Government operations in January caused fiscal deficit of Shs1.3 Trillion- Report

The performance economy report of January 2022 which was released by the Ministry of Finance and Economic Development has revealed that government operations in January caused a fiscal deficit of Shs1.3 Trillion

The report which was released on Monday showed the overall deficit of Shs1,304.79 billion was slightly above the planned deficit of Shs1,300.40 billion for the month. And it was due to the shortfall in revenue and grants (Shs186.40 billion), which was partly offset by lower than planned expenditures and net lending of Shs182.04 billion.

It also revealed that in January, the government generated revenues and grants amounting to Shs1,845.22 billion, representing still a shortfall of Shs186.40 billion, against the planned target for the month of Shs2,031.62 billion.

Both revenue and grants registered shortfalls amounting to Shs89.18 billion and Shs97.22 billion, respectively.

According to the report, although the economy was re-opened, revenue collections still continue to be negatively affected by the impact of the Covid-19 pandemic on the country’s economy.

Government expenditure of Shs3,150.01 billion in January reflected a 94.5 per cent performance against the planned expenditures of Shs3,332.03 billion which means that the current expenditures exceeded projections by 8.0 per cent, and were more than offset by development expenditures which performed at 77.0 per cent. And the bulk of this underperformance is due to external development expenditures that performed at 26.0 per cent on account of low project execution.

The report further showed that the shortfall performance of the economy was mainly due to the government’s spending which was higher than the planned expenditure under wages & salaries and other non-wage recurrent spending.

The increase in wages and salaries for the month was attributed to supplementary expenditures issued to universities, the health and justice sectors to cover additional recruitment and increments in wages. In addition, there was a 15.3 per cent expenditure overrun on non-wage recurrent activities which were attributed to additional expenditure under the security and health sectors, to cover COVID-19 vaccination efforts and enforcement of the Standard Operating Procedures (SOPs).

Government spending towards domestically financed projects amounted to Shs1,047.09 billion representing a 94.1 per cent performance against the target for the month. This was due to payments made towards the works, transport and security sectors during the month. This was partly due to the re-allocation of some development expenditure at the start of the financial year in order to support the Covid-19 interventions.

Overall performance of the economy

Tax revenue collections for the month amounted to Shs1,688.35 billion, registering a shortfall of Shs83.8 billion or 4.7 per cent against the planned target, as collections on all the major tax categories underperformed during the month.

Direct domestic tax collections amounted to Shs526.08 billion against the planned Shs546.37 billion for the month. This performance was on account of lower collections from withholding tax, rental income tax and presumptive tax, which more than offset the surpluses recorded under Pay As You Earn (PAYE) and corporate tax.

While Indirect domestic revenue tax collected amounted to Shs475.12 billion against the target of Shs541.29 billion. This was attributed to shortfalls in both Value Added Tax (VAT) and excise duty collections during the month. Collections under excise duty continue to be affected by administrative difficulties in enforcement of the digital tracking system and lower than planned consumption of items such as beer, spirits, cigarettes and soft drinks during the month. Similarly, collections under VAT continue to be affected by roll-out challenges of the Electronic Fiscal Receipting and Invoicing System (EFRIS).

Taxes on international trade and transactions amounted to Shs693.67 billion against the planned Shs716.09 billion which translated into a shortfall of Shs 22.42 billion. This performance was mainly on account of shortfalls registered under import duty as taxes charged on dutiable goods fell short of the target by Shs34.91 billion.