Fiscal deficit hit Shs822.88 billion in March, says Ggoobi

Increased expenditure needs have forced the government to spend Shs391.35 billion higher than it had planned to spend in the March of 2023.

Speaking during the release of quarter four (final) expenditure for the Financial Year 2022/2023 on April 20 at the Ministry of Finance, Planning and Economic Development headquarters in Kampala, the Permanent Secretary/Secretary to the Treasury, Mr Ramathan Ggoobi said government spending was much higher than planned.

“Government operations in March 2023 resulted in a fiscal deficit of Shs822.88 billion. This was higher than the programmed deficit of Shs431.53 billion due to a combination of shortfalls in revenues and higher than planned expenditure for the month,” he said. 

Adding: “Domestic revenue and grants were short of their target for the month by Shs251.90 billion while total expenditure was above plan by Shs139.44 billion.”

Statistics in the performance of the economy report for March, indicate that the government spending amounted to Shs2.847 trillion which was higher than the plan of Shs2.707 trillion.

The higher spending was mainly registered under the recurrent category which was above its plan for the month by 23.5 per cent (Shs 394.30 billion).

“Expenditure on non-wage recurrent items explained this performance as most MDAs exhausted their funds for quarter three while completing their quarterly work plans for this period,” said the Ministry of Finance.

Development expenditure performed below the plan for the month mainly due to externally financed development projects which were less than the plan by 33.8 per cent.

Performance of this category is hinged on the disbursement of funds by development partners and does not reflect the physical progress of the projects. The domestically financed development projects performed at 99.3 per cent of the plan for the month.

Breakdown in tax collection indicates that the government collected revenue totalling Shs1.887 trillion in March 2023 which was 13.9 per cent lower than the target of Shs2.192 trillion for the month as both tax and non-tax revenue were lower than their respective targets.

Of the total amount collected, Shs1.781 trillion was tax revenue while Shs106.37 billion was non-tax revenue. Tax revenue collection was less by Shs252.38 billion.

“All the three major tax categories registered shortfalls during the month. Direct taxes registered a shortfall for the first time this financial year amounting to Shs67.85 billion,” the Ministry of Finance said.

It explained that this followed an underperformance of corporate tax (short by Shs60.27 billion) and withholding tax (short by Shs22.94 billion) both of which more than offset the surpluses registered for PAYE (Shs29.32 billion) and rental income tax (Shs1.73 billion).

Similarly, indirect taxes were also short of the target for the month by Shs45.30 billion as both excise duty and Value Added Taxes were lower than targeted by Shs4.12 billion and Shs41.18 billion, respectively.

The Ministry of Finance said the major reason for the underperformance of both direct and indirect domestic taxes was the level of economic activity, which albeit improving, was lower than what had been projected for this period at the time of setting the targets.

“As a result, the projected profitability for firms as well as projected demand for goods and services turned out lower than expected, which negatively affected performance of corporate tax, VAT and excise duty,” Ministry of Finance said.

The largest shortfall in tax revenue was registered under taxes on international trade transactions, as the amount collected under this category was Shs733.60 billion against a target of Shs867.80 billion, posting a shortfall of Shs 134.20 billion.

This followed lower than projected volumes of imports such as petroleum and others. As such, petroleum duty, import duty, excise duty on imports and VAT on imports all underperformed during March 2023.

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