Government bottlenecks expenditure to guard against borrowing

It cut expenditure by at least Shs352.9 billion in January when it spent Shs3.3 trillion against the planned Shs3.5 trillion which resulted in a deficit of Shs973.6 billion rather than the planned Shs1.3 trillion.

This conduct implies a strategy to guard against borrowing which fuels public debt and worsens debt servicing.

Performance

Expenditure

It spent Shs979.7 billion (a performance rate of 83.6 percent) against a planned Shs1.177 trillion.

Domestic development expenditure took Shs842.3 billion against a planned Shs991.5 billion.

Revenue

Domestic revenue collections amounted to Shs2 trillion against the target of Shs2.1 trillion.

Of the total collections, Shs1.9 trillion was tax revenue and Shs145 billion was non-tax revenue collections.

Tax revenue collections had a performance rate of 98.5 percent missing the target of Shs1.968 trillion by Shs29.47 billion.

According to the report, the surplus from direct taxes was usurped by low collections from indirect taxes.

“This performance was mainly driven by the lower than planned collections for indirect [consumption] taxes and taxes on international trade, which more than offset the surplus collections registered under direct [income] taxes,” the report reads in part.

Direct taxes performance

Direct domestic taxes saw a surplus of Shs44.5 billion with a performance of Shs653.6 billion against the planned target of Shs609 billion.

This performance was attributed to higher-than-planned collections from Pay As You Earn as a result of increased recruitment in the private sector and salary hikes among civil servants.

Indirect taxes performance

Tax collections for January totaled Shs510.5 billion against the target of Shs572.2 billion. The shortfalls were registered in excise duty and value-added tax collections.

This performance is attributed to a decline in production and sales volumes for goods such as beer, soft drinks, and cement, among others.

Taxes from international trade had a performance rate of 99.9 percent. Collections totaled Shs775.6 billion against the planned target of Shs775.7 billion.

“This performance was mainly driven by surplus collections registered under import duty, excise duty, and [value added tax] on imports. Non-tax revenue collections for the month amounted to Shs145b, an Shs10.8b surplus compared to the target for the month,” the report said.

The report also noted that improved performance was due to the consistent streamlining of operations and enhanced coordination in government agencies that are responsible for non-tax revenue collection.

In the period under review, the government received budget support loans from the International Monetary Fund ($242.11 million) and Standard Chartered Bank ($140.86 million).