Clearing domestic arrears pushes up govt spending

Government expenditure was higher compared to tax collections in May. Photo | Rachel Mabala

Summary

• During May, government spent Shs444.8b more than it had panned, some of which went to payment of domestic arrears in form of supplementary expenditures.

By MARTIN LUTHER OKETCH

More by this Author

Government spending during May grew by Shs444.8b against planned expenditure.

According to the Ministry of Finance Monthly Performance of the Economy report for May, total government spending amounted to Shs2.591 trillion against Shs2.146 trillion that had been planned for the period.
 
All items except external interest payment, recorded higher than planned expenditure with “additional resources availed to various ministries, departments and agencies in form of supplementary budgets for quarter four of the financial year”.

Of the expenditure, according to the Ministry of Finance, Shs103.5b was paid out during May to clear part of the outstanding domestic arrears, which was Shs60.61b higher than what had been programmed.

As of April, domestic arrears stood at Shs4 trillion with some debtors going for as long as 10 years without being paid.  

During May government expenditure was above domestic revenue collection, which stood at Shs1.516 trillion against a target of Shs1.603 trillion thus creating a Shs87.2b shortfall.

The report indicates that tax collections stood at Shs1.4 trillion against a target of Shs1.5 trillion thus Shs99.9b shortfall.

During the period, direct domestic taxes registered the biggest shortfall (Shs71.77 billion) while Pay As You Earn, Withholding Tax, Corporate Tax and Presumptive Tax all performed below target.
 
Indirect domestic taxes registered a shortfall of Shs14.75b during the month with the bulk of it mostly being visible under Value Added Tax, especially in the construction, real estate, hotel and restaurants subsectors.

International trade taxes also registered a shortfall of Shs13.73b, following a reduction in the volume of imports on which VAT and Import Duty are charged.

Non-Tax Revenue collections, on the other hand, were more than targeted during the period, registering a surplus of Shs12.71b mainly due increase collections from driving permits, passport fees, migration fees, and penalties for traffic offences.

Overall, the report shows government operations in May 2021 resulted in a deficit of Shs1.037 trillion, which was higher than the projected Shs469.07b.

During May, revenues and grants were lower than targeted, registering a shortfall of Shs123.24b or 7.3 per cent while expenditure and net lending was higher than programmed by 20.8 per cent or Shs445.6b.

Tax shortfalls    
Revenues and grants, the report notes amounted to Shs1.554 trillion in May against a target of Shs1.677 trillion. Of the total amount during the month, Shs1.516 trillion billion was domestic revenue while Shs37.99b was in form of grants from development partners.

moketch@ug.nationmedia.com