List of Acronyms

Acronym		Expansion
B.Franc		Burundian Franc
BOU		Bank of Uganda
BTI		Business Tendency Index
CBR		Central Bank Rate
CIEA		Composite Index of Economic Activity
EAC		East African Community
EFU		Energy, Fuels and Utilities
FX		Foreign Exchange
FY		Financial Year
GBP		British Pound Sterling
ICBT		Informal Cross Border Trade
KShs		Kenyan Shilling
MDAs		Ministries, Departments and Agencies
MOFPED		Ministry of Finance, Planning and Economic Development
NGOs		Non-Governmental Organisations
PAYE		Pay as You Earn
PMI		Purchasing Managers’ Index
PSC		Private Sector Credit
R.Franc		Rwandan Franc
T-Bills		Treasury Bills
T-Bonds		Treasury Bonds
TShs		Tanzanian Shilling
UBOS		Uganda Bureau of Statistics
UShs / Shs		Ugandan Shilling
US$ / USD		United States Dollar
VAT		Value Added Tax
YTM		Yield to Maturity

Summary¹

Real Sector

Economic activity continued to improve and business sentiments remained positive, as shown by the high frequency indicators.
The Composite Index of Economic Activity (CIEA) improved by 0.43% during the month of July to 161.21 from 160.52 the previous month. This improvement was majorly attributed to increased activity in agriculture (increased production of beans, coffee, and flowers), and services (increased financial services).
There was continued improvement in business activity with the PMI recorded at 51.6 in August, above the 50.0 threshold. Particularly, there was an increase in new orders, output and employment during the month.
Sentiments about business conditions also remained positive in August 2023 with the BTI recorded at 61.25, well above the 50.0 threshold and the average of 54.50 for FY 2022/23. Optimism was mainly registered in the construction, manufacturing, and services sectors.
Annual headline inflation continued on a downward trend, declining to 3.5% in August 2023 from 3.9% the previous month. The slowdown in headline inflation was mainly driven by a reduction in core inflation as well as inflation for energy, fuel & utilities. Particularly, prices went down for transport services, refined oil, liquid fuels and cooking gas compared to the same month last year.

Financial Sector

The Uganda shilling registered a depreciation of 0.8% against the US Dollar to an average midrate of UShs. 3,689.12 per USD. The weakening of the shilling in August reflected increased corporate demand for the USD.
Commercial banks’ shilling denominated lending rate reduced to a weighted average of 17.95% in July compared to 18.41% in June, partly supported by the continued easing of inflation.
The stock of outstanding private sector credit grew by 0.6% from UShs. 20,407.32 billion in June to UShs. 20,535.40 billion in July, partly supported by the reduction in the lending rates for shilling denominated credit over the same period.
Treasury bill yields (interest rates) increased during the month on account of higher issuances by Government.The annualized yields for the 91 day,182 day , and 364-day tenors increased to 10.3%, 11.4% and 12.5% compared to 9.8%, 11% and 12% respectively the previous month.

External Sector

The trade deficit widened by 12.4% from USD 247.43 million in June to USD 278.52 million in July 2023, following a reduction in exports which more than offset the reduction in imports.
Uganda exported merchandise worth USD 569.78 million in July 2023, a 12.42% decrease compared to USD 650.57 million exported during June 2023. This decrease was mainly on account of lower export earnings from gold, beans, cotton, tea, flowers and fish registered during the month.
The value of merchandise imports decreased by 5.57% from USD 898.31 million in June 2023 to USD 848.3 million in July 2023. This decline was largely attributed to lower private sector imports, particularly vegetable products, animal, beverages, fats & oil; prepared foodstuffs, beverages & tobacco; mineral products (excluding Petroleum products).

Fiscal Sector

Government operations in August 2023 resulted in a fiscal deficit of Shs 218.19 billion, higher than the programmed value of Shs 215.67 billion on account of shortfalls in grants and domestic revenues.
Domestic revenue collections amounted to Shs 2,175.43 billion in August 2023 against a target of Shs 2,236.48 billion representing a shortfall of Shs 61.04 billion. This shortfall was on account of under performance of non-tax revenues as tax revenue was above the target for the month.
Total government spending in August 2023 amounted to Shs 2,456.63 billion, representing performance of 94.7% as both recurrent and capital expenditure were lower than planned.

