Suspension of gold exports due to new tax reduces Uganda’s trade balance

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Kampala, Uganda | THE INDEPENDENT | Uganda’s foreign merchandise trade declined further in July, as both imports and exports declined.

The import bill fell by $ 436.80 million while export earnings fell by $ 155.05 million, according to the latest information from the Ministry of Finance, Planning and Economic Development.

This translated into a deficit of $ 196.37 million in July 2021, compared to a deficit of $ 478.12 million recorded the previous month.

Also, compared to the same month last year, there was a drop in both export earnings and the import bill, but this time with export earnings declining faster than the bill. imports.

This means that the deficit widened by 7.2% between July 2020, when it was $ 183 million, and July 2021.

Although there was an increase in some export commodities like coffee, export earnings fell for the second month in a row, mainly due to containment measures at the time, intended to contain the increase cases of COVID-19. The month of July 2021 was subjected to a lockdown which affected economic activity and disrupted trade.

In addition, the government imposed a tax of 5% on each kilogram of refined gold and 10% on untreated gold exported.

Processors and exporters have asked the government to revise the tax downwards and negotiations are underway to that end, according to the finance ministry.

As a result, exporters withheld their gold for export in July, pending the conclusion of these negotiations.

As a result, export earnings fell 30.4% year on year, from $ 434.95 million in July 2020 to $ 300.39 million in July 2021.

The other export items which registered the main declines in earnings are maize, cotton, tobacco, fish and fishery products.

The comparison between June 2021 and July 2021 shows a drop in export earnings of 34%, from 455.44 million USD to 300.39 million USD, largely attributed to the lack of export of mineral products in July 2021.

The East African Community (EAC) was the main destination for exports, overtaking the Middle East.

This change follows the suspension of mineral exports in July 2021 as the Middle East largely absorbs all of Uganda’s mineral exports.

These thus increased from 225.31 million dollars in July 2020 to 4.33 million in July 2021.

The EAC absorbed 40.6 percent of Ugandan exports, followed by the rest of Africa and the European Union at 27 percent and 20.8 percent respectively.

Meanwhile, Ugandan imports in July 2021 were nearly halved from June, to $ 496.76 million.

This significant drop is mainly due to the drop in imports of mineral products which fell to 15.46 million dollars against 316.31 million the previous month, following the entry into force of new fiscal measures. Most of the mineral imports into the country are ores which are then processed for export, but since the exporters went out of business this has had an effect on imports.

Minerals aside, other imports fell 17.7% in July, mainly due to sluggish economic activity during the lockdown period.

As in previous months, most imports in July (46.6%) were from Asia, followed by EAC goods at 15.6%, while 13% were from the European Union.

The 63% drop in imports from the EAC was due to lower imports of minerals. Almost two-thirds of imports from the region came from Kenya, while 35% came from Tanzania.

During the month of July 2021, Uganda traded in surplus with the EAC and the rest of Africa, but in deficit with the Middle East, the European Union, the rest of Europe, the Americas and Asia, according to data.

Uganda recorded surpluses of 44.32 million with the EAC and 60.33 million with the rest of Africa, a recovery from the deficits of 89.96 million and 164.42 million recorded on same month, the previous year.

Uganda recorded a deficit of $ 54.7 million with the Middle East in July 2021 as mineral exports fell, having been in surplus since April 2020.

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