The report paints a bleak picture of the economy

Economists and policy analysts yesterday raised concerns about the decline in the value of the country’s goods and imports, pointing out that the July report does not paint a good picture of where the economy is headed, especially -largely about people’s purchasing power.

The July Performance of the Economy Macroeconomic Policy Department Monthly Report showed that the value of imports and exports decreased, with imports down 23.6 percent from $940m in May to $ 718.6m in June, while the value of imports decreased by 6.5 percent from $ 1.03. b in May to $966m in June.

The decline in exports was due to lower earnings from mineral products, while foreign debt decreased due to lower imports. mainly non-oil independent; vegetable products, animal products, beverages, fats, and oils as well as mineral products (except petroleum products) during the month.
Dr Fred Muhumuza, an expert on development and a lecturer at the College of Business, Makerere University, said that this decrease should raise concerns among the planners.

“For exports, it means that production can be sluggish or just a seasonal cycle. If the decline in exports is caused by low demand and financial assets, then the economy can “I have a different opinion. Hopefully, it’s not imported goods that are used in development and delivery of services,” he said.

Meanwhile, the report shows that coffee earnings increased by 27 percent to $162.2b in June, driven by higher export prices mainly due to higher yields of Robusta coffee in from the large areas of Masaka and South West Uganda, and international expansion. Coffee prices were driven by a reduction in the supply of coffee from Vietnam and Indonesia, which had a shortage of domestic supply due to a bad harvest.

Exports of mineral products which recorded $494.1m in May decreased to $248.8m in June, according to the report.
The reduction in the value of exports and imports, experts said has a direct negative impact on the economy that receives a lot of income from foreign exchange.

“It is possible that you have an imbalance when the foreign trade declines but the country still receives a lot of money from foreign exchange but the government spends as if we are a country very rich,” Mr Richard Ssempala, an economist and lecturer at Makerere University School of Economics said.

The report stated that the sentiment towards doing business in Uganda remained positive and optimistic due to the continuous improvement in the economic situation indicated by the high frequency indicators shown in the Composite Index of Economic Activity (CIEA) and Purchasing Managers’ Index. PMI) which grew by 0.97 percent and 53.7 percent respectively.
“The Business Tendency Index (BTI) was recorded at 59.03 percent in July 2024, which exceeds the threshold of 50 points, with a high confidence seen in large business and other services,” the report highlights.

Mr Ssempala said that these numbers do not show what is happening on the ground.
“In fact, the purchasing power of the citizens is still struggling. For example, you cannot measure Shs10,000 now and a few months ago, the prices of goods are increasing while the money is still the same,” he said.

Despite the report showing that the Uganda Revenue Authority has exceeded its monthly target by Shs1 trillion, but Mr. Ssempala says this will not help because of excessive expenditure.
“First of all this is only for a short period of time. We need to predict the future and secondly, this development will be taken away by heavy costs by our government which pretends that we are a rich country but we are not “If this matter is not dealt with, nothing good will come true,” he said.

Mr Enock Twinoburyo, an economist and senior adviser on financial reform for the Sustainable Development Goals (SDGs) at the Kigali-based Africa SDG Center, says the progress is good, but it is not a sign of growth in the future. medium.

“The value of the shilling is good, but compared to last year, it has gone down. Also note that the current account deficit narrowed due to lower imports and exports but more imports. The small deficit in the first quarter is not surprising. Financial costs are increasing in some areas. A little bit of fiscal deficit could also come from collecting arrears,” he said.

The report showed that the shillings appreciated by 1.1 percent against the dollar to an average rate of Shs3,705.85 per dollar in July compared to Shs3,747.19 per dollar in June due to the surplus of dollars in excess of its demand .

Among the East African Community (EAC) partner countries, only Uganda’s currency appreciated against the dollar while all others depreciated.

The Tanzanian and Kenyan shillings fell by 1.2 percent and 0.5 percent respectively, while the Rwandan and Burundian francs fell by 0.5 percent and 0.2 percent respectively.
According to the report, the Bank of Uganda increased the Central Bank Rate by 25 percent from 10 percent in July, but also reduced the shilling lending rate from 18.85 percent in May 2024 to to 17.64 percent by June 2024.

The report adds, this was driven by increased lending to prime lenders, who received loans at favorable rates due to their low-risk status.
In June 2024, Uganda traded $45.2m with other EAC Partner States, a change from the deficit of $72.2m registered last month.

“Imports from the region fell by 40.9 per cent to $188.35m in June 2024, from $318.8m the previous month. Imports from the region also fell by 5.3 per cent from $246.6m to to $233.61m in the same period,” reads the report.
Experts said the government however needs to invest in areas that will have a direct impact on the economy.

Summary of Economic Status
1. The real sector (Purchasing power) grew by 0.97% of the Shilling compared to 1.1%.
2. Exports decreased by 23.6 percent from $940m in May to $718.6m in June.
3. The import bill fell by 6.5 per cent from $1.03b in May to $966m in June.
4. Gross loan (finance) reported at Shs29.9b against the target of Shs975.5b.
5. July 2024, revenue was Shs2.2 trillion, exceeding the target of Shs2.1 trillion.
6. Expenditure in July 2024 reached Shs2.1 trillion against the program of Shs2.8 trillion.
The price rose to 4 percent from 3.9 percent.

Source: Department of Macroeconomic Policy Monthly Report for July 2024