Govt admits economy in distress

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The State Minister for Finance in-charge planning has cast a sluggish outlook of Uganda’s economy, saying a combination of drought, mounting domestic arrears and diminished regional demand means Uganda will not achieve the projected 5 per cent economic growth.

In a tailored update on the state-of-the economy yesterday, Mr David Bahati cited conflicts in key trading neighbouring partners such as South Sudan, Burundi and the Democratic Republic of Congo as well theft of public resources at home, low prices for coffee and tea and high interest rates have stymied growth.

“We see our economy growing not at pace we had expected but at a steady base and achieving the objectives we set one year ago,” Mr Bahati said at the government Media Centre in Kampala.
He added: “Our export base to South Sudan alone was close to $700m (2.5 trillion) [before the conflict] but as we speak now, it is coming down to $200m (Shs716b) on account of instability,” he said.

South Sudan has provided Ugandan traders the most lucrative regional market since becoming semi-autonomous in 2005, but its descending into renewed fighting in 2013 constipated demand as millions fled and doing business there became precarious for foreigners.

A number of Ugandans who supplied goods to South Sudan government remain unpaid to-date, holding up their capital for other investments.

At yesterday’s briefing, minister Bahati said the government will not pick new loans “if we are not sure that [it] has money to cater for compensation, counterpart funding [and] if a sector is not sure of implementing a project”.

Uganda’s debt-to-Gross Domestic Product ratio is at 36 per cent, which is considered manageable, but closer in the range of vulnerability.

Obstacles
Other millstones, according to Mr Bahati, include drought and consequent crop failures, resulting in higher food prices, massive investment in infrastructure without or with little local content, delays in acquiring land for development projects, late or no payment of government suppliers and contracting in foreign currencies.

The minister branded these as “challenges” to the economy which they plan to reinvigorate the private sector by ring fencing government domestic borrowing at Shs700b or below down from Shs900b; injecting Shs120bn to re-capitalise Uganda Development Bank; and, making Shs300b available to clear a portion of Shs2.7 trillion domestic arrears.

Some observers, however, prefer to watch on the sidelines until the government walks the talk on the economy.
Mr Gideon Badagawa, the executive director of Private Sector Foundation Uganda’s, recently said: “It is our hope that the government reduces on domestic borrowing to avoid crowding out private [investors].”

Mr Bahati yesterday said the government will spend more than Shs260b to buy seedlings to supply farmers, hoping this will, with good rains, increase agriculture productivity.
Another Shs186b will be spent on irrigation and establishing a factory for solar pumps alongside Shs120b allocated for the youth and women economic programmes.

South Sudan has provided Ugandan traders the most lucrative regional market since becoming semi-autonomous in 2005, but its descend into renewed fighting in 2013 constipated demand as millions fled and doing business there became precarious for foreigners. A number of Ugandans who supplied goods to South Sudan government remain unpaid to-date, holding up their capital for other investments.

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