Uganda’s March revenue collections decline amid increased spending

Uganda’s domestic revenue collections for the month of March 2024 declined while government expenditure went up amid concerns that the state will continue to borrow to provide services.

According to the Performance of the Economy Report for the month of March 2024 released by the Ministry of Finance, domestic revenue collections totaled Shs 2.060.02 trillion in March 2024, comprising Shs1.922.03 trillion tax revenue and Shs137.98 billion non-tax revenue.

This means both tax and non-tax revenues fell short of their respective targets for the month, resulting in a total shortfall of Shs 386.64 billion for domestic revenues.

Tax revenue fell short of the Shs 1,922.03 billion target by Shs 317.37 billion, with indirect domestic taxes and taxes on international trade performing at 86.37% and 79.58% respectively. The shortfall in taxes on international trade, particularly Value Added Tax (VAT) on imports, amounted to Shs 88.57 billion.

“This was mainly on account of lower-than-expected imports on which these taxes are levied. This follows increased imports from the EAC region as well as intermediate goods used in production which attract little or no taxes,” the report reads in part.

Additionally, local excise duty and VAT were below their targets by Shs 17.77 billion and Shs 65.36 billion respectively, contributing to the underperformance of indirect domestic taxes by 13.63% against the target of Shs 609.67 billion.

 Similarly, direct domestic taxes were below the target of Shs 709.51 billion by Shs 38.77 billion, primarily due to lower-than-expected revenue from treasury bills and bonds, corporate tax, withholding tax, and taxes on interest earnings.

On the other hand, in March 2024, total government expenditure amounted to Shs 3,309.86 billion, which was above the programmed expenditure of Shs 2,874.11 billion for the month, indicating a performance rate of 115.2%.

“The higher-than-programmed performance was due to higher spending on recurrent items, which exceeded the planned amount by 50.3% as wage, interest payments and non-wage spending were all above plan for the month. This was due to the supplementary budget allocated for these items during the financial year to cater for wage and non-wage shortfalls, thus resulting in greater expenditures than initially anticipated at budget time when the monthly programs were set,” the report reads in part.

Interest payments were also above the program by 10.7% for the month mainly due to exchange rate depreciation which increased the Shilling amount that must be paid for external debt service.