic activity to improve efficiency and reduce costs. This can be applied through e-Commerce; e-Government (including tele-conferencing, procurement and the dispensation of justice); e-Learning; robotic automation, artificial intelligence, cyber security and cloud computing; and digital marketing in tourism. This permits to fast-track implementation of the Fourth Industrial Revolution (4IR);

3. Strengthening contingency planning to mitigate the impact of disasters, and protect the most vulnerable persons;

4. Transforming Informality of doing business to being formal.

5. Reform of Urban Transport to reduce congestion, starting with the Greater Kampala Metropolitan Area and eventually Regional Cities;

6. Domestic tourism stimulation to encourage many Ugandan residents to explore local touristic destinations.


Real Sector • There has been a general improvement in the level of economic activity as well as senti[1]ments about economic and business conditions in the country over the last few months as shown by the high frequency indicators of economic activity. • The Composite Index of Economic Activity (CIEA), which measures economic activity, rose by 0.81% to 162.63 in August 2023 from 161.33 in July 2023. • Similarly, the Purchasing Managers Index (PMI) was recorded at 52.9 in September 2023, up from 51.6 in August 2023, signaling an improvement in business conditions compared to the previous month month. This was mainly driven by the growth of output and new orders supported by improved customer demand. • There were also positive sentiments about doing business in September 2023 in the Ugan[1]dan economy by business owners and investors as illustrated by the Business Tendency Index (BTI) which was recorded at 59.31 (higher than the 50-mark threshold). • Inflation continued on a downward trajectory in September 2023 as a general price decline was recorded under the Energy Fuels and Utilities (EFU) category while the pace of price increases in the rest of the categories further slowed down. Annual headline inflation de[1]clined to 2.7% for the year ended September 2023 compared to the 3.5% recorded for the year ended August 2023. This was partly due to declining prices for fuels as well as disin[1]flation for processed food items such as whole grain maize, sim sim, sorghum, packed milk, cassava flour, maize flour, etc.

Financial Sector • The Ugandan Shilling registered a depreciation of 1.2% in September 2023, having traded at an average midrate of Shs 3,738.02/US$ compared to an average midrate of Shs 3,689.12/US$ in August 2023. This followed a continued increase in corporate demand for the US Dollar and a general strengthening of the US Dollar globally. • Yields on shorter term treasury instruments continued on an up-ward trend for the 182 -day and 364-day tenors but declined for the 91-day tenor. The annualized yields for the 91- day,182-day and 364-day tenors for September were 10.0%, 12.4% and 12.8% compared to 10.3%, 11.4% and 12.5% in August, respectively. • There was an increase in the lending rates for the shilling denominated credit from 17.95% in July 2023 to 18.40% in August 2023. On the other hand, lending rates for foreign currency 1Data on Private Sector Credit, CIEA and External sector has a lag of one month. VI denominated credit declined from a weighted average of 9.18% in July 2023 to 8.57% in August 2023. • The stock of outstanding private sector credit registered an increase of 1.5% to Shs 20,841.36 billion in August 2023. Most of this growth was accounted for by the foreign currency denominated credit whose interest rates lowered during the month. External Sector • Uganda traded at a deficit of US$ 402.05 million with the rest of the world in August 2023. This was 41.9% higher than the US$ 283.28 million trade deficit registered in July 2023 as the growth in the import bill more than offset the growth in export receipts registered over this period. • The value of merchandise exported in August amounted to US$ 669.88 million which was 17.6% higher than the US$ 569.78 million in July 2023. This was mainly on account of increased export earnings mainly from commodities such as gold and coffee exports during the month. • Uganda imported goods worth US$ 1,071.93 million representing a 25.7% increase from the US$ 853.06 million that was imported in July 2023. This increase was mainly in formal private sector imports during the month.

Fiscal Sector • Government operations in September 2023 resulted in a fiscal deficit of Shs 231.89 billion. This was against a programmed deficit of Shs 216.83 billion. The higher than programmed deficit was mainly due to shortfalls registered for both domestic revenues and grants during the month. • Government had projected to collect domestic revenue amounting to Shs 2,187.16 billion in September 2023. However, actual collections during the month were Shs 2,028.27 billion of which Shs 1,896.27 billion was tax revenue while the remainder was non-tax revenue. This implies a domestic revenue shortfall of Shs 158.89 billion as both tax and non-tax revenue were below their respective targets for the month. • Total government spending amounted to Shs 2,342.19 billion in September 2023, against a program of Shs 2,647.57 billion implying a performance of 88.5%. Most of the under[1]performance was due to lower than planned spending on externally financed development projects, which performed at 39.5% of the program for the month as disbursements from development partners were much less than had been anticipated

Extract from Ministry of Finance, Planning and Economic Development;