February 2024
Performance of the Economy Report
Ministry of Finance, Planning and Economic Development
2024-03-20
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 | |
| D.R.C | Democratic Republic of Congo | |
| EAC | East African Community | |
| EFU | Energy, Fuel and Utilities | |
| FOB | Free on Board | |
| 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 | |
| TzShs | 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 strengthen as shown by the high-frequency indicators of economic activity (The Composite Index of Economic Activity (CIEA) and the Purchasing Managers’ Index (PMI)). Perceptions about business conditions over the next few months also remained positive with the Business Tendency Index (BTI) scoring above its threshold of 50.
The Composite Index of Economic Activity continued to increase from 160.03 in December 2023 to 160.34 in January 2024. This represented a month on month growth of 0.19% in January, higher than the growth of 0.15% in December 2023.
The PMI for February recorded at 51.7 signaled a continued expansion in private sector activity. The expansion was mainly driven by an increase in new orders, higher output and a rise in staffing levels.
Perceptions about doing business in Uganda remained positive with the Business Tendency Index (BTI) recorded at 55.82 in February, above the threshold of 50. Nonetheless,it reduced from 58.88 in January 2024 indicating less optimism largely due to increasing fuel prices, materials and utility costs, affecting the agriculture and wholesale sector.
Annual headline inflation continued on an upward trend increasing to 3.4% in February from 2.8% the previous month. This development was on account of an increase in annual core inflation and energy, fuel & utilities inflation, which rose to 3.4% and 8.0% in February from 2.4% and 7.4% in January respectively. On the other hand, annual food crops and related items inflation slowed down over the same period to 0.5% from 2.6%.
Financial Sector
In February 2024, the Shilling depreciated by 1.8% on average to a mid-rate of Shs. 3,873.6 per USD from Shs. 3,805.0 per USD recorded the previous month. This depreciation was in part due to strong dollar demand from the energy and manufacturing sectors.
Commercial banks’ shilling denominated lending rates increased to a weighted average of 17.32% in January 2024 from 16.70% in December 2023, partly explained by the increase in inflationary pressures over that period.
Yields (interest rates) on Treasury Bills remained unchanged for the 182 and 364 day tenors at 12.4% and 13.1% respectively in February 2024. The annualized yield for the 91-day tenor edged downwards to 9.6% from 9.8% recorded the previous month.
The stock of outstanding private sector credit reduced by 0.7% from Shs. 21,703.07 billion in December, 2023 to Shs. 21,542.68 billion in January 2024, mainly explained by an increase in loan repayments despite an increase in new credit approved over the same period.
External Sector
During January 2024, Uganda’s trade deficit with the rest of the world narrowed both on a monthly and annual basis. Between December 2023 and January 2024, the merchandise trade deficit narrowed by 30.3%, from USD 269.87 million to USD 188.14 million, resulting from a decline in the import bill which more than offset the decline in export receipts.
Uganda exported merchandise worth USD 565.40 million, which is an 8.3% reduction in export earnings, when compared with USD 616.36 million earned in December 2023. This decline was majorly attributed to lower export earnings from gold, beans, oil re-exports and tobacco during the month.
The value of merchandise imports decreased by 15.0% from USD 886.24 million in December 2023 to USD 753.54 million in January 2024. This decrease was largely attributed to lower private sector imports particularly mineral products(excluding petroleum products), textile and textile products, machinery equipments, vehicles and accessories, among others.
Fiscal Sector
Government operations in February 2024 resulted in a fiscal deficit of Shs 615.71 billion, which was higher than the Shs 350.73 billion planned deficit for the month due to a shortfall in revenues and grants as well as higher than planned expenditure.
Domestic revenue collections amounted to Shs. 2,102.53 billion in February 2024, registering a shortfall of Shs. 148.12 billion against the target of Shs. 2,250.65 billion. Both the tax and non-tax revenue were short of their respective targets for the month.
Total government expenditure amounted to Shs 2,785.66 billion in February 2024, which was a 102.3% perfomance against the planned expenditure of Shs 2,721.88 billion. The higher than programmed expenditure was mainly due to an increase in recurrent expenditure which was above the plan by 13.5%.
