Will Shs48 Trillion Budget Address Uganda’s Economic Recovery?

The Shs48.3 trillion budget for the 2022/23 financial year, comes at a time when the World is grappling with multiple crises arising from the COVID-19 pandemic and consequently the ongoing war in Ukraine.

Because of the COVID-19 pandemic supply chains across the globe were disrupted which exacerbated existing vulnerabilities in most developing countries.

Many developing countries, Uganda inclusive are now witnessing an increase in prices, especially for essential commodities, and worrying debt levels that have constrained their ability to invest in public services.

Recently, Parliament passed the National Budget for Financial Year 2022/23 under the theme; ‘‘Full monetization of the Ugandan Economy through commercial agriculture, industrialization, market access, and digital transformation,” to accelerate Uganda’s economic recovery post-COVID 19.

In the National Budget Framework Paper for FY 2022/23 (NBFP), the Ministry of Finance highlighted the need to monetize the economy as the magic bullet to turn around an economy that is trying to find its footing as a result of the COVID-19 pandemic shocks.

The 2022/23 Budget emphasizes restoring business activity and deepening financial inclusion. This is because of the effects of the COVID-19 that affected businesses some of which had to even shut down.

In a bid to restore business activity and deepen financial inclusion, the government has noted that they will keep funding the Emyooga program and support SACCOs to provide seed capital for small businesses including special interest enterprising groups.

The Government has also made it a priority to capitalize Uganda Development Bank and other financing schemes such as the Agricultural Credit Facility.

The Government has also highlighted the Parish Development Model (PDM), which is believed to bring the majority of the population into the money economy.

The proposed PDM is aimed at alleviating poverty by improving household incomes and welfare through employment and wealth creation.

However, despite the good intentions of establishing the PDM, the initiative is unlikely to fulfil its mandate once the following prevalent challenges are not addressed.

There is a deliberate need to secure markets, support value addition and post-harvest handling facilities, fluctuating commodity prices, limited market information, and limited standards compliance.

Whereas the government has made priorities as indicated above, the various Post COVID-19 stimulus packages have not adequately addressed the challenges faced by Micro and Small Enterprises especially those led by women and youth of accessing viable, timely, and affordable finances.

It should be noted that many people are dependent on the micro and small enterprises that have been harshly hit by the pandemic.

Whereas the government has identified agro- industrialization and light manufacturing, the agro-processing sector is still faced with challenges, and these include; high cost of operation as a result of the high cost of utilities like electricity, capital, and transport, an insufficient supply of inputs leading to industries operating below capacity; and the de-link between aspirations to industrialize and the requisite policies and resources.

This validates the findings of the Auditor General’s Report 2019 which highlights that 70% of the established factories in Uganda are performing below capacity.

Take this for example; the Parliamentary Committee on Trade, Tourism, and Industry recently observed that factories such as Soroti fruit factory are marred with mismanagement challenges, leading to underperformance below capacity.

Uganda’s debt burden has continued to increase which means that the country continues to sink deeper into debt. This has prompted an allocation of more than 15 trillion to loan repayments more than the amount invested in social sectors such as Social Development and Education.

Debt financing is as follows domestic refinancing at 8 trillion Shillings, interest payments at 6 trillion, external debt repayments at 2.41 trillion, domestic arrears at 697.9 billion, and Appropriation in Aid 238.5 billion.

Government should address the mismatch in the establishment of agro-processing industries and production areas to ensure sustainable production of raw materials and promote forward and backward linkages. This can in turn play a critical role in increasing household incomes.

Government should provide resources for key institutions for a successful agro-processing agenda. These key institutions include; the Cooperatives.

On the issue of the Parish Development Model, Government should not reinvent new structures but link up and leverage existing strategies and structures to enhance production, value chains, and market access to make the PDM successful.

With the scrapping of the Youth livelihood fund, the government should have considered ring-fencing 30% of the funds under the Parish Development Model for the youth. This 30% would be a better cushion for the scrapped youth empowerment programs.

The COVID-19 pandemic has exposed the long-standing structural bottlenecks and vulnerabilities the Ugandans have always faced socially and economically. Whereas we recognize the government’s efforts toward the resuscitation of the economy, there is a need for a rethink about the various policies and practices to reiterate achieving an equitable and transformative Economic Recovery Post COVID 19.

The Shs48.3 trillion budget for the 2022/23 financial year, comes at a time when the World is grappling with multiple crises arising from the

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