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Uganda’s weak economy faces tough recovery from Covid-19

Bank of Uganda governor Tumusiime Mutebile Known to be at its most lethal when it attacks a person with some sort of illness, the coronavirus, which has so far claimed more than 100,000 lives globally, found an ailing Ugandan economy battling debts and deficits, and is bound to stretch to the limit the cocktail of fiscal and monetary prescriptions that government has set aside to limit the damage from the pandemic.

By the time Uganda recorded its first case of coronavirus disease (Covid-19) late March, the economy was not in the best of shapes, and poverty levels were still up.

“Uganda’s economy faces several risks on the macro and micro level. One in five Ugandans still live in extreme poverty and more than a third live on less than $1.9 a day with 70 per cent still depending primarily on agriculture for their livelihood. This exposes them to risks of weather-related and other shocks,” the World Bank pointed out in a February 2020 report.

As a point of emphasis, Tony Thompson, the Uganda country manager, World Bank, explained: “Two out of three people who get out of poverty fall back in – that is about 1.4 people in the last household survey conducted in 2016. We need to consider the importance of investing in people, building their human capital, and providing them with the tools and assets to manage shocks and reduce their vulnerability.”

By the time the coronavirus hit, government was short on money. While presenting the National Budget Framework Paper to parliament in January, the ministry of Finance noted that the money available for the budget was lower than their projects – almost a trillion shillings – on account of a drop in external financing, sometimes known as donor funds.

BLEAKER OUTLOOK

The total resource envelope for FY 2020/21 is projected to be Shs 39.6 trillion, down from Shs 40.4 trillion, the ministry said. The resource envelope is mainly supported by the taxes the public pays. However, Uganda Revenue Authority had already recorded a nearly Shs 700 billion shortfall for the six months to December 2019, with the outlook now looking bleaker for the other half of the financial year.

Even for the available money, a sizeable amount of it is set apart to clear some of the country’s debts. Government, with more than 70 ministers and over 100 presidential advisors, has for long been criticized for running a bloated public sector, […]

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