East African Community

Headline inflation declined in Uganda and Kenya, increased in Rwanda and was unchanged in Tanzania. Kenya’s headline inflation reduced from 7.3% for the year ending July to 6.7% for the year ending August, mainly on account of a decline in the cost of food and non-alcoholic beverages as well as information and communication services. On the contrary, Rwanda’s annual headline inflation increased to 17.4% in August from 17.3% the previous month.
All EAC currencies depreciated against the US Dollar in August. The Tanzanian shilling registered the highest level of depreciation in the region at 3.4% from an average mid-rate of TShs.2346.37/USD to TShs.2427.29/USD.
During July 2023, Uganda registered a trade surplus with the EAC amounting to USD 25.15 million, a significant improvement from the deficit of USD 21 million in June 2023. The trade surplus was on account of an increase in export earnings and a simultaneous decline in import receipts during the month.

Real Sector Developments

Inflation

Annual headline inflation continued on a downward trend, reducing from 3.9% in July to 3.5% in August 2023. The slowdown was driven by reductions in core and Energy, Fuel & Utilities(EFU) inflation, which more than offset a slight increase in food crops inflation.

Annual core inflation reduced to 3.3% for the year ending August 2023 from 3.8% for the year ending July 2023, mainly on account of a reduction in the cost of transport services, refined oil, laundry bar soap, clothing and footwear, second hand vehicles among others.

The general price level for Energy, Fuel and Utilities’ (EFU) continued to decline, with inflation recorded at -2.7% for the year ending August 2023. In particular, prices went down for petrol, diesel, kerosene and cooking gas in August 2023 compared to the same month last year.

On the other hand, annual inflation for food crops and related items went up to 9.8% in August from 9.3% the previous month, mainly driven by significant increase in the prices for beans, round onions, cassava, Irish potatoes and fruits.

Economic Activity

Economic activity as reflected by the Composite Index of Economic Activity (CIEA) improved during the month of July. The CIEA recorded a 0.43% increase in July 2023, to 161.21 from 160.52 the previous month. Growth in the CIEA was majorly attributed to increased activity in agriculture (increased production of coffee and flowers), and services (increased financial services).

The Purchasing Managers’ Index (PMI) remained above the 50.0 threshold in August 2023, recorded at 51.6 which signalled an improvement in business activity particularly as new orders, output and employment increased during the month. Growth of new orders encouraged companies to increase their staffing levels and purchasing activity in August. Despite this, there was a decline in the PMI from 53.9 in July 2023 to 51.6 in August majorly attributed to persistent higher input costs incurred by firms.

Business Perceptions

Sentiments about business conditions remained positive during the month of August 2023, with the BTI recorded above the 50.0 threshold, and above the average of 54.50 for FY 2022/23. Optimism was mainly registered in the construction, manufacturing, and services sectors as key indicators like; present business situation, order volumes, competition, number of employees, average selling price signaled an improving outlook in the economy. Despite this, there was a slight decline in the BTI from 63.63 in July, to 61.25 in August 2023 mainly on account of pessimism reflected by respondents, regarding the financial situation and access to credit in the economy.

Financial Sector Developments

Exchange Rate Movements

The Uganda shilling registered a depreciation of 0.8% against the US Dollar to an average midrate of UShs. 3,689.12 per USD. The weakening of the shilling in August reflected increased corporate demand for the USD.

On the other hand, the Uganda shilling appreciated by 0.8% and 0.7% against the Euro and Pound Sterling respectively.

Interest Rate Movements

In the month of August, the Central Bank’s Monetary Policy Committee lowered the Central Bank Rate (CBR) to 9.5% from 10% the previous month. This followed a steady reduction in inflation, with core inflation going below the central bank target of 5%. The downward revision of the monetary policy rate is also premised on the expectation that headline inflation will continue on a downward trend over the next 12-month period.

Lending Rates²

Commercial banks’ shilling denominated lending rate reduced to a weighted average of 17.95% in July compared to 18.41% in June, partly supported by the continued easing of inflation.

On the other hand, foreign currency denominated lending rates which have been on an upward trend since February this year, continued to increase recording a weighted average of 9.18% in July from 8.83% in June. This follows the continued shilling appreciation over the same period.