East African Community
In January 2024, movements in annual headline inflation varied across EAC Partner States. Kenya’s annual headline inflation eased to 6.3% in February 2024 down from 6.9% the previous month. Tanzania’s annual headline inflation remained unchanged at 3.0% in February, same rate recorded in January 2024 while Rwanda’s annual headline inflation picked up slightly to 3.2% in February from 3.1% the previous month. 2
During the review month, the currencies within the EAC continued to depreciate against the USD, save for the Kenyan Shilling that strengthened by 4.7%. In comparison to other EAC currencies, the Uganda Shilling registered the biggest loss against the USD during the month, depreciating at 1.8%. The Burundi Franc, Rwanda Franc and Tanzanian Shilling depreciated by 0.2%, 0.6% and 0.7%, respectively. 3
In January 2024, Uganda traded at a surplus of USD 80.63 million with the rest of the EAC partners, an increase from the surplus of USD 22.30 million recorded the previous month. This was mainly on account of the trade surpluses recorded with Democratic Republic of Congo, South Sudan, Kenya, Rwanda and Burundi which more than offset the deficit registered with Tanzania.
1 Real Sector Developments
1.1 Inflation
Annual headline inflation continued on an upward trend increasing to 3.4% in February from 2.8% the previous month. This development was on account of an increase in annual core inflation and energy, fuel & utilities inflation, which rose to 3.4% and 8.0% in February from 2.4% and 7.4% in January respectively. On the other hand, annual food crops and related items inflation slowed down over the same period to 0.5% from 2.6%.
The increase in core inflation was mainly driven by annual services inflation, which rose to 5.4% in February from 3.9% the previous month, as education costs went up following the re-opening of schools in the new calendar year. Prices also went up for restaurant and accommodation services, as well as special hire taxi services in February 2024 compared to the same month last year. In addition, annual other goods inflation also picked up increasing slightly to 1.8% in February 2024 from 1.3% the previous month, mainly driven by an increase in the price of meat (beef, pork, goats’ meat & mutton), fish and its products as well as sugar, compared to February last year.
Annual inflation for food crops and related items decreased significantly from 2.6% in January to 0.5% in February, following better agricultural harvests compared to the previous year. Particularly, prices dropped in February 2024 for Cassava, sweet potatoes, Irish potatoes, Tomatoes and a few other fruits, compared to February 2023.
Annual EFU inflation increased in February 2024 largely on account of a surge in prices for water, petrol, charcoal and firewood compared to February 2023. The persistent increase in charcoal and firewood prices follows from the ban of commercial production of charcoal as government pursues its strategy to increase forest cover as a mitigation measure to deal with climate change.
1.2 Economic Activity
Overall, economic activity continued to strengthen as shown by the high-frequency indicators of economic activity (The Composite Index of Economic Activity (CIEA) and the Purchasing Managers’ Index (PMI)). Perceptions about business conditions over the next few months also remained positive with the Business Tendency Index (BTI) scoring above its threshold of 50.
The Composite Index of Economic Activity continued to increase from 160.03 in December 2023 to 160.34 in January 2024. This represented a month on month growth of 0.19% in January, higher than the growth of 0.15% in December 2023.
The PMI for February recorded at 51.7 signaled a continued expansion in private sector activity. The expansion was mainly driven by an increase in new orders, higher output and a rise in staffing levels. New orders and output grew in construction, industry, services, wholesale and retail, while agriculture saw a decline. Whereas the PMI registered growth at 51.7 in February, it dropped from 54 recorded the previous month as stocks of purchases fell for the first time in three months. The fall in stocks of purchases was particularly seen in lower purchases of inputs in the agriculture and industry sectors.
1.2.1 Business Perceptions
Perceptions about doing business in Uganda remained positive with the Business Tendency Index (BTI) recorded at 55.82 in February, above the threshold of 50. Nonetheless,it reduced from 58.88 in January 2024 indicating less optimism largely due to increasing fuel prices, material and utility costs affecting the agriculture and wholesale sector.
At sectoral level, business players in the construction, manufacturing and other services remained optimistic with their respective indices above the threshold of 50. However, pessimism about doing business was recorded in the agricultural and wholesale trade sectors during the month.
