In April 2024, Uganda’s government expenditure significantly exceeded its target, driven by supplementary budgets and higher-than-anticipated recurrent expenditures. According to the Ministry of Finance’s April 2024 Economic Performance Report, total government spending reached Shs 3,463.61 billion, surpassing the target of Shs 2,992.43 billion by 15.72%. This higher expenditure level resulted from increased wage, interest, and non-wage spending, reflecting a 31.92% rise in recurrent expenditures over planned amounts.
“Supplementary budgets allocated during the financial year to address wage and non-wage shortfalls led to greater expenditures than initially anticipated at budget time,” the Ministry of Finance noted. Specifically, wage and salary expenditures amounted to Shs 603.18 billion, exceeding the target of Shs 537.74 billion. Non-wage spending also saw a significant increase, totaling Shs 1,485.85 billion against a target of Shs 992.15 billion. Interest payments rose to Shs 261.82 billion, surpassing the planned Shs 252.13 billion due to depreciation pressures on the shilling, which increased the cost of external debt servicing.
However, development expenditure was lower than planned, with Shs 1,108.76 billion spent against a target of Shs 1,206.62 billion. This shortfall was primarily due to reduced external development spending, which amounted to Shs 318.83 billion compared to the target of Shs 460.0 billion.
On the revenue side, domestic revenue collections in April 2024 fell short of expectations, totaling Shs 2,127.39 billion or 89.4 percent of the targeted Shs 2,379.73 billion, resulting in a shortfall of Shs 252.35 billion. Both tax and non-tax revenues underperformed, with tax revenues reaching Shs 1,994.07 billion against a target of Shs 2,198.04 billion, missing the mark by Shs 203.97 billion.
“This shortfall was driven by lower collections in international trade taxes and Value Added Taxes (VAT),” the report highlighted. Taxes on international trade brought in Shs 790.96 billion, falling short of the Shs 921.0 billion target by Shs 130.03 billion. The underperformance was particularly noticeable in VAT on imports and petroleum duty, which fell short by Shs 61.82 billion and Shs 49.79 billion, respectively.
Similarly, indirect domestic taxes collected were Shs 565.01 billion, below the Shs 677.82 billion target by Shs 112.81 billion, due to lower-than-expected VAT and Excise duty collections. VAT collections totaled Shs 378.21 billion, missing the target of Shs 458.85 billion by Shs 80.64 billion. This was attributed to declines in production volumes of key vatable supplies like sugar, cement, and soft drinks. Excise duty collections were Shs 186.80 billion, against a target of Shs 218.96 billion, a shortfall of Shs 32.17 billion, mainly due to lower collections from beer and spirits.
In contrast, direct domestic taxes performed well, amounting to Shs 680.58 billion against a target of Shs 643.36 billion, resulting in a surplus of Shs 37.22 billion. This surplus was driven by higher-than-expected collections in Pay As You Earn (PAYE) taxes, which totaled Shs 433.49 billion, exceeding the target of Shs 382.90 billion by Shs 50.59 billion. The increase in PAYE collections was due to increased recruitment and higher wages in the public service, particularly following salary increments for the science cadre, and higher employment levels in the manufacturing and banking sectors.
Overall, while the government’s expenditure exceeded targets, the shortfall in revenue collections presents a challenge. The Ministry of Finance will need to address these discrepancies to maintain fiscal stability.