Reforms cover public debt, interest rates, taxation and public spending
Kampala, Uganda | JULIUS BUSINGE | A group of civil society organisations under their umbrella organization Civil Society Budget Advocacy Group (CSBAG) have presented a list of budget proposals to government that they think can jumpstart the economy that has badly been hit by COVID-19 pandemic.
Once implemented, the group believes livelihoods will improve in FY2021/22 and beyond.
Despite the predictions on the country’s economy regarding COVID-19 disruptions, recent reports continue to show positive indicators for Uganda’s economic growth.
For instance, the Composite Index of Economic Activity (CIEA) grew by 5.7% month-on-month in June 2020 and the Purchasing Managers’ Index (PMI) passing the 50 mark.
There has been increased value of international trade which is reflected by an increase in the value of both exports and imports. For example, according to government data, Uganda’s exports within East African Community grew by 8.3% from US$75.32million in July 2019 to US$81.6million in July 2020, private sector credit grew by 4.1% to Shs16, 9trillion in June 2020 from Shs16.3trillion in May 2020.
Net revenue collection by Uganda Revenue Authority performed at 135% in the first quarter of FY2020/21 (from the target of Shs2.9trillion to Shs4trillion).
Whereas these figures look impressive, CSBAG says there still exists significant shortcomings in the FY2020/21 that require critical budget reforms, to sustain these gains and ready the country to further revamp the economy, create jobs and wealth in the upcoming financial year 2021/22.
From the monetary policy angle, Bank of Uganda appears to be taking steps to have the economy back to its normal positive growth trend curve. On Oct.22, Governor Emmanuel T. Mutebile maintained the central bank rate at 7%.
He said the high frequency indicators for economic activity in the quarter to September 2020 point to a mild recovery of economic activity with estimated growth of 2% from a sharp contraction of 6% in the quarter to June 2020.
The simultaneous fiscal, monetary, and financial stimuli have been effective in avoiding the most negative economic consequences of the COVID-19 shock.
Mutebile said the easing of the lockdown, the stability of the exchange rate, as well as a feeble improvement in both foreign and domestic demand are supporting economic growth recovery.
“However, economic growth is tepid, uneven, and still fragile and projected to contract in the range of 0.2 and 0.5 percent in 2020,” Mutebile said.
Barring a renewed worsening of the course of the COVID-19 pandemic, BoU said, GDP growth momentum in 12 to 24 months ahead is likely to be modest against sluggish external demand, subdued consumer expenditure, the weak performance of the service sector, commercial banks’ cautious lending, and uncertain economic outlook.
Indeed, Mutebile said economic growth in FY2020/21 is projected at 2.0-3.0 percent and is expected to increase to 5.0-6.0 percent in FY2021/22 and to 6-7 percent in the outer years.
The economic outlook is extremely uncertain, largely because of the unpredictable course of the virus and the wide range of shocks hitting the economy, the bank said.
It is against this background that CSBAG is calling on government to implement reforms to support growth of the economy through the budget.
The group says emphasis should however be placed on improving public investment management, budget restructuring and review, sustainable management of public debt, strengthening the financial sector and enhancing domestic revenue mobilization on improving public investment management.
On public investments, CSBAG says the country continues to experience a low return on investments with an average return of 0.7 dollars for every 1 dollar invested in capital infrastructure compared to US$6 returns globally.
As of December 2019, Uganda had loan commitments amounting to US$8.723 billion of which about US$4.16billion had been disbursed posting 47.7% disbursement rate.
“We call for a comprehensive and transparent process to address the underlying causes of poor project management including assessing performance of accounting officers and project managers,” the group says. It adds that government needs to address public land acquisition to improve right of way which will go a long way in reducing delay and other inefficiencies related to project implementation. Thirdly, all projects whose disbursement rate is below10% and commencement dates are over five years should be the first to exit from the government budget.
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