Kampala- Uganda’s export earnings are expected to drop by $200m (Shs682b) this year, following a decline in global trade.
The Bank of Uganda (BoU) says the expected decline in export earnings will worsen the country’s already weak balance of payments, resulting in a sharp depreciation of the Uganda Shilling.
BoU executive director of research Adam Mugume told Daily Monitor’s sister newspaper The East African, that Uganda’s total export earnings are projected at $2.4b while the import bill is likely to be $6b.
“The impact of the global economic slowdown has affected Uganda in terms of reduced earnings from commodity exports, while imports are projected to rise this year,” he said.
Most of Uganda’s exports go to the European Union, the US and China. In recent years, Uganda’s exports have also been gaining momentum in regional markets, especially South Sudan.
The principal research fellow at the Economic Policy Research Centre, Dr Ibrahim Kasirye, says the projected drop in Uganda’s export earnings in 2015 could be the result of the decline in the country’s exports to South Sudan and the fall in earnings from coffee exports due to a decline in global coffee prices.
“These developments will continue to weaken the country’s current account,” he said.
Fragile current account
In its latest monetary policy report released on October 20, BoU said the external current account of the country continues to be fragile.
For instance, in the quarter ended August 2015, the current account deficit deteriorated to $578m from $538m in the preceding quarter, largely driven by the trade imbalance, which deteriorated by $55m to $582m on account of the high import bill and a decline in exports.
In the period under review, the import bill increased by $81m, mainly driven by project imports, whereas private sector imports fell by $34m.
The report shows that export receipts decreased by 1.2 per cent quarter to quarter to $667m, largely due to a decrease in non-coffee exports that fell by 3.0 per cent to $464m, due to lower export volumes.
“Coffee exports, however, increased by 6.2 per cent on account of higher volumes despite lower prices,” the BoU report says.