Government Securities

During the month under review, Government carried out four auctions of treasury instruments (three T-bill and T-Bond ), and one bond switch auction. A bond switch³ involves exchanging a bond tending towards maturity with other bonds of different tenors. It is aimed at smoothening the domestic debt redemption profile.

In total, all Government securities auctions held in August 2023 resulted in total issuance of Shs.1,893.63 billion (at cost). Of this Shs 976.45 billion was used for the refinancing of maturing domestic debt (including those managed in the bond switch auction); while Shs 917.18 billion went towards financing other items in the Government budget as shown in Table 1.

Breakdown of Government Securities (UShs Billion) [Source: MOFPED]
	Total Issuances	Financing other items in the Government budget	Refinancing
FY 2021/22	13,247.7	5,228.1	8,019.7
FY 2022/23	11,334.2	3,928	7,406.2
August 2023	1,893.6	917.2	976.5
FY 2023/24 to date	2,981.5	1,252.5	1,729.1

Annualised Yields (Interest Rates) on Treasury Bills

Yields (interest rates) on shorter term tenors increased for the 91-day, 182 -day and 364 day tenors. The annualized yields for the 91 day,182 day , and 364-day tenors all increased to 10.3%, 11.4% and 12.5% compared to 9.8%, 11% and 12% respectively the previous month. The increase in the yields on short term securities was partly driven by increased issuance amounts by Government.

All auctions for Treasury Bills were oversubscribed, with the average bid to cover ratio being recorded at 2.88 in August 2023.

Yields on Treasury Bonds

During the month, Government issued two T-bond instruments i.e., for a 2-year and a 10-year (both reopened)⁴. The Yield to Maturity for the 2 year tenor increased marginally to 13.54% in August from 13.50% registered in the previous auction. Unlike the increase in the yield for the 2-year tenor, the Yield to Maturity on the 10- year tenor decreased to15.49% in August from 15.75% registered in the previous issuance.

Outstanding Private Sector Credit⁵

Following a 0.6% contraction in June, the stock of private sector credit grew by 0.6% from UShs. 20,407.32 billion to UShs. 20,535.40 billion in July 2023, partly supported by the reduction in the lending rates for shilling denominated credit over the same period.

Credit Extensions⁶

The value of credit approved in July amounted to UShs. 1,128.8 billion a slight reduction from UShs. 1,180.7 billion approved in June. Nonetheless, this represents an approval rate of 61.0% of the total loan amount requested during the month.

The largest share of credit approved was towards the trade sector at 27.3% of total approvals, closely followed by Personal and Household loans at 26.5%. Other notable recipients of credit were Business, Community, Social and other Services at 15.6%, the Agricultural sector at 11.9% and Building, Construction and Real Estate at 11.2%.

External Sector Developments

Merchandise Trade Balance⁷

The trade deficit widened by 12.4% from USD 247.43 million in June to USD 278.52 million in July 2023, following the reduction in exports despite the reduction in imports.

Year-on-year, the merchandise trade deficit declined by 15.3% from USD 328.72 million in July 2022 to USD 278.52 million in July 2023.

Merchandise Exports⁸

In July 2023, Uganda exported merchandise worth USD 569.78 million. This represented a 12.42% decrease compared to USD 650.57 million exported during June 2023. This decrease was mainly on account of lower export earnings from gold, beans, cotton, tea, flowers and fish registered during the month.

Coffee export receipts amounted to USD 104.99 million, a 15.93% increase from USD 90.56 million in June 2023. This growth was mainly attributed to two factors. There was 11.19% increase in the average price of coffee from USD 2.68 to USD 2.71 from June to July as well as a 14.54% increase in the number of bags exported from 564,152 to 645,832 (60-kg bags).

In comparison to the same month the previous year, merchandise exports grew by 65.97% from USD 343.30 million in July 2022 to USD 569.78 million in July 2023. This was largely attributed to increased export earnings from coffee, maize, electricity, gold, cotton, tea, tobacco, oil re-exports and flowers.

