This archive report was first published on 23 July 2019.
Uganda's current account deficit has swelled to an estimated $3.037 billion by the end of 2018/19, according to the latest Central Bank data. This represents a significant increase from the $1.23 billion deficit recorded at the end of 2017/18.
The widening trade deficit is attributed to increased private imports, particularly machinery, base metals, and oil, as well as weak export earnings between July 2018 and May 2019.
Despite the challenges posed by the current account deficit, the Uganda Revenue Authority reported a 10.85% growth in total import duty revenues to Ush6.87 trillion ($1.8 billion) at the end of 2018/19.
However, the deficit is expected to continue growing, driven by rising car imports and certain consumer items. The Uganda Revenue Authority has implemented various measures to boost Customs revenues, including a 10% increase in import duty on tomato paste and other preserved tomatoes, and a 60% increase in import duty on honey products.
Experts have warned that the new taxes, particularly on ceramic tiles, are creating inefficiencies in the import value chain and raising the cost of doing business. The switch to a digital Customs declaration system has also been criticized for causing delays in clearing goods.
According to the Bank of Uganda, the current account deficit may lower towards election day after the completion of key infrastructure projects, but government infrastructure spending could pick up after the election season, putting pressure on the forex market.
As the country navigates these economic challenges, experts are cautioning that the current account deficit is likely to continue growing, with potential implications for the exchange rate and core inflation.
