Export earnings drop by UGX 4.1 Trillion – BoU

Kampala, Uganda | THE INDEPENDENT | Uganda’s export earnings in the twelve months to February 2020 dropped by at least USD 1.1bn (27.2%), equivalent to 4.1 trillion shillings.

According to the Bank of Uganda, this has worsened by the country’s trade deficit – a situation when a country’s imports exceed its exports during a given period.

The Central Bank says in its Monetary Policy report for April 2020 that Uganda exports excluding gold, declined to USD 2.9bn (Shs 10.9tn) drown from USD3.9bn (Shs 14.7tn) – indicating a slash of a whopping USD 1.1bn.

Meanwhile, the country’s import bill dropped slightly although still high at USD 5.6bn (Shs 21tn) for twelve months to February 2020, the central bank said. This reporting excludes imports and exports of gold which went up because of the opening of the new gold refinery.

The reason for this drop “is due to low international commodity prices which have affected Uganda’s key exports like coffee and tea.” There was a decline in exports to the regional markets.

Last November the Ministry of Finance reported that Ugandan coffee dealers were halting exportation of hundreds of tons of coffee to see if the global coffee prices will improve.

As a result, Uganda’s coffee earnings had dropped by 25% from $46.3m (Shs 169bn) in August to just $34.7m (Shs 125bn) in September 2019.

BoU reports that there has also been a decline in exports to the regional markets which have been Uganda’s key destination for most goods.

Here, one key culprit has been milk and sugar which saw the heaviest decline due to trade disputes with Kenya and Tanzania. A drop in the prices of milk saw Kenya stop Uganda’s milk especially Lato Milk to help depressed prices at home.

This however meant that Uganda didn’t earn. Tanzania also maintained its ban on Ugandan sugar for much of the year until February when it indicated it would only take 3 tons from Kampala.

Also the closure of the Rwanda, Gatuna border since February 2019 means that Uganda has been unable to capitalize on the Kigali market where the country would have earned at least $200m.

Lower earnings in exports mean the country cannot earn enough hard currency – dollars – to support the value of the shilling. Between February and March 2020, Uganda shilling lost 4% of its value as people panicked over the impact coronavirus would have on the economy.

Travel restrictions due to Covid-19 means trade and movement of goods will suffer a huge dent. BoU says it will take the country up 2022 for a full recovery.

Business activity will remain low until the pandemic is contained globally and domestically, BoU says.

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