Uganda is continuing to post an annual balance of trade deficit of about 2.4 billion dollars. According to Dr Adam Mugume, the executive director research at Bank of Uganda, the 2.4 billion-dollar deficit is out of the monthly deficit of about 200 million dollars in its external trading.
Balance of trade is the difference between the monetary value of exports and imports in an economy over a period of time, usually annually.
In 2010/11, Uganda imported goods and services worth 4.5 billion dollars.
According to Dr Adam Mugume, the executive director research at Bank of Uganda, the 2.4 billion-dollar deficit is out of the monthly deficit of about 200 million dollars in its external trading.
The deficit arises because Uganda is simply a net importer of goods and services as its export portfolio has few commodities in small quantities.
Uganda’s main export remains coffee. Others are fish, cotton, flowers and a few manufactured goods mainly to the neighbouring countries. Cumulatively, the incomes from exports do not much money spent on imports, hence the 200 million dollar deficit.
Mugume says the deficit should not be a cause for alarm because in order to build the foreign exchange reserves, like the central bank is doing, the books have to balance. Otherwise, argues Mugume, there would be no reserves.
Mugume explains that the balance is achieved through capital remittances from abroad like from Ugandans living abroad, direct foreign investments, aid and grants, among others.
He explains that at the end of it all Uganda actually posts positives of about 89 million dollars which is then used to build the foreign exchange reserves.
Robert Okello, the managing director of Sage Uganda, a business development firm, says the government needs to focus on wiping out the deficit altogether in order to have more foreign exchange reserves.
This, reasons Okello, can be achieved through boosting productivity of export crops and products like coffee, cotton and fish as well as outsourcing labour, among others.