Weak commodity exports amid increased importation of goods and services into the country have worsened Uganda’s trade balance.
The Central Bank State of the Economy report for August states that Uganda’s trade balance continues to deteriorate on account of stagnant exports and high import requirements.
This implies that Uganda’s trade position with the rest of the world is not favourable and the country is spending more on imports than it is earning from exports.
According to the report, Uganda’s trade deficit fell by 11.4 per cent, implying that total trade deficit stood at $2.123 billion (about Shs550.918 trillion) in 2012/13. However, in the financial year 2013/14, the deficit rose to $2.365 billion (about Shs613.717 trillion).
The executive director of research, Bank of Uganda, Dr Adam Mugume, said during the period under review, private consumption imports decreased by $6.9 million (about Shs17.905 billion) to $352.5 million (about Shs914.737 billion).
“Exports earnings as a share of Gross Domestic Product (GDP) declined to 11.4 per cent from 13.6 per cent in Financial Year (FY) 2012/13 and 15.4 per cent in FY 2010/11,” he said.
Dr Mugume added: “Imports expenditure as a percentage of GDP declined to 21.5 per cent from 23.5 per cent in FY2012/13, but could have actually been higher had the implementation of the Karuma project not been deferred.”
The Central Bank report shows that external sector imbalances continue to persist. In FY 2013/14, the current account deficit is projected at $ 1.63 billion (about Shs2.758 trillion) which is about 8 per cent of GDP from $ 1.72 billion (about Shs2.781 trillion) in 2012/13. The deficits on the trade account and income account more than offset the surplus on the services and foreign transfers.
In quarter two of 2014, the current account deficit increased by 32 per cent to $435.8 million (about Shs11.309.trillion) driven mainly by a larger deficit on the trade and income account.
Going forward, the Central Bank anticipates that imports are expected to increase as government infrastructure projects commence and private agents stock up for the December festive season.
In an interview with Daily Monitor on Friday, the managing director of Alpha Capital, Mr Stephen Kaboyo said: “Looking at the Balance of Payment (BOP) position, you clearly see the trade imbalance, indicating that the country is running a huge current account deficit.”
The war in South Sudan has also put pressure on Uganda’s export performance. Uganda’s weak export performance in part reflects the depreciation of the Uganda Shilling relative to other regional currencies, particularly the Kenyan Shilling and Congolese Franc.