Government spent Shs2.037 trillion in March – Finance

The total government expenditure in the month of March 2021 stood at Shs2.037 trillion representing a performance of 83.2 per cent, which is below Shs2.448 trillion that the government had planned to spend in March 2021.

This was 16.8 per cent lower than what had been planned for the month owing to the under-performance in externally financed development spending (including on Hydro Power Projects).

The Ministry of Finance, Planning, and Economic Development explained that the under-performance was mainly on account of externally financed development expenditure which performed at only 55.3 per cent and amounted to Shs422.21 billion against the planned Shs764.04 billion for the month.

“In addition, planned expenditures amounting Shs188.43 billion on hydro-power projects was not realised, as no disbursement was made,” said the Ministry of Finance, Planning and Economic Development in the monthly Performance of the Economy Report it published Monday morning.

The Ministry of Finance, explains that the performance of the external development budget (including expenditure on hydro power projects) is tied to the disbursement of funds by external development partners and therefore do not necessarily reflect the physical progress of projects. In some instances, funds are disbursed after agreed work milestones have been completed.

“However, the rest of the expenditure categories were on or above the programme. Spending on domestically financed development items as well as non-wage recurrent items was higher than programmed for the month. This was partly because some Ministries, Departments and Agencies (MDAs) undertook activities in the last month of the quarter in line with their work plans for the third quarter,” said the ministry, adding: “At the same time, some other MDAs received supplementary budgets for quarter three causing them to exceed their original programmes.”

Without revealing the amount spent on clearing domestic arrears, the Ministry of Finance said domestic arrears repayments were above target for the month, stressing that the performance under arrears follows government response to the Covid-19 pandemic in which it allocated additional funds to cater for the clearance of arrears so as to ease liquidity challenges of its suppliers.

A fiscal operation overview by the Ministry of Finance, Planning and Economic Development shows that government operations during March 2021 resulted in a fiscal deficit of Shs366.90 billion against the programme deficit of Shs612.76 billion.

It points out that the lower deficit was due to government spending during the month being lower than anticipated, which more than offset the shortfalls registered for revenues.

Domestic revenues

Domestic revenues in March 2021 amounted to Shs1.646 trillion, representing a 92.1 per cent performance against the planned target of Shs1.789 trillion for the month.

The Domestic taxes (direct and indirect taxes) recorded shortfalls for the month while taxes on international trade and transactions were above their target for the month. Of the total revenue collections, Shs1.520 trillion was tax revenue while Shs126.58 billion as non-tax revenue.

“Direct domestic tax collections for the month amounted to Shs475.23 billion, representing an 86 per cent performance against the targeted Shs550.41 billion for the month. Pay as You Earn registered the biggest shortfall (Shs23.83 billion) under this category, while Corporation tax collections were also lower than targeted due to low profitability of firms amidst challenges posed the Covid-19 pandemic,” said the Ministry of Finance.

The Ministry of Finance said indirect taxes registered an 89 per cent performance, representing Shs362.32 billion of the targeted Shs407.05 billion as both Excise duty and Value Added Tax registered shortfalls.

“Under VAT, milk continued to perform below target registering only Shs0.39 billion of the planned Shs82.9 billion as the ban on Uganda’s dairy products in Kenya continues to discourage milk processing (value addition). On the other hand, the performance under Excise duty was mainly on account of shortfalls in duty collection on beer and spirits/waragi because of subdued demand, as bars and entertainment places remain close,” the monthly  Performance of the Economy Report for March 2021 reads in part.

The Ministry of Finance said additionally, the challenges in the implementation of some of the tax policy measures continued to affect indirect taxes during the month.

On the other hand, taxes on international trade and transactions posted a surplus during the month, amounting to Shs704.80 billion against the target of Shs677.08 billion. It says this performance is partly attributed to a continued recovery in domestic demand for imports, as reflected in the increased import volumes.

[email protected]