Uganda: Coffee Earnings And Tax Receipts Shore Up Economy

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The East African (Nairobi)

6 September 2008
Posted to the web 8 September 2008

Esther Nakkazi
Nairobi

For the financial year ending June 2008, Uganda's economy recorded an impressive performance characterised by improvements in revenue collection and export earnings, and an improvement in sources of foreign exchange.

Coffee earnings fetched almost twice the amount collected the previous financial year, while remittances from abroad contributed 10 per cent of the gross domestic product.

The growth in exports has increased the flow of foreign exchange into the economy strengthening the shilling besides the persistent weakness of the dollar on the global financial markets. The shilling has been trading between Ush1,616 and Ush1,565 against the dollar.

Remittances have grown to 10.6 per cent of GDP in 2008/09 from 5.5 per cent in 2007/08 attributed to not only more Ugandans working abroad but also concurrent with higher volumes of remittances being sent through other documented channels.

As more Ugandan migrant workers send money home through the formal banking system, remittance data should continue to dramatically increase, capturing flows that previously existed but were unrecorded," according to a report from the Ministry of Finance.

Money from remittances is invested in both traditional and non-traditional sectors especially real estate which is more popular than agriculture and tourism.

Remittances were valued at $1,503.2 million during the months under review in the 2008/09 financial year compared with $645.6 million in the same period in 2007/08.

Although this is a year-on-year super normal increase of over 130 per cent, there is an exchange rate effect at play, as the dollar has depreciated against most currencies including the Uganda shilling.

Coffee exports volume increased by 32 per cent and 53 per cent in value compared with the same period last year.

The volume was boosted by Robusta coffee which experienced a high export volume increase of 27.5 per cent this year and compensated for Arabica's export volumes that fell by 10 per cent.

The Uganda Coffee Development Authority (UCDA) attributed the improvement in Robusta harvests and exports to higher prices that translated into good husbandry practices and good weather, whereas the fall in Arabica was due to a crop cycle problem.

The value of exports grew as a result of demand outstripping supply pushing up the unit price for the crop.

The average unit export price in June was $2.13 per kilo which represents an increase of 28.6 per cent compared with June 2007, and a month-on-month price increase of 0.5 per cent, a report from UCDA says.

The report shows that coffee exports in June alone amounted to 278,107 60-kg bags worth $35.6 million representing an increase in volume and value by 13.6 per cent and 28.6 per cent respectively as compared to June 2007.

This trend of increased volumes and export earnings is consistent for all the 2007/08 months in comparison to 2006/07 with the exception of November.

The Uganda Revenue Authority annual tax revenue collections in June 2008 increased by 14.6 per cent or Ush373.6 billion from June 2007 as a result of excess performance with collections on most sub-categories exceeding projections.

The June domestic tax revenues were Ush5.7 billion or 1.5 per cent above projections with collections on direct domestic taxes and fees as well as licenses and taxes on international trade performing above excess projections, according to the Ministry of Finance.

Revenue collections were also boosted by direct domestic tax collections which were 1.6 per cent above target or a growth of 3.5 per cent compared with June 2007.

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