Key indicators measured by the index signified a lower level of optimism about the present business situation and order volumes by suppliers. This was in part due to a rise in prices for inputs driven by higher prices for fuel and materials, which would result in higher selling prices.
2 Financial Sector Developments
2.1 Exchange Rate Movements
Since the beginning of the Fiscal Year 2023/24, the Uganda shilling was largely stable up until the month of January 2024. However, the Shilling experienced a significant depreciation of 1.8% on average in February to a mid-rate of Shs. 3,873.6 per USD from Shs. 3,805.0 per USD recorded the previous month. This depreciation was in part due to strong dollar demand from the energy and manufacturing sectors, as well the higher external debt repayments made in January. In addition, an outflow of offshore funds for higher yields in competing markets during the month created depreciation pressures on the Shilling. The outflow of offshore funds was partly explained by Kenya’s USD 1.5 billion Bond issued on the international market in February at a high yield of 10.375%. Going forward, it is expected that the shilling will stabilize in the next months as inflows of forex rebound given the monetary policy stance implemented by the Bank of Uganda.
Similarly, the Shilling depreciated against the British Pound Sterling and Euro by 1.2% and 0.8%, respectively.
2.2 Interest Rate Movements
In February, the Central Bank maintained the monetary policy rate at 9.5% as the overall risks to the inflation outlook continued to be tilted to the upside. The Central Bank decided that keeping the rate unchanged was sufficient to anchor inflation around the medium-term target of 5% while supporting economic stability to encourage saving, investment, economic growth, competitiveness, and socioeconomic transformation.
2.2.1 Lending Rates4
Commercial banks’ shilling denominated lending rates increased to a weighted average of 17.32% in January 2024 from 16.70% in December 2023, partly explained by the increase in inflationary pressures over that period. On the other hand, foreign currency denominated lending rates slightly reduced from a weighted average of 8.79% to 8.59% over the same period.
2.3 Government Securities
In February 2024, the government secured Shs. 2,170.19 billion from four auctions (2 T-Bills, 1 T-Bond and 1 Private Placement). Of the total amount raised, Shs. 765.15 was from T-Bills while Shs. 166 billion was from the T-Bond auction. Following the additional domestic borrowing plan approved by parliament intended to cover unforeseen expenses, a private placement5 was held on 7th February, 2024 in which Shs. 1,239 billion was raised. The proceeds from the auctions were used to refinance maturing securities worth Shs. 537.46 billion which left a balance of Shs. 1,632.74 billion to finance other items in the budget.
| Total Issuances | Financing other items in the Government budget | Refinancing | |
|---|---|---|---|
| FY 2022/23 | 11,334.2 | 3,928 | 7,406.2 |
| Q1 2023/24 | 4,272.8 | 1,682.4 | 2,590.5 |
| Q2 2023/24 | 3,681.5 | 1,558.2 | 2,123.2 |
| January 2024 | 896.1 | -514.1 | 1,410.2 |
| February 2024 | 2,170.2 | 1,632.7 | 537.5 |
| FY 2023/24 to date | 11,020.6 | 4,359.2 | 6,661.4 |
2.4 Annualised Yields (Interest Rates) on Treasury Bills
Yields (interest rates) on Treasury Bills remained unchanged for the 182 and 364 day tenors at 12.4% and 13.1% respectively in February 2024. The annualised yield for the 91-day tenor edged downwards to 9.6% from 9.8% recorded the previous month. All auctions for Treasury Bills were oversubscribed, with the average bid to cover ratio being recorded at 2.38 in February 2024.
2.4.1 Yields on Treasury Bonds
Government issued 3-year, 5-year, 10-year, 15-year and 20-year tenor bonds in the private placement. Yields edged upwards for all bonds in comparison to the previous issuance of similar securities. The yields for the 3-year, 5-year and 10-year tenor bonds increased to 14.25%, 14.90% and 15.80% from 14.00%, 14.50% and 15.50% respectively. Yields for the 15-year and 20-year tenor bonds similarly edged upwards to 16.30% and 16.75% from 16.00% and 15.99%, respectively. The rise in yields during the month follows the increase in additional borrowing requirement by Government and approved by parliament in December 2023.
