Country Report Uganda March 2010

Economic performance: Government revenue increases by around 20%

The Uganda Revenue Authority (URA) fell just shy of the government's ambi-tious revenue projections for the first half of fiscal year 2009/10 (July-June). Compared with the half-year estimate of USh2.12trn (US$1.12bn), actual collections fell around 2% short, at USh2.07trn. Matched against the same period of the previous year, however, it represented an improvement of about 20%. The shortfall was due to lower-than-expected revenue from international trade, especially import duties. Other revenue headings were ahead of target: domestic direct taxes by about 7% and indirect taxes by about 5%. International trade taxes contribute around one-half of total revenue, of which petroleum and other import duties account for 25%. Although petroleum duties were close to projections, other import duties fell short by more than 20%.

The URA blamed the shortfall in trade-related revenue on unexpectedly low levels of domestic consumption and, particularly, the strength of the shilling against the US dollar. Following the depreciation of the shilling early in 2009, the URA fixed its 2009/10 exchange rate at USh2,292:US$1. However, the shilling strengthened progressively from USh2,110:US$1 in July to USh1,871:US$1 by November, and averaged USh1,968:US$1 for the first half of 2009/10. The strength of the currency means that when tariffs charged in US dollars are converted back into Ugandan shillings, they are worth less than they would be at a weaker exchange rate. The shilling has weakened in the past few months and the URA expects the revenue position to improve during the second half of the financial year, boosted by higher income from trade taxes. Despite the relatively healthy state of the public finances, a proposed supplementary budget of USh300bn (US$158.6m), which would have raised spending by around 4%, was rejected in February by the cross-party parliamentary budget committee, as it was insufficiently aligned with priority spending areas such as social services, health and education.

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