Merchandise Exports by Product (US$ Million) [Source: BOU and MOFPED Calc.]
Product	Jul-2022	Jun-2023	Jul-2023	Jul-2023 vs Jul-2022 % Change	Jul-2023 vs Jun-2023 % Change
Total Exports	343.3	650.57	569.78	65.97	-12.42
Coffee
Value Exported	83.52	90.56	104.99	25.7	15.93
Volume Exported (Millions of 60 Kg Bags)	0.58	0.56	0.65	12.03	14.54
Average Unit Value (US$ per Kg of Coffee)	2.41	2.68	2.71	12.2	1.21
Non-Coffee Formal Exports	218.19	511.31	415.9	90.61	-18.66
of which:
Mineral Products	0	253.29	146.62	Inf	-42.11
Cotton	0.81	2.95	0.84	4.02	-71.54
Tea	6.8	8.74	7.42	9.08	-15.07
Tobacco	2.68	3.67	4.92	83.47	34.07
Fish & Its Prod. (Excl. Regional)	12.2	10.67	10.28	-15.76	-3.66
Simsim	1.42	1.92	1.15	-18.81	-39.97
Maize	7.24	12.19	23.79	228.68	95.16
Beans	6.63	4.78	3.32	-49.94	-30.62
Flowers	5.66	6.89	6.25	10.31	-9.31
Oil Re-Exports	10.54	13.37	16.91	60.37	26.5
Base Metals & Products	14.85	22.12	18.65	25.57	-15.68
ICBT Exports	41.59	48.7	48.89	17.56	0.38

Destination of Exports⁹

In July 2023, the EAC remained the top destination of Uganda’s exports, accounting for 41.17% of the total market share. Within the EAC region, the top three destinations for Uganda’s exports were South Sudan, Democratic Republic of Congo and Kenya, taking up 28.10%, 26.31%, and 24.97% of the total exports respectively. Asia and the European Union emerged as the second and third top destinations for Uganda’s exports, accounting for 22.01% and 15.28% respectively.

Merchandise Imports¹⁰

The value of merchandise imports decreased by 5.57% from USD 898.31 million in June 2023 to USD 848.3 million in July 2023. This decline was largely attributed to lower private sector imports, particularly in vegetable products, animal, beverages, and fats & oil, prepared foodstuff, beverages & tobacco, mineral products (excluding Petroleum products).

Comparison with the same month last year shows that merchandise imports grew by 26.23% from USD 672.02 million in July 2022, to USD 848.30 million in July 2023. This increase was mainly driven by increased import volumes for mineral products (excluding petroleum products), machinery equipment, vehicles and accessories, plastics, rubber, and related products.

Origin of Imports

Asia remained Uganda’s largest source of imports, accounting for 36.87% of the total imports in July 2023. Within Asia, China and India were the major contributors, accounting for 72.79% of the imports from the region.

Other notable regions included the EAC, the Rest of Africa and the Middle East, which accounted for 24.68%, 22.11%, and 18.90% of the total imports respectively. Within the EAC region, Tanzania and Kenya emerged as the lead sources of Uganda’s merchandise imports, accounting for 55.35% and 40.17% of the total imports from the region respectively.

Trade Balance by Region

In July 2023, Uganda traded at deficits with Asia, Rest of Africa, the Middle East, and Rest of Europe at USD 187.37 million, USD 156.17 million, USD 98.11 million and USD 4.22 million respectively.

On the other hand, a trade surplus of USD 25.15 million was registered with the EAC and USD 34.56 million with the European Union.

Merchandise Trade Balance by Region (US$ Million) [Source: BOU]
Region	Jul 2022	Jun 2023	Jul 2023
European Union	7.47	23.67	34.56
Rest of Europe	-4.78	-1.74	-4.22
Middle East	-168.39	-48.33	-98.11
Asia	-263.07	-117.83	-187.37
EAC	115.45	-21.11	25.15
Rest of Africa	-1.2	-69.62	-33.28
Other Countries	-14.19	-12.77	-15.25

Fiscal Developments¹¹

Government operations in August 2023 resulted in a fiscal deficit of Shs 218.19 billion, higher than the programmed value of Shs 215.67 billion on account of shortfalls in grants and domestic revenues. Expenditure and net lending, on the other hand, was below what had been programmed for the month.