2.5 Outstanding Private Sector Credit6
The stock of outstanding private sector credit reduced by 0.7% from Shs. 21,703.07 billion in December,2023 to Shs. 21,542.68 billion in January 2024, mainly explained by an increase in loan repayments despite an increase in new credit approved over the same period. Particularly, the stock of Shilling denominated credit reduced to Shs. 15,165.67 billion in January 2024 down from Shs. 15,267.46 billion the previous month, while the stock of forex denominated credit in shilling equivalent reduced by 0.9% to Shs. 6,377.01 billion from Shs. 6,435.61 billion over the same period, despite the reduction in the weighted average lending rate for forex denominated credit. This is partly explained by the shilling depreciation over that period.
2.6 Credit Extensions7
The value of credit approved increased from Shs. 883.1 billion in December 2023 to Shs. 1,348.8 billion in January 2024 following the sustained improvement in economic activity and a continued decline in the ratio of non-performing loans to total gross loans from 5.3% in September 2023 to 4.6% in December 2023. The rate of loan approval also significantly improved from 56.5% in December 2023 to 75.0% in January 2024.
As was the case in December 2023, Personal loans and Household loans continued to dominate the largest share of credit approved in January 2024 at 27.0% of total, followed by Manufacturing at 18.3% , Building, Construction and Real Estate at 15.2% and trade at 14.5%. The share approved towards the manufacturing sector, which is a key driver of growth, significantly increased from 3.9% in December 2023 to 18.3% in January 2024.
3 External Sector Developments
3.1 Merchandise Trade Balance8
During January 2024, Uganda’s trade deficit with the rest of the world narrowed both on a monthly and annual basis. Between December 2023 and January 2024, the merchandise trade deficit narrowed by 30.3%, from USD 269.87 million to USD 188.14 million, resulting from a decline in the import bill which more than offset the decline in export receipts.
Year-on-year comparison shows that the merchandise trade deficit declined by 13.7% percent from USD 218.04 million in January 2023 to USD 188.14 million in January 2024. This was on account of an increase in export earnings which more than offset the increase in the import bill.
3.2 Merchandise Exports
In January 2024, Uganda exported merchandise worth USD 565.40 million, which is an 8.3% reduction in export earnings, when compared with USD 616.36 million earned in December 2023. This decline was majorly attributed to lower export earnings from gold, beans, oil re-exports and tobacco during the month.
In comparison to the same month the previous year, merchandise exports grew by 34.1% from USD 421.55 million in January 2023 to USD 565.40 million in the same month this year. This was attributed to increased export earnings from gold, coffee, oil re-exports among others.
Coffee exports receipts during the month amounted to USD 85.57 million, a 29.8% increase in value from USD 65.94 million registered in December 2023. This increase was majorly on account of a rise in the average price from USD 2.74/kilo in December to USD 2.96/kilo in January 2024. In additon, volumes exported increased by 20% from 0.40 million (60-kg bags) to 0.48 million (60-kg bags).
When compared with the same month the previous year, earnings from coffee exports grew by 27.0% from USD 67.35 million in January 2023 to USD 85.57 million in January 2024. The year-on-year increase in was driven by the price increment from USD 2.27/kilo in January 2023 to USD 2.96/kilo in January 2024.
The price of Uganda’s coffee increased in tandem with higher global prices which have been driven by continued concerns over supply, especially in Indonesia and Vietnam9. The US Department of Agriculture in Indonesia notes that excessive rainfall have disrupted the cherry development stage and lowered yeilds in major robusta-producing areas. In Vietnam, factors such as decreased land, rising labour and fertilizer expenses, and farmers switching to alternative crops have caused a drop in production.
