The government operations in the first quarter of this year were a mixture of fortunes, but at the end of the period, it recorded a much lower net borrowing (deficit) than had been programmed.
A budget deficit is a negative balance between a government’s spending and revenues, meaning that the government spent more than it collected in tax revenues. If there is more collection than what is spent, there is a surplus, according to the International Monetary Fund.
The deficit is filled by extra borrowing.
At the beginning of the period, the government programmes how much the balance will be, and in the case of Uganda and most governments, how big the deficit (net borrowing) will be.
Cumulatively, the first three months of this financial year, show programmed deficits totaling 2.9441 Trillion Shillings but at the end, it had to borrow 1.343 trillion.
Monthly, July recorded the lowest deficit that amounted 29.5 Billion, much lower than the 975 Billion that was in the government planning records.
According to the Ministry of Finance, Planning and Economic Development, this was largely because of higher government revenues than the targeted, which combined with lower spending.
Total revenue for the month amounted to 2.234 Trillion, against the target of 2.182 Trillion, with tax alone realising a surplus of 124.3 Billion Shillings.
Taxes on income, profits and capital gains, as well as taxes on goods and services and on international trade all recorded surpluses.
However, available data shows that, grant disbursements amounted to 12.1 Billion against a target of 74.01 billion, while other revenue registered shortfalls of 10.06 Billion Shillings.
During the same month, expenses amounted to 2.2 Trillion against the program of 2.85 Trillion Shillings, with all expense categories, except social benefits, performing below their respective targets.
For instance, only 61 percent of the compensation to employees was paid during the month, with delays arising from payroll system challenges accounting for this underperformance, the July Monthly Performance Report shows.
In addition, the purchase of goods and services was slower than planned due to longer than anticipated budget processes at the beginning of the financial year that delayed spending by agencies.
A total 505.2 Billion Shillings was released to Local Governments in grants, of which 279.3 billion was for wages, 129 billion for recurrent expenditure, and 97 billion for development expenditure.
Regarding net acquisition of non-financial assets 65.18 billion was used against a target 310 billion, with this underperformance being attributed to “longer procurement processes at the beginning of the financial year and lower-than-expected external disbursements.”
In August, government operations registered a net borrowing of 796.68 Billion as compared to the program target of 1.22 Trillion.
This was still attributed to the lower than projected net acquisition of non-financial assets which registered 36.7 percent performance
During the month, a total of 2.477 Trillion was realised against the programmed target of 2.5 trillion and a shortfall of 22.77 billion.
This was because grants realised were lower than planned grants, just as other revenues.
While there was higher budget support than programmed by 37 Billion, project grants fell short of the target by 71.5 Billion Shillings.
The surplus under budget support grants was enhanced by disbursements from USAID to support regional referral hospitals.
Tax revenues amounted to 2.2 Trillion against the target of 2.15 Trillion shilling, showing a surplus of 476 billion, mainly coming from good performances in taxes on goods and services. However, international trade registered a short fall of 36.35 Billion.
The month’s expenses amounted to 3 Trillion Shillings against the planned 2.998 Trillion.
Areas where Government spent less than programmed included compensation of employees, purchase of goods and services and social benefits, while grants and other expenses were above program.
The performance under other expenses is attributed to many grants made at the end of the month.
Compensation of employees in August took 521 billion Shillings compared to the planned 665 billion, while purchase of goods and services was lower than the planned by 689 billion partly on account of delays in procurement processes by agencies.
However, grants amounted to 1.13 Trillion Shillings, indicating 131 percent performance, mainly due to transfers to “extra budgetary institutions.”
A grant of 505.2 billion was released to local governments of which 279 billion and 129 billion was for recurrent and development expenditure, respectively.
On the acquisition of new non-financial assets, 268 billion was spent against a target of 730.8 billion Shillings, due to lower releases for development expenditure than originally appropriated for quarter one, and lower disbursements for externally financed projects.
In the last month of the quarter (September), government operations resulted in a net borrowing of 496.81 billion which was lower than the programmed 745.8 billion shillings largely on account of lower than projected expenditure.
Both expenses and net acquisition of non-financial assets were short of their respective programs for the month, while there was also less revenue collected than the target.
Total revenue amounted to 2.34 Trillion.
The data at the Ministry shows that all the revenue categories were short of their respective targets, with Tax revenue being short of the 2.186 Trillion target by 81.28 billion, mainly due to shortfalls from taxes on income, profit and capital gains and taxes on international trade and transactions.
On the other hand, taxes on goods and services were closer to target, falling short by being short by only 3.87 billion.
Non-tax revenues registered a performance of 98.5 percent or a shortfall of 2.7 billion Shillings.
However, records show, since the start of the financial year 2024/25, cumulative domestic revenue collections amounted to 6.913.80 Trillion which is 108.98 billion Shillings higher than the cumulative programmed target.
Project grants, on the other hand, only performed at 39.1 percent of the projected 152.2 billion from development partners to fund various projects during the month, meaning that only 59.5 billion was realized.
On the side of expenses, government spent a total of 2.694 Trillion Shillings, which was lower than the projected 2.758 Trillion due to underperformance in compensation of employees as well as purchases of goods and services among other expenses.
On the other hand, grants and social benefits were above what was planned for the month, says the September Performance Report of the Ministry.
There were also some expenses under purchase of goods and services that were instead made in August and July.
But part of the grants and social benefits that should have been paid in the first two months of the quarter fell into September mainly due to the processes involved in their preparation and disbursement.
On the acquisition of non-financial assets, the planned total spending was 503 billion Shillings but only 142.2 billion was spent due to “project execution challenges such as delays in compensation due to disagreements on valuation between government and land owners, as well as long procurement processes which hinder timely disbursement of funds.