Summary Table of Fiscal Operations August 2023 (UShs Billion) [Source: MOFPED]
Shs Billion	Program	Prel. Outturn	Performance	Deviation
Revenues and grants	2,377.65	2,238.44	94.1%	-139.22
Revenues	2,236.48	2,175.43	97.3%	-61.04
Tax	1,983.94	1,990.91	100.4%	6.98
Non-tax	252.54	184.52	73.1%	-68.02
Grants	141.18	63.01	44.6%	-78.17
o/w Project support	138.83	63.01	45.4%	-75.82
Expenditures and lending	2,593.32	2,456.63	94.7%	-136.69
Current expenditures	1,881.33	1,837.15	97.7%	-44.18
Wages and salaries	586.85	584.37	99.6%	-2.48
Interest payments	447.21	447.26	100.0%	0.05
o/w domestic	414.67	414.71	100.0%	0.04
o/w external	32.54	32.55	100.0%	0.01
Other recurrent expenditure	847.27	805.52	95.1%	-41.75
Development expenditures	704.99	616.67	87.5%	-88.32
Domestic	190	172.49	90.8%	-17.51
External	514.99	444.18	86.2%	-70.81
Domestic arrears repayment	7	2.81	40.1%	-4.19
Domestic fiscal balance	-215.67	-218.19	__	__

Domestic Revenues

Domestic revenue collections amounted to Shs 2,175.43 billion in August 2023 against a target of Shs 2,236.48 billion representing a shortfall of Shs 61.04 billion. This shortfall was on account of underperformance of non-tax revenues as tax revenue was above the target.

Tax revenue collections in August amounted to Shs 1,990.91 billion, which was Shs 6.98 billion above the target. This was mainly on account of direct domestic taxes (taxes on incomes) especially Pay As You Earn (PAYE) and the tax on returns on treasury bills and bonds. PAYE continues to perform well due to increased activities in the oil and gas sector leading to the creation of more jobs.

Overall, the surplus registered under direct domestic taxes was Shs 88.60 billion which more than offset the shortfalls registered under indirect domestic taxes and taxes on international trade transactions.

Indirect domestic tax collection was Shs 537.43 billion against a target of Shs 578.73 billion, resulting in a shortfall of Shs 41.31 billion. Both excise duty and Value Added Tax (VAT) were short of their targets as the level of aggregate demand that was anticipated for the month did not materialize.

Similarly, taxes on international trade transactions were lower than projected for the month by Shs 40.89 billion. This was partly due to lower than anticipated imports for the month, resulting in shortfalls in excise duty and VAT on imports.

Expenditure

Total government spending in August 2023 amounted to Shs 2,456.63 billion. This was against a program for the month of Shs 2,593.32 billion, representing a 94.7% performance. Expenditure on both the recurrent items and capital items was lower than planned.

Recurrent expenditure was lower than programmed by 2.3% (Shs 44.18 billion) mainly on account of non-wage recurrent items of which spending was less than planned by Shs 41.75 billion. This is partly explained by some MDAs that spent significantly more in July 2023, thereby reducing the need (and available funds) to spend in August 2023.

Similarly, expenditure on development projects was less than programmed for the month, amounting to Shs 616.67 billion against the target of Shs 704.99 billion. Both domestically and externally financed project spending were below target. Domestically financed development spending performed at 90.8%, being lower than anticipated by Shs 17.51 billion. External development expenditure fell short by Shs 70.81 billion representing a performance of 86.3%.

East Africa Community Developments

EAC Inflation¹²

Headline inflation declined in Uganda and Kenya, was unchanged in Tanzania and increased in Rwanda. Kenya’s headline inflation reduced from 7.3% for the year ending July to 6.7% for the year ending August, mainly on account of a decline in cost of food and non-alcoholic beverages as well as information and communication services. Tanzania’s annual headline inflation remained unchanged at 3.3% in August, the same rate recorded the previous month.

On the contrary, Rwanda’s annual headline inflation slightly increased to 17.4% in August from 17.3% the previous month, mainly driven by a surge in the prices for transport services and food and non-alcoholic beverages (especially vegetables).

EAC Exchange Rates¹³

All EAC Currencies depreciated against the US Dollar in August. The Tanzanian shilling registered the highest level of depreciation at 3.4% from an average mid-rate of TShs.2346.37/USD to TShs.2427.29/USD. The Kenyan Shilling, Rwandan Franc and Burundian Franc depreciated by 1.8%,1.4% and 0.2% respectively, against the US Dollar.

