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Government’s spending plan
Lakuma said, careful implementation of the new budget for FY2021/22 will determine the direction of the economy even as the central bank continues to play its monetary policy role.
According to the FY2021/22 budget, government plans to restore the economy to medium growth path by boosting private sector business especially micro, small and medium enterprises by extending COVID-19 relief measures, increasing regional and continental market access, access to long term affordable capital and supporting entrepreneurial development.
The other plans are aggressively promoting agro-industrialisation to unlock the potential of primary production, together with standards development and enforcement including enhanced market access.
It is also planning to commercialise minerals, oil and gas endowments to obtain the greatest benefits from adding value to Uganda’s natural endowments and develop and maintain infrastructure for economic growth and development and promote regionally balanced growth.
Government officials say, despite the adverse impact of the COVID-19 pandemic, the economy remains resilient, partly as a result of government response.
To minimize the negative impact of COVID-19 on the social and economic welfare of the country, direct fiscal interventions totalling Shs2.6trillion have been implemented since COVID-19 hit.
In addition, Shs7.3trillion private loans in commercial banks were restructured, as part of the stimulus package, representing 43% of all loans. Some loan repayments were postponed, a quarter of which were loans in tourism, trade, and commerce.
Tax relief totalling to Shs2trillion was provided to businesses disrupted by COVID-19.
In addition, government paid Shs677billion in arrears to private sector firms it owed in order to ease their liquidity during the pandemic period.
The Uganda Development Bank was allocated Shs555billion to finance manufacturing, agribusinesses and other private sector firms affected by the COVID-19 pandemic.
“The economic stimulus supported household economic welfare; firms to survive the crisis; and financial stability to avoid the potential collapse of the economy,” reads part of the budget speech.
Beyond this, government is planning to implement the Parish Development Model, an approach geared towards organising and delivering public and private sector interventions for wealth creation including investment planning, budgeting and service delivery at the parish level as the lowest planning unit.
This approach seeks to create income generating opportunities at the 10,594 Parishes in the country.
In the end, government officials say, the model will provide a unique opportunity for transforming the subsistence households through productivity enhancement, jobs, and the empowerment of youth and women.
BoU predictions
The Bank says, coronavirus vaccine effectiveness will among other factors determine how fast the economy will recover in the outer years.
It adds that on the upside, the upward surge of international commodity prices, if it becomes another commodity super-cycle, pose upside risks to the inflation outlook.
In addition, a more depreciated exchange rate, one-off effects of increases in some taxes, adverse weather-related shocks, and a more robust than anticipated global economic recovery could put upward pressure on domestic inflation.
But on the downside, BoU says, expected bumper harvests in 2021 could keep food prices low. Also, full lockdown to combat rising Covid-19 infections and lower than anticipated domestic demand could exert downward pressure on domestic inflation.
