Business
Govt fiscal operations result in sh2.071 trillion deficit – report
Economists define a fiscal deficit as a situation where government expenditure exceeds government income. It represents the gap between total government revenue and total expenditure.
Ministry of Finance Permanent Secretary and Secretary to the Treasury Ramathan Ggoobi. (File photo)
By: Umaru Kashaka, Journalist @New Vision
_________________
Preliminary data from the Ministry of Finance shows that government operations in May this year resulted in a fiscal deficit of sh2.071 trillion.
The deficit was lower than the projected sh2.146 trillion for the month, largely due to lower-than-planned government expenditure.
The ministry revealed this in its Performance of the Economy Report for May 2026.
Economists define a fiscal deficit as a situation where government expenditure exceeds government income. It represents the gap between total government revenue and total expenditure.
Fiscal operations refer to actions undertaken by government to implement budgetary policies, including revenue and expenditure measures, the issuance of public debt instruments and public debt management.
The report indicates that revenue and grants amounted to sh2.785 trillion, resulting in a shortfall of sh567.36 billion, as both domestic revenue and grants performed below their respective targets for the month.
Overall, domestic revenue collections amounted to sh2.747 trillion, representing 90.7% of the sh3.027 trillion target for May.
Of the total collections, sh2.540 trillion was generated from tax revenue, while sh206.62 billion came from non-tax revenue sources.
Tax revenue collections fell short of the sh2.725 trillion target by sh185.11 billion, as all three major tax categories, namely direct domestic taxes, indirect taxes and international trade taxes, performed below target.
Fiscal operations refer to actions undertaken by government to implement budgetary policies, including revenue and expenditure measures, the issuance of public debt instruments and public debt management.
The report indicates that revenue and grants amounted to sh2.785 trillion, resulting in a shortfall of sh567.36 billion, as both domestic revenue and grants performed below their respective targets for the month.
Overall, domestic revenue collections amounted to sh2.747 trillion, representing 90.7% of the sh3.027 trillion target for May.
Of the total collections, sh2.540 trillion was generated from tax revenue, while sh206.62 billion came from non-tax revenue sources.
Tax revenue collections fell short of the sh2.725 trillion target by sh185.11 billion, as all three major tax categories, namely direct domestic taxes, indirect taxes and international trade taxes, performed below target.
Direct domestic taxes recorded a shortfall of sh40.79 billion against a target of sh906.21 billion.
“This underperformance was largely driven by lower-than-expected collections from Pay As You Earn (PAYE), corporate income tax, and rental income tax,” the report said.
The decline in PAYE collections was mainly attributed to lower chargeable income, a reduction in the number of employers filing returns and reduced donor funding during the month.
Corporate income tax collections also fell below target, particularly in the transport, storage and communication, real estate, renting and business services, and manufacturing sectors.
According to the report, performance in the manufacturing sector was negatively affected by load shedding and rising fuel costs, which increased production expenses and reduced profitability, leading to lower corporate tax contributions.
Similarly, indirect domestic taxes registered a shortfall of sh68.25 billion against the target of sh758.5 billion, as both excise duty and Value Added Tax (VAT) underperformed.
The report attributes the decline in excise duty and VAT collections to reduced phone talk time and international call usage, as more people opted for internet-based calling services.
Taxes on international trade amounted to sh1.017 trillion against a target of sh1.083 trillion during the month.
This performance was mainly attributed to lower-than-expected values and volumes of some dutiable goods, including woven fabrics, gas, liquid rolled iron and beet sugar.
“This underperformance was largely driven by lower-than-expected collections from Pay As You Earn (PAYE), corporate income tax, and rental income tax,” the report said.
The decline in PAYE collections was mainly attributed to lower chargeable income, a reduction in the number of employers filing returns and reduced donor funding during the month.
Corporate income tax collections also fell below target, particularly in the transport, storage and communication, real estate, renting and business services, and manufacturing sectors.
According to the report, performance in the manufacturing sector was negatively affected by load shedding and rising fuel costs, which increased production expenses and reduced profitability, leading to lower corporate tax contributions.
Similarly, indirect domestic taxes registered a shortfall of sh68.25 billion against the target of sh758.5 billion, as both excise duty and Value Added Tax (VAT) underperformed.
The report attributes the decline in excise duty and VAT collections to reduced phone talk time and international call usage, as more people opted for internet-based calling services.
Taxes on international trade amounted to sh1.017 trillion against a target of sh1.083 trillion during the month.
This performance was mainly attributed to lower-than-expected values and volumes of some dutiable goods, including woven fabrics, gas, liquid rolled iron and beet sugar.