Kampala, Uganda: Uganda’s formal employment sector experienced a notable increase in April 2024, as captured under the PAYE (Pay As You Earn) register. According to the April 2024 Microeconomic Indicators and Developments (MIND) report, published on the Ministry of Finance portal, formal employment rose by 9.3%, from 460,407 employees in March 2024 to 503,129 in April 2024.
This increase marks a significant improvement in the country’s employment landscape, reflecting positive economic developments and a growing workforce. “The MIND report, a monthly publication, provides a comprehensive analysis of key economic indicators updated on monthly, quarterly, and yearly frequencies.”
The preparation of the report involves a one-month lag to ensure the compilation of officially released data following the end of the preceding month, applying the same principle to quarterly and yearly data.
The FY2023/24 series of the MIND report offers valuable insights into the economic performance and trends in Uganda. This latest data on formal employment suggests a strengthening economy, with more individuals securing formal jobs, thereby contributing to increased tax revenue through the PAYE system.
Employment Trends
The report reveals a significant increase in formal employment, with the number of employees under the PAYE register rising by 9.3%. This growth, from 460,407 employees in March 2024 to 503,129 employees in April 2024, signals a strengthening formal sector. This expansion suggests that more businesses are transitioning from informal to formal status, likely influenced by efforts to improve business registration and compliance.
However, this positive trend is contrasted by a notable decrease in the number of migrant workers. The number of migrant workers captured by the Immigration Department dropped by 38.6%, from 2,524 in March 2024 to 1,548 in April 2024. This decline may reflect changes in labor market dynamics or tighter immigration controls.
Inflation and Consumption
Inflation figures present a mixed picture. Monthly inflation for food & non-alcoholic beverages, energy, fuels, and utilities (EFU) increased by 0.7% and 0.2% in April 2024, compared to declines recorded in March 2024. This increase in inflation rates could be attributed to seasonal factors and supply chain disruptions. Concurrently, household final consumption expenditure fell by 1.8%, indicating reduced consumer spending power and potential economic stress among households.
The power tariff for domestic consumers increased by 2.77%, from Ushs 793.3 per unit in Q3 FY2023/24 to Ushs 819.4 per unit in Q4 FY2023/24. This rise in utility costs could further strain household budgets and contribute to inflationary pressures.
Fiscal Policy and Taxation
The Excise Duty (Amendment) Bill 2024 introduces a new 0.5% excise duty on cash withdrawals through payment systems or agent banking, excluding financial institutions or microfinance deposit-taking institutions. Effective from July 1, 2024, this amendment aims to broaden the tax base and enhance revenue collection. However, this could also increase the cost of financial transactions for consumers and small businesses.
Environmental Sustainability
On a positive note, air quality in Kampala improved significantly, with particulate matter levels dropping by 18.6%. This improvement reflects successful environmental policies and efforts to reduce pollution. Nevertheless, the country faced severe natural disasters, affecting 37,866 individuals and displacing 12,731 people, primarily in the Elgon, Lango, Teso, and Tooro sub-regions. These events underscore the need for robust disaster preparedness and response strategies.
Productivity and Competitiveness
Malaria morbidity rates increased slightly, which could be attributed to the heavy rains in April 2024. Meanwhile, monthly inflation for Liquid Energy Fuels increased by 0.5%, indicating rising energy costs. Export earnings declined by 6.4%, from Ushs 4,611 billion in Q1 FY2023/24 to Ushs 4,316 billion in Q2 FY2023/24, while investment measured by Gross Fixed Capital Formation decreased by 2%.
Trade and Regulation
Uganda’s trade deficit widened by 45.8%, from US$ 276.5 million in February 2024 to US$ 403.4 million in March 2024. This increase was primarily due to a sharp rise in the import bill for vegetable products, animal products, beverages, fats, and oil. The IMF commodity price index also rose by 2.51%, indicating higher global commodity prices.
Despite these challenges, new business registrations grew by 5.27%, suggesting entrepreneurial activity remains robust. The All-Share Price Index rose by 2.69%, reflecting positive investor sentiment in the stock market.
In conclusion, while Uganda’s economy shows signs of resilience with increased formal employment and improved environmental sustainability, challenges such as rising inflation, a growing trade deficit, and significant natural disasters need to be addressed. Strategic policy interventions focusing on enhancing productivity, supporting household consumption, and managing inflationary pressures will be crucial for sustained economic growth.