Uganda’s external reserves have gone down by about 9 per cent, amounting to US$266.5 million, after the balance of payment position registered a deficit of US$475 million over a 12-month period ending March this year.
Reading the Budget on June 11 during the Fifth Session of the 9th Parliament at the International Conference Centre, finance Minister Matia Kasaijja noted that the country had suffered from the effects of imports outweighing the exports, regional security challenges, the economic meltdown in Europe and, the Shilling depreciating against the dollar.
“Our external sector suffers from an imbalance between growing imports compared to the poor performance of exports. Exports have been constrained largely due to political instability faced by some of our trading partners in the region, and an economic slowdown in Europe,” the minister said.
Mr Kasaijja disclosed that the total export revenue was about half the import revenue, standing at US5, 0498.9 million and US$2,701.6 million, respectively, for the period between April 2014 and March 2015.
The Minister, who is serving his first year at finance, having been appointed on March 1, said government would remedy the problem by enhancing export diversification and value addition to agricultural products, and revealed that government had already identified investors to add value to Uganda’s coffee and cotton.
Further, Mr Kasaijja revealed that the current account deficit had been plugged by US$2414 million through external grants (US$299 million); workers remittances (US$915); and current account deficit investments inflows of US$1200 million. The Minister further noted that in the period ending March 2014, the government recorded a surplus of US$ 287.4 million during the previous 12-month period and allayed any fears, saying that the overall external reserves were healthy, standing at US$2.972.4 million, an equivalent of four months of future imports of goods and services.
Government expenditure in this financial year, Mr Kasaijja said, is estimated at Shs 13,988 billion compared to Shs11, 456 billion in the last year, an increase of about Shs2.5 billion. Further, the recurrent expenditure this year is estimated at Shs7, 550 billion, while the development expenditure is projected at Shs4, 881 billion during the same period, the Minister said.
“Domestically raised revenues will fund 100 percent of the recurrent expenditures and 66 percent of development expenditure,” he said adding that statutory expenditure will almost be doubled this year, from Shs753.9 billion last year to Shs1, 4007.7 billion.
“Development expenditure is budgeted to grow by 58 percent next financial year, mainly driven by major infrastructure projects including the rehabilitation of Entebbe International Airport, new roads and the Karuma and Isimba hydropower projects,” the minister revealed.
According to the Minister, Uganda’s public debt that comprises 60 and 40 per cent external and internal arrears, respectively, enjoys donor endorsement, is sustainable and expected to rise by US$0.4 billion, from US$7.2 billion last year to US$7.6 billion this year, as a result of borrowing to finance infrastructure development.
“Our public debt therefore remains sustainable and our economy is by no means under debt distress. This is the same conclusion reached by independent parties who undertake credit rating for Uganda, and the Debt Sustainability Analysis (DSA) conducted by the International Monetary Fund (IMF) and the World Bank,” Mr Kasaijja said.