| Product | Jan-2023 | Dec-2023 | Jan-2024 |
Jan-2024 vs Jan-2023 % Change |
Jan-2024 vs Dec-2023 % Change |
|---|---|---|---|---|---|
| Total Exports | 421.55 | 616.36 | 565.4 | 34.13 | -8.27 |
| Coffee | |||||
| Value Exported | 67.35 | 65.94 | 85.57 | 27.05 | 29.76 |
| Volume Exported (Millions of 60 Kg Bags) | 0.49 | 0.4 | 0.48 | -2.56 | 20 |
| Average Unit Value (US$ per Kg of Coffee) | 2.27 | 2.74 | 2.96 | 30.38 | 8.14 |
| Non-Coffee Formal Exports | 295.51 | 505.83 | 436.3 | 47.64 | -13.75 |
| of which: | |||||
| Mineral Products | 0 | 241.26 | 182.04 | Inf | -24.55 |
| Cotton | 3.16 | 1.32 | 2 | -36.84 | 51.22 |
| Tea | 7.14 | 4.82 | 5.31 | -25.64 | 10.06 |
| Tobacco | 4.22 | 5.68 | 3.51 | -16.81 | -38.28 |
| Fish & Its Prod. (Excl. Regional) | 12.12 | 11.78 | 12.19 | 0.62 | 3.47 |
| Simsim | 4.94 | 3.15 | 4.54 | -8.03 | 44.32 |
| Maize | 35.01 | 12.27 | 13.99 | -60.03 | 14.05 |
| Beans | 7.48 | 11.89 | 5.23 | -30.04 | -55.99 |
| Flowers | 5.62 | 4.34 | 5.14 | -8.66 | 18.35 |
| ICBT Exports | 58.69 | 44.6 | 43.54 | -25.81 | -2.37 |
Italy maintained the highest market share for Uganda’s coffee exports absorbing 41.8% of our coffee. This was an increase when compared with its 39.5% market share the previous month. It was followed by Germany 13.4%, India 9.8%, Spain 5.3% and United States of America 4.4%.
3.3 Destination of Exports10
The EAC remained the top destination of Uganda’s exports in January 2024, accounting for 38.2% of the total market share. Among the EAC partners, Kenya received the largest share of Uganda’s exports, constituting 30.4% of the total exports to the region.
Following EAC, the Middle East and the European Union emerged as the second and third top destinations for Uganda’s exports, accounting for 26.4% and 17.5% respectively. Notably within the Middle East, the United Arab Emirates remained the leading destination, absorbing 97.1% of Uganda’s total exports to the region.
3.4 Merchandise Imports11
The value of merchandise imports decreased by 15.0% from USD 886.24 million in December 2023 to USD 753.54 million in January 2024. This decrease was largely attributed to lower private sector imports particularly mineral products(excluding petroleum products), textile and textile products, machinery equipments, vehicles and accessories, among others. Excluding gold, imports grew by 6.9% from USD 614.09 million to USD 656.28 million.
On the contrary, comparison with the same month last year shows that merchandise imports grew by 17.8% from USD 639.59 million in January 2023, to USD 753.54 million in January 2024. This increase was mainly driven by increased import volumes for mineral products (excluding petroleum products), vegetable products, animal, beverages, fats and oils, machinery equipments, vehicles and accessories, petroleum products, chemical and related products, among others. Excluding gold, imports grew by 9.3% from USD 600.50 million to USD 656.28 million.
3.5 Origin of Imports
Asia remained Uganda’s largest source of imports in January 2024, accounting for 48.4% of the total imports. Within Asia, China and India were the major contributors, accounting for 46.2% and 17.7% of imports from the region.
Other notable regions included the EAC, the Rest of Africa, and the Middle East, which accounted for 18.0%, 11.8%, and 10.4% of the total imports respectively. Within the EAC region, Tanzania and Kenya remained the major sources of Uganda’s merchandise imports, accounting for 62.1% and 36.4% of the total imports from the region respectively.
3.6 Trade Balance by Region
In January 2024, Uganda traded at surpluses with EAC, the Middle East, and the European Union at USD 80.63 million, USD 71.52 million and USD 44.93 million respectively.