Trade Balance with EAC¹⁴

During July 2023, Uganda registered a trade surplus with the EAC amounting to USD 25.15 million, a significant improvement from the deficit of USD 21.1 million in June 2023.

The decrease in the trade deficit was on account of an increase in export and a simultaneous decline in import receipts during the month. Total export receipts to the EAC amounted to USD 234.55 million in July 2023 up from USD 220.70 million the previous month. The import bill also dropped to USD 209.40 million in June 2023 from USD 241.73 million the previous month.

Glossary

Term	Description
Bid to cover ratio	This is an indicator for the demand of Government securities in a given auction. A ratio equal to 1 means that the demand for a particular security is equal to the amount offered by the government. A ratio less than 1 means the auction is under subscribed and a ratio greater than 1 means that the auction is over subscribed.
BTI	The Business Tendency Index measures the level of optimism that executives have about current and expected outlook for production, order levels, employment, prices and access to credit. The Index covers the major sectors of the economy, namely construction, manufacturing, wholesale trade, agriculture and other services. The Overall Business Tendency Index above 50 indicates an improving outlook and below 50 a deteriorating outlook.
CIEA	CIEA is constructed using seven variables, that is; private consumption estimated by VAT, private investment estimated by gross extension of private sector credit, government consumption estimated by its current expenditure, government investment estimated by its development expenditure, excise duty, exports and imports. Data comes with a lag of one month.
Core Inflation	This is a subcomponent of headline inflation that excludes items subject to volatility in prices. It excludes energy, fuels, utilities, food crops and related items.
Headline Inflation	This refers to the rate at which prices of general goods and services in an economy change over a period of time usually a year.
Tenor	This refers to the time-to-maturity of a financial instrument, for example, if a certain instrument matures after 91 days – it is called a 91-day tenor.
PMI	The PMI is a composite index, calculated as a weighted average of five individual sub-components; New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stocks of Purchases (10%). It gives an indication of business operating conditions in the Ugandan economy. The PMI above 50.0 signals an improvement in business conditions, while readings below 50.0 show a deterioration. The PMI is compiled on a monthly basis by Stanbic Bank Uganda.
Yield to Maturity (YTM)	Yield to maturity (YTM) is the total return anticipated on a treasury instrument if the instrument is held until it matures.

Online Resources

Visit us online at mepd.finance.go.ug.

The entire history of data used for this and previous Performance of the Economy Reports - subject to data revisions - can be downloaded at mepd.finance.go.ug/apps/macro-data-portal.

An interactive display of leading economic indicators and a GDP nowcast is available at mepd.finance.go.ug/apps/macro-monitor.

Data on Private Sector Credit, CIEA and External sector has a lag of one month.↩︎
Data comes with a month lag.↩︎
On January 18, 2024, Government has a maturing Treasury bond instrument that has cumulatively increased to UGX 1,629 billion (at cost) following several re-openings in the primary domestic securities market. Given the fact that this enormous sum of money on the maturing instrument will present significant refinancing risks in the third quarter of the year, Government has switched a portion of the maturing bond (Shs 446.73 billion) for four others with tenors of 3-years, 10-years, 5-years, and 20 years.↩︎
Reopening a bond instrument refers to issuing additional amounts using previously issued bond instruments. The reopened instrument has the same maturity date and coupon interest rate as the original instrument, but with a different issue date and different purchase price.↩︎
Data on private sector credit has a lag of one month.↩︎
Data on private sector credit has a lag of one month.↩︎
Statistics on trade come with a lag of one month.↩︎
Other Countries include: Australia and Iceland.↩︎
Others include: Australia and Iceland.↩︎
Statistics on trade come with a lag of one month.↩︎
Fiscal data is preliminary.↩︎
Data for Burundi, South Sudan and Democratic Republic of Congo not readily available.↩︎
Recent data for Democratic Republic of Congo and South Sudan not readily available.↩︎
Data on trade with the EAC has a one-month lag.↩︎

August 2023

Performance of the Economy Report

Ministry of Finance, Planning and Economic Development

2023-09-21