Opinion: The Covid-19 pandemic is not just a health war but an economic one too 

By Dan Ayebare

While addressing the country on the status of Covid 19 last Tuesday, President Museveni said it is ‘suicidal’ to ban trucks from accessing the country through borders.

Truck drivers have for the last couple of weeks dominated new cases of Covid 19 in Uganda and this has posed a major challenge to Uganda’s quest to curb  the pandemic.

There have been growing concerns among members of the public with some suggesting that the truck drivers be completely barred from entering the country and this has received mixed reactions.

“Though new cases are imported, we can’t stop international trade as Uganda’s balance of payments has already dropped down. We still need some vital goods like pharmaceuticals and still have to export our own goods. In fact Uganda imports more than it exports, “says Francis Muhire an Economics lecturer at Makerere University Business School.

The contrast in the amount of imports and exports is evidenced by the deformity of one side of the Jinja road highway, according to Darius Mugabe, also an economist.

“A quick glance on Jinja road (which connects Uganda to Mombasa port) will give you Uganda’s trade balance. The left side of the road (Malaba-Kampala) sunk in because truck vehicles come heavy (carrying imports) and go back when they’re lighter (with few exports, if not nothing at all),“ he noted.

The Central bank of Uganda indicates that the country’s GDP growth might drop to 3-4% from the earlier projections of 6%. The International Monetary fund (IMF) on the other hand projects that Uganda’s GDP growth will drop by 2.5%.

As Ugandans like many others continue to remain indoors with many economic activities halted, it may only help to flatten the pandemic curve with the economic curve unattended according to Mugabe.

“The containment or lock-down measures were necessary and admittedly they were employed timely. These measures have been successful in containing the spread of the virus and thus flattening the epidemiological curve for Uganda. However these measures have flattened the epidemiological curve by inevitably steeping the economic recession curve. Right now, the jury is still out on which of two things — COVID-19 or the lock-down effects — will cost more lives and do more damage to Uganda’s economy. My bet is still on the latter, if the lock-down is not lifted in a month's time.”

The truck drivers may be hard to do away with and Muhire agrees with the widely suggested option that the government partner with the private sector to carry out a relay truck driving approach where Ugandan truck drivers take over from foreign truck drivers at the borders after sanitizing the trucks to avoid more infections.

Despite other sections of the public arguing that Uganda should endeavour to produce goods locally and do away with imports, Muhire says we cannot afford to adopt the import substitution strategy in a very short period. 

“Besides all the other challenges, if you are to adopt import substitution and produce formally imported goods, it requires sophiscated technology."  Muhire says that would require importing capital goods to be able to produce everything locally which becomes very costly. 

Import substitution is a trade and economic policy which advocates replacing foreign imports with domestic production.

 “Every country would love to do import substitution but you have to be extra careful because it can backfire. Uganda is a founding member of the World Trade Organisation (WTO) , therefore stopping importation of certain goods all of a sudden is impossible. Members of WTO would complain because it is a breach of their agreement, “Muhire says

Muhire adds that Uganda is not always a final destination of goods because of our equally landlocked neighbours like South Sudan, Rwanda and Burundi.

To be able to minimise road transportation of cargo, Mugabe advises Ugandans need transport policy reforms. Uganda needs to consider reviving the Ugandan Railways and commercializing it to compete with road transportation. This can improve efficiency in rail transportation and have a positive impact in reducing road transport costs and associated issues according to him.

Moving forward, Mugabe says since Uganda’s economy survives on small and medium-sized enterprises (SMEs) which constitute over 90% of Ugandan businesses, they should be safeguarded against bankruptcy. 

“As SMEs face a fall off in demand, reducing or even suspending fixed charges (such as rent), deferring taxes and credit forbearance would help to ease the pressure on them. Such interventions can increase liquidity buffers to these firms in affected sectors and enable them avoid debt default,” he explains.                                                                                                                

Muhire advises that the government should come up with an approach that brings the two trade - offs of health and the economy to a point of equilibrium. An emergency economic policy is as good as the health policy to counteract the lockdown minimize the economic effects of the Covid – 19 pandemic.

Uganda had registered 82 cases of Covid 19 by press time.