Uganda’s merchandise trade deficit shrank in July as an increase in gold exports allowed outbound merchandise to outpace a gain in goods imports.
The shortfall narrowed by 15.3 per cent year on year to $278.5m (Shs1tn), according to Bank of Uganda data.
The value of total goods exports increased by 66 per cent to $569.8m (Shs2.1tn), reflecting a jump in the value of gold. Merchandise imports rose 26.2 per cent to $848.3m (Shs3.2tn), driven by a surge in mineral products, excluding petroleum products.
The impact of the tax can be seen in comparing the value of merchandise exports in the first seven months of 2021, 2022, and the current year. Goods exports dropped 20.7 per cent in value in the first seven months of 2022, compared to the first seven months of 2021. However, after the resumption of gold exports in March, the value of merchandise exports is up 59.5 per cent in the first seven months of 2023 from the same period last year.
In the first seven months of 2022, the value of goods exports plummeted by 20.7 per cent compared to the same period in 2021. However, following the resumption of gold exports in March, the value of merchandise exports has rebounded, surging by 59.5 per cent in the first seven months of 2023 compared to the corresponding period last year.
The mineral exports tax, especially its impact on the gold trade, also explains the performance of merchandise imports in the 24 months to July. Following the tax’s implementation, total imports, which had been steadily rising, experienced a year on year decline for six consecutive months from July to December 2021.
They picked up again, posting modest growth rates in the first two months of 2022, only to experience another dip over the following four months. A turning point came in July 2022, however, coinciding with the start of the 2022/2023 financial year, when goods imports returned to robust growth.
Behind this performance is the “mineral products (excluding petroleum products)” import category. Merchandise imports in the category dropped 92 per cent on year in July 2021, and maintained the trend to June 2022. They rebounded at the start of 2022/2023, increasing by 18.8 per cent in July 2022; growth was strong throughout the year, aside from a decline last October.
Gold is the driving force of that performance. While gold is Uganda’s most valuable export commodity, a relatively small portion of what is exported is domestically mined. Close to 90 percent of Uganda’s gold exports actually originate from the Democratic Republic of Congo, often not through legal channels.