On the other hand, trade deficits were registered with Asia, Rest of Africa and Rest of Europe at USD 292.76 million, USD 73.72 million and USD 6.56 million respectively.
| Region | Jan 2023 | Dec 2023 | Jan 2024 |
|---|---|---|---|
| EAC | 182.11 | 22.3 | 80.63 |
| Middle East | -126.41 | 99.72 | 71.52 |
| European Union | 10.41 | 23.32 | 44.93 |
| Rest of Europe | -3.78 | -6.64 | -6.56 |
| Rest of Africa | 0.13 | -118.15 | -73.72 |
| Asia | -273.39 | -267.64 | -292.76 |
| Other Countries | -7.11 | -22.79 | -12.18 |
4 Fiscal Developments12
Government operations in February 2024 resulted in a fiscal deficit of Shs 615.71 billion, which was higher than the Shs 350.73 billion planned deficit for the month due to a shortfall in revenues and grants as well as higher than planned expenditure.
| Shs Billion | Program | Outturn | Performance | Deviation |
|---|---|---|---|---|
| Revenues and grants | 2,371.15 | 2,169.95 | 91.5% | -201.2 |
| Revenues | 2,250.65 | 2,102.53 | 93.4% | -148.12 |
| Tax | 2,057.27 | 1,981.88 | 96.3% | -75.38 |
| Non-tax | 193.38 | 120.65 | 62.4% | -72.73 |
| Grants | 120.5 | 67.42 | 55.9% | -53.08 |
| o/w Project support | 120.26 | 67.42 | 56.1% | -52.84 |
| Expenditures and lending | 2,721.88 | 2,785.66 | 102.3% | 63.78 |
| Current expenditures | 1,794.49 | 2,036.06 | 113.5% | 241.57 |
| Wages and salaries | 600.95 | 638.13 | 106.2% | 37.19 |
| Interest payments | 316.8 | 440.23 | 139.0% | 123.43 |
| o/w domestic | 288.2 | 399.28 | 138.5% | 111.09 |
| o/w external | 28.61 | 40.95 | 143.1% | 12.34 |
| Other recurrent expenditure | 876.74 | 957.69 | 109.2% | 80.95 |
| Development expenditures | 884.47 | 748.95 | 84.7% | -135.52 |
| Domestic | 543.99 | 532.24 | 97.8% | -11.74 |
| External | 340.49 | 216.71 | 63.6% | -123.78 |
| Net lending/repayments | 25.97 | 0 | 0.0% | -25.97 |
| o/w HPP GoU | __ | __ | __ | 0 |
| HPP Exim | __ | __ | __ | 0 |
| Domestic arrears repayment | 16.95 | 0.65 | 3.8% | -16.3 |
| Domestic fiscal balance | -350.73 | -615.71 | __ | __ |
4.1 Domestic Revenues
Domestic revenue collections amounted to Shs. 2,102.53 billion in February 2024, registering a shortfall of Shs. 148.12 billion against the target of Shs. 2,250.65 billion. Both the tax and non-tax revenue were short of their respective targets for the month.
Tax revenue collections were short of the Shs. 2,057.27 billion target by Shs. 75.38 billion. This was on account of taxes on international trade as well as indirect domestic taxes which performed at 90.8% and 90.0% respectively. Taxes on international trade were mainly affected by underperformance of Value Added Tax (VAT) on imports which was short of target by Shs. 44.56 billion as the projected import volumes did not materialize for the period.
Indirect domestic taxes performed below the Shs. 622.82 billion target by 10.0% resulting from shortfalls in both local excise duty and VAT. Local excise duty registered a shortfall of Shs. 23.24 billion while VAT registered a shortfall Shs. 39.26 billion against their respective targets for the month.
Direct domestic taxes, on the other hand, performed above the Shs. 579.11 billion target for the month by Shs. 69.76 billion. This was mainly due to PAYE, corporate tax, withholding tax and taxes on interest earnings.
4.2 Expenditure
Total government expenditure amounted to Shs 2,785.66 billion in February 2024, which was a 102.3% perfomance against the planned expenditure of Shs 2,721.88 billion. The higher than programmed expenditure was mainly due to an increase in recurrent expenditure which was above the plan by 13.5%.
Both wage and non-wage recurrent expenditure were above program by 6.2% and 9.2% respectively on account of the supplementary budget that was passed for these items for this financial year, implying higher payments than what was initially planned at budget time.
