Uganda shilling appreciates by 0.3%

The Uganda shilling has continued to be stable after appreciating by 0.3% according to the latest figures by the Ministry of Finance for the month of June.

“During the month of June 2021, the Ugandan shilling continued to face appreciation pressures. The shilling gained by 0.3% against the USD, trading at an average mid-rate of Shs 3,540/USD in June from Shs 3,553/USD recorded in May 2021. The appreciation was on account of the increased inflows mainly from offshore investors into the government securities market. The Ugandan shilling also posted 1.2% and 0.4% appreciations against the Euro and Pound Sterling respectively,” the statement said.

According to the report, Bank of Uganda lowered the central bank rate to 6.5%  last month from 7.0% where it had been maintained for 12 months, adding the reduction is the lowest level it has been since it was first introduced in 2011.

“The main reasons for the reduction of the CBR was the low inflation outlook and the need to support economic growth amidst economic challenges due to the COVID-19 pandemic. There was an increase in lending rates charged on both the shilling and foreign currency-denominated credit in May 2021 compared to the previous month. The weighted average lending rates on shilling denominated credit increased from 18.1% in April to 19.8% in May 2021.”

“At the same time, the rates on foreign currency denominated lending continued an upward trend to 6.8% from 6.5% over the same period. The increase in lending rates reflects increased credit risks.”

Revenue

The report also indicates that despite slowed economic activity due to the Covid-induced lockdown, the government raked in shs2.1trillion in June.

Government collected revenues worth Shs 2.1 trillion in June 2021, representing a shortfall of  13.5% against the target.”

According to the finance ministry report, of the shs2.1 trillion, the biggest part was from taxes but noted that major taxes registered shortfalls against their respective targets during to the Covid lockdown.

“Direct domestic taxes amounted to Shs1.1trillion, representing an 87.0% performance rate against the target for the month. This performance was partly on account of the underperformance of corporate tax collections as firms encountered low profitability amidst challenges posed by the second lockdown.”

 Trade

In the month of June, Uganda’s export earnings increased by 6.7% to $455.22 million in May 2021 from $426.56 million in April 2021.

This according to the Ministry of Finance was due to higher receipts from mainly non-coffee exports such as mineral products, electricity, tea, beans among others due to an increase in their respective volumes.

The report also indicates that the Middle East remained Uganda’s top destination for exports in May 2021 accounting for 42.7% of the total exports whereas other destinations included East African Community(25.6%), the rest of Africa and the European Union.

In terms of imports, the volume also increased by 11.7% to $777.39 in May.

Asia remained the main source of Uganda’s imports increasing its share from 32% a year ago to 3.5% in May whereas the East African region and the Middle East came in second and third respectively.