ACODE executive director Arthur Bainomugisha (left) and the Permanent
Secretary and Secretary to the Treasury, Mr Keith Muhakanizi, at the
launch of the National Budget Month in Kampala yesterday. PHOTO BY
KELVIN ATUHAIRE.
Government
technocrats have finalised a Shs4.7 trillion stimulus package to revive
the economy
which has slumped from the effects of the Covid-19 pandemic.
which has slumped from the effects of the Covid-19 pandemic.
Finance Minister Matia Kasaija is expected to
unveil the raft of measures as early as Tuesday if approved by Cabinet
on Monday, although the announcement could also be held back to the
State of the Nation address on June 4 or Budget Day on June 11, sources
told this newspaper.
The plan seeks to help struggling
businesses stay afloat, create jobs and provide tax breaks for
struggling companies to encourage spending and investment. Although the
plan is yet to be made public, interviews with different senior
government officials familiar with the planning shared insights of what
is contained in the stimulus package.
They include
providing cheaper loans to small and medium enterprises, tax cuts for
sectors badly affected by the pandemic, and defending the shilling to
prevent imported inflation.
Speaking during a public
dialogue yesterday, Secretary to the Treasury Keith Muhakanizi revealed
that the Executive is waiting for the Parliament to approve a $491.5
million (Shs1.9 trillion) loan from the World Bank and another $300
million (Shs1.1 trillion) financing tranche from the same institution to
support the budget and pay for the interventions.
The dialogue was organised by Advocacy Coalition for Development and Environment (Acode), Civil Society Budget Advocacy Group (CSBAG) and Ministry of Finance.
The dialogue was organised by Advocacy Coalition for Development and Environment (Acode), Civil Society Budget Advocacy Group (CSBAG) and Ministry of Finance.
The
executive director of Acode, Dr Arthur Bainomugisha, called for strict
accountability of the stimulus package funds and transparency in the
budget.
“The interventions must be well-targeted to revamp our economy.
Covid-19 has impacted both the global economy and national economies of
African countries, and economic recovery will depend on the fiscal and
monetary policy intervention being undertaken by the government,” Dr
Bainomugisha said.
Separately, Investment minister
Evelyn Anite, who represented Mr Kasaija at the Uganda Development Bank
annual general meeting, said government would make a Shs1.5 trillion
capital injection into the bank to provide long-terms loans to the
private sector.
“We have a draft partial stimulus
package that prioritises vital sectors of the economy such as
agriculture, ICT, manufacturing and import substitution through Buy
Uganda Build Uganda policy,” Ms Anite said.
“We are going to take the plan to Cabinet and Parliament for approval,” she added.
“We are going to take the plan to Cabinet and Parliament for approval,” she added.
Mr
David Bahati, the State minister for Planning, offered more details of
the plan in a separate interview yesterday. “We shall invest Shs1.5
trillion in Uganda Development Bank to help in support manufacturing
companies and our Small and Medium Enterprises (SMEs) access cheap
capital credit,” Mr Bahati said.
“We are going to put
more money in agriculture for food security and agro-industrialisation,
more money in microfinance, support Uganda Development Corporation and
various fiscal interventions to help small and big companies,” he added.
While government officials have previously publicly praised the resilience of the economy, Mr Muhakanizi yesterday revealed concerns within Finance ministry circles about the impact of the pandemic on long-term growth.
While government officials have previously publicly praised the resilience of the economy, Mr Muhakanizi yesterday revealed concerns within Finance ministry circles about the impact of the pandemic on long-term growth.
“Covid-19 is having negative impact
on Uganda’s economy in terms of slowdown in Gross Domestic Product,
decline in revenue being collected by the Uganda Revenue Authority,
slowdown in economic activities, especially in the services, trade,
tourism, remittances; these areas have been badly affected by this
pandemic,” he said.
Mr Muhakanizi warned that as many as 2.6 million people could fall back into poverty because of the economic slowdown.
“We already have a big revenue shortfall, for example in the month of April, Shs650 billion was wiped out of the revenue. Therefore, the treasury in itself is in emergency. The room for fiscal reallocation is almost zero; at the moment, Uganda is faced with three problems; Covid-19, floods and floating on the Lake Victoria,” he said.
“We already have a big revenue shortfall, for example in the month of April, Shs650 billion was wiped out of the revenue. Therefore, the treasury in itself is in emergency. The room for fiscal reallocation is almost zero; at the moment, Uganda is faced with three problems; Covid-19, floods and floating on the Lake Victoria,” he said.
The Treasury mandarin warned of spending cuts to the Financial Year 2020/21 budget in light of reduced tax revenues.
During the UDB meeting, Minister Anite said government is increasing its share capital in the state-owned bank from Shs500b to Shs2t to give the institution more cash to lend out to manufacturers and agro processors.
During the UDB meeting, Minister Anite said government is increasing its share capital in the state-owned bank from Shs500b to Shs2t to give the institution more cash to lend out to manufacturers and agro processors.
She
added that the government has directed UDB to reduce the interest rate
from the current 12 per cent to 10 per cent. Speaking at the public
dialogue, the International Monetary Fund resident representative in
Uganda, Ms Mira Clara, said government plans to use about 70 per cent of
the Rapid Credit Facility resources from the Fund as a shock absorber
to protect the country’s reserves—essential for maintaining
macroeconomic stability, including low inflation.
moketch@ug.nationmedia.com
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