Uganda’s forex earning reduces by Shs113b
Trucks with goods enter the country through Malaba border post. Uganda’s current account balance has depreciated partly because the levels of exports have gone down, according to experts. FILE PHOTO
What you need to know:
Factor. Experts attribute the situation to reduced exports.
Kampala. Uganda’s current account balance has depreciated by $32m (about Shs113.280b) due to low export earnings.
The current account balance is the difference between a country’s savings and its investments abroad.
In its monetary policy report released on August 10, Bank of Uganda said: “Preliminary data indicates that the Current Account balance deteriorated by $32 million to a deficit which translated into the $578 million (about Shs204.612 billion) during second quarter of 2015, driven by a higher deficit in the Services Account.”
The Central Bank executive director of research, Dr Adam Mugume, said the Services balance also deteriorated by $146m (about Shs516.840b) to a deficit of $220m (about Shs778.800b) during second quarter of 2015 on account of higher payments for services on infrastructure projects during the period.
Reason
In an interview with Daily Monitor on August 11, the principal research fellow at Economic Policy Research Centre (EPRC), Dr Ibrahim Kasirye, said: “The one explanation why Uganda’s current balance has deteriorated is that the levels of exports have gone down. The prolonged war in South Sudan has affected Uganda’s exports to that country alongside low export in the region and overseas.”
Dr Kasirye said export earnings from coffee, which has always boosted Uganda’s foreign earnings, have also declined.
“Though there is has been a decline in imports, the gap between imports and exports is very wide,” he said.
The Central Bank report shows that in the second quarter of 2015, merchandise trade deficit improved by 6.3 per cent to $526m (about Shs186.204b) on account of lower import expenditure.
The import bill decreased by 3.1 per cent Quarter On Quarter (q-o-q) to $1.207 billion (about Shs427.278 trillion), mainly due to lower government imports.
The report shows export receipts decreased by 2.8 per cent q-o-q to $680m (about Shs240.720 trillion), largely due to a decrease in coffee exports.
Coffee exports decreased by 16.0 per cent to $99m (about Shs350.460b) on account of both lower volumes and lower prices.
Coffee average unit price dropped from $2.14 to $1.88; volume exported decreased by 31,051 (60kgs) bags to 882,000.
Non-coffee exports increased by 2.5 per cent to $489m (about Shs173.106b).
The commodities that recorded the highest increases were: beans (more than 100%), maize (more than 100%) and tea (42.4 per cent).
Capital account
The capital account is a national account that shows the net change in asset ownership for a nation. It is the net result of public and private international investments flowing in and out of a country. The current account and the capital account are the two main components of a nation’s balance of payments. A nation’s current account balance is influenced by numerous factors – its trade policies, exchange rate, competitiveness, foreign exchange reserves, inflation rate and others.
