Parliament Committee on Finance meets Minister on the Macro-Economic and Fiscal Performance Report 2017/18 (Including 2016/17).
Discussed in the Committee on Finance, Planning and Economic Development on February 12th, 2019
The Cabinet Minister for Finance, Planning and Economic Development together with the team from the Ministry appeared before the Finance Committee of Parliament Chaired by Hon. Musasizi Henry on 12, Tuesday February 2019. The Minister presented a brief to the Members on how the country scored in the last two financial years in terms of macro-economic and fiscal performance.
The Minister noted that the Financial Year 2017/2018 marked significant economic recovery following positive developments in the global economy and on the domestic scene. The economy grew at 6.1% compared to 3.9% in the previous financial year of 206/17.
The Minister informed the committee members that headline inflation remained subdued during the FY 2017/19 registering an average of 3.4 percent down from 5.7 percent in the previous financial year, mainly due to; increased supplies in the market as a result of favorable weather conditions, relatively stable exchange rate, and favorable fiscal and monetary policies.
Financial sector trends
The central bank continued with the monetary policy easing, lowering its rate from 10 percent in June 2017 to 9.0 percent by the end of the financial year. Commercial bank lending rates declined to 20.34 percent in 2017/18 from 22.59 percent in the previous financial year, however, he noted that they remain sticky downwards due to other structural rigidities in the financial sector. The yields on the treasury instruments were generally low and almost auctions were oversubscribed for the most part of the financial year mainly attributed to favorable monetary policy.
In the external sector, the Minister for Finance informed the Committee that Uganda’s merchandise trade deficit widened by USD 449 Million, that is; USD 2,003.6 million from USD 1,554.7 million the previous financial year. This was mainly due to an increase in the import bill by 16.4 percent (USD 774.46 million) whereas the export receipts grew by only 9.6 percent (USD 306.80 million).
The Minister stressed that in the financial year 2017/18, the shilling weakened against the US dollar, depreciating by 3.7 percent to Uganda Shs. 3,659.15 per USD from Uganda Shs. 3,529.68 per USD in the previous financial year.
The Minister informed the Committee that the government collected Uganda Shs. 15,281.1 billion in revenues and grants against the target of 16,698.2 billion. Of the total receipts, 14,506.9 billion was from the domestic revenues while 774 billion was from the grants by the development partners. The Tax revenue collections performed at Uganda Shs. 14,076.1 billion, a performance of 96 percent against the target against the financial year. The Minister informed the committee that the reductions in the tax collections resulted from tax evasion by some companies.
The total government spending was Shs. 20,183.4 billion for the financial year 2017/18 representing 20.1 percent of the GDP, up from the 19.0 percent in the previous financial year.
The total public debt stock as at 30th June 2018, rose to USD 10.65 billion from USD 9.4 billion a year ago. This is equivalent to 40.6 percent of the GDP, up from 37.0 percent in June 2017.
The Minister noted that in the Financial Year 2018/19, the growth is expected to continue recovering to a projection of 6.0 percent and 7.0 percent over the medium term. The minister was quoted:
“With increased electricity, better roads, railway system, relatively literate citizens, despite the shortcomings, the economy will take off.”
In reaction to the Minister, Members questioned why the national loans continue to increase yet the revenue collections are reducing. They also asked the Minister to present a report to Parliament on the performance of loans.
The Minister, in response, revealed that government would introduce a digital stamp policy where all commodities on the market will have digital stamps issued by Uganda Revenue Authority to reduce tax avoidance. Also, the Minister noted that the country is still below the loan limit of borrowing which is 50 percent. He informed the committee that the Ministry will provide reports on the performance of loans.