The Independent Uganda: You get the Truth we Pay the Price
Remittances from Ugandans living abroad amounted to over US$ 1 billion for the second year running, while foreign direct investments totalled to US$ 848 million.
This contributed to a stronger external position with the rest of the world, with the overall balance of payments position recording a surplus of US$ 182.21 million in FY 2020/21.
Consequently, there was a build-up in the stock of international reserves, which rose to US$ 4.1 billion as at the end of June 2021, equivalent to a cover of 4.4 months of imports of goods and services in event of an external shock.
On the fiscal front, a slower pace of economic recovery coupled with pandemic related uncertainties hampered revenue mobilization efforts and resulted into revenue shortfalls during the year.
At the same time, government was also faced with the critical need to use fiscal policy to promote economic recovery.
To protect health systems and promote private sector activity, a fiscal response stimulus package comprising of over Shs 2.4 trillion was disbursed to the Ministry of Health, the Uganda Development Bank, the Microfinance Support Center and funds under the Presidential Initiatives on wealth and job creation emyooga programme.
A further Shs844 billion was disbursed during the financial year towards clearing domestic arrears. Lower domestic revenues and the spending requirements to support the health sector and economic recovery contributed to a dent in public finances.
As a result, the fiscal deficit increased to 9.5%of GDP during FY 2020/21 from 7.1% in FY2019/20 and was financed through external and domestic sources.
The stock of public debt increased to 46.9% of GDP at the end of June 2021, up from 40.8% reported in June 2020. In-spite of the increase, government officials maintain, the country’s debt remains sustainable in the medium to long run.
Nonetheless, the risk of debt distress has increased from low to moderate, with the major vulnerabilities to the debt outlook emerging from the sluggish progress in growing in export earnings and the increasing debt service burden.
Global factors
The global economy is expected to grow significantly, recovering to 5.9 percent during 2021 following a contraction of 3.1% in 2020. Economic activities in advanced economies rebounded as increased fiscal stimulus measures and scaled-up vaccination efforts resulted into the easing of trade and travel restrictions.
In emerging market and developing economies, the re-bound was largely due to benefits from a surge in commodity prices, particularly for crude oil and coffee as global trade improved.
Looking ahead, over the medium term, economic growth is expected to gradually rise to an average of between 6 to 7%, driven by increased production and productivity in agriculture and manufacturing, according to Bank of Uganda and Ministry of Finance officials.
This growth will be supported by government interventions in improving quality of agricultural inputs, provision of extension services, efforts in irrigation and continued investments in industrial parks and economic processing zones.
Long-term sources of growth are anchored on, increased private sector participation and investment, continued public infrastructure investment, as well as the take-off of the oil and gas sector.
Nonetheless, the pace of vaccinations and the evolution of the virus coupled with the sluggish response of supply chains, pose significant risks to the economic outlook, officials say.
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