Interest payments were also above the program for the month mainly due to exchange rate depreciation which increased the Shilling amount that must be paid for external debt service. Domestic interest payments were also higher than the initial plan due to higher than anticipated interest rates on treasury instruments.
Development expenditure, on the other hand, was lower than the program for the month by 15.3% mainly on account of spending on externally financed projects which performed at only 63.6%. This is partly due to absorption constraints faced by implementing entities resulting in slower disbursement of the funds from development partners towards these projects.
5 East Africa Community Developments
5.1 EAC Inflation13
Kenya’s annual headline inflation eased to 6.3% in February 2024 down from 6.9% the previous month mainly driven by a slow down in the rate of price increase for food and non-alcoholic beverages, housing, water, electricity, gas and other fuels.
Tanzania’s annual headline inflation remained unchanged at 3.0% in February, same rate recorded in January 2024.
Rwanda’s annual headline inflation picked up slightly to 3.2% in February from 3.1% the previous month, as prices increased faster for alcoholic beverages, tobacco & narcotics; transportation as well as housing & utility.
Although Burundi’s14 annual headline inflation remained at double digit, it reduced slightly to 17.6% in January 2024 from 20.1% in December of 2023.
The annual headline inflation15 rate in South Sudan accelerated to 5.8% in December 2023 from 0.8% in the previous month.This was the highest reading since February 2023, mainly due to a rebound in price increase for food and non-alcoholic beverages. The annual inflation rate in the Democratic Republic of Congo slightly increased to 5.6% in December 2023 from 5.0% in November 2023.
5.2 EAC Exchange Rates16
During the review month, the currencies within the EAC continued to depreciate against the USD, save for the Kenyan Shilling that strengthened by 4.7%. The rebound of the Kenyan Shilling after a persistent depreciation seen in the previous months follows the increased inflows of forex raised from the high yield Bonds issued on the international market. In addition, the successful issuance of the international bonds increased investor confidence in Kenya’s ability to retire the Eurobond maturing in June 2024 which further increased the value of the Shilling. In comparison to other EAC currencies, the Uganda Shilling registered the biggest loss against the USD during the month, depreciating at 1.8% mainly due strong seasonal dollar demand amid outflow of offshore funds to other competing markets. The Burundi Franc, Rwanda Franc and Tanzanian Shilling depreciated by 0.2%, 0.6% and 0.7%, respectively.
5.3 Trade Balance with EAC
In January 2024, Uganda traded at a surplus of USD 80.63 million with the rest of the EAC partners, an increase from the surplus of USD 22.30 million recorded the previous month. Exports to the EAC partners amounted to USD 216.08 million while imports amounted to USD 135.45 million for the period under review.
On a country specific level, Uganda traded at surpluses of USD 59.67 million with the Democratic Republic of Congo, USD 52.47 million with South Sudan, USD 22.37 million with Rwanda, USD 16.32 million with Kenya, and USD 2.91 million with Burundi; while deficits were recorded with Tanzania (USD 73.11 million).
Our main export to Kenya was iron and steel accounting for 59.8% of our exports to the country while gluten wheat, iron and steel, vehicles and cereals were our main exports to South Sudan. DRC had a high demand for beverages, spirits, vinegar and animal & vegetable fats and oils. One of our major imports from Tanzania was cereals.
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. |
| Non-Performing Loan | This is a sum of borrowed money upon which the debtor has not made scheduled payments for a period usually at least 90 days. |
| 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 on inflation for Burundi, D.R.C and South Sudan not readily available.↩︎
Data on Exchange Rates for D.R.C and South Sudan not readily available.↩︎
Data comes with a month lag.↩︎
is the sale of government securities to pre-selected investors and institutions rather than on the open market.↩︎
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.↩︎
Source : Uganda Coffee Development Authority↩︎
Other Countries include: Australia and Iceland.↩︎
Statistics on trade come with a lag of one month.↩︎
Fiscal data is preliminary.↩︎
Data on inflation for Burundi, D.R.C and South Sudan not readily available.↩︎
Burundi’s inflation data is reported with a one month lag.↩︎
South Sudan and DRC inflation data is reported with a two month lag.↩︎
Data on Exchange Rates for D.R.C and South Sudan not readily available.↩︎