Government has said Uganda will face a revenue shortfall of as much as 270 Billion shillings ($70m) due to the coronavirus lockdown that is deteriorating the economy.
Ministry of Finance Planning and Economic Developement
The Ministry of Finance has said that the country will face a
revenue shortfall of as much as 270 Billion shillings ($70m) due to the coronavirus
Matia Kasaija says that the shortfalls will come from international trade taxes
through the reduction in the value of imports and consumptive taxes which include
Value-added Tax and Excise duty due to the slowdown in the industry and service
Kasaija was on Thursday making a statement in Parliament on the economic
impact on the coronavirus to the country. 230,000 People worldwide have tested
positive for coronavirus, while 9.000 people have died.
As a result of the outbreak, trade in goods and services has been
affected as several countries close their borders and issue travel bans.
According to Kasaija, revenue collections will register an additional
shortfall of about 82 billion shillings for the remaining period of this
financial year, and about 187 billion for the next financial year assuming that
Uganda doesn’t register any case.
In case of an outbreak in Uganda, the revenue shortfall is expected to
drop further to 638 billion shillings for this financial year ending, and next
Kasaija also says Ministry of Health needs 25 billion shillings to handle
the coronavirus challenge, and more money will still be required.
“More financing may be
required to facilitate continued surveillance, aerial and ground spraying of
locusts as well as continued awareness creation and sensitization as well as to
provide support to the people whose livelihoods will be affected,” Kasaija
Kasaija also says that 780,000 Ugandans are mostly likely to be
pushed into poverty, due to the low activity in the service and industry areas,
and this will lead to a decline in economic growth. The economic growth
for the country for financial year 2019/2020 has been revised downwards from
6.0% to 5.2% or 5.7% depending on the severity of the virus impact in Uganda.
According to Kasaija, the biggest impact of the coronavirus
will be on the services sector. He says travel restrictions are already
affecting the tourism sector including hotels, accommodation and
“Supply chain disruptions are hampering trade, and this is
expected to continue until the virus is contained at the global level. Travel
restrictions at the global level will also affect the flow of imports into the
country leading to disruption in the supply of inputs into the Industry sector.
This will affect industrial output.” Kasaija says.
He says to deal with the possible negative impacts on our balance of
payments, the Government will seek support from the International Monetary Fund
to support the Central Bank in ensuring that international reserve buffers
remain strong and that the exchange rate remains stable.
According to Kasaija, imports will decline by 44% in the last four months
of this financial year, and loan disbursements are projected to decline by 50%.
In the worst-case scenario, if an outbreak is confirmed in Uganda, economic
growth for financial year 2019/2020 which is ending would decline to between
4.6 percent and 5.1 percent, and an additional 2.6 million Ugandans would be
pushed into poverty. Revenue collections would decline to 600 billion
Kasaija says that in total, the Government of Uganda is faced with a
preliminary additional financing gap of approximately 370 billion shillings for
financial year 2019/2020 and shillings 350 billion shillings for financial year
2020/20221 due to revenue shortfalls and additional expenditure needs.
To deal with the financing gap in the Government budgets for this ending
financial year and next financial year, the Ministry seeks a budget support
loan on concessional terms worth 720 billion shillings for this ending
financial year and financial year 2020/2021 from the World Bank.
According to Kasaija, the money is meant to deal with the challenges in
the health sector, needs arising from the desert locust invasion and related
support to people whose livelihoods will be affected.