Economic experts have warned that another lockdown will imperil economic growth and sink people further into poverty.
Given the upsurge in the cases of Covid-19 in the country, some government officials had cautioned that the country could be locked down for the second time.
But the experts say another lockdown makes no economic sense therefore time has come for the country to come up with innovative ways on how to deal with Covid-19.
The remarks were made during the 4th Economic Growth Forum 2020 in Kampala which was aired on NBS TV.
The commissioner for Macroeconomic department at the Ministry of Finance, Planning and Economic Development, Dr Albert Musisi, said the pandemic has affected government’s fiscal position, with domestic revenues far below target while spending needs have increased.
Musisi said revenue collections declined significantly especially in the third quarter of Financial Year 2019/2020 due to the lockdown.
“The government should take the lead in boosting aggregate demand and also provide support to sectors with high fiscal multipliers and those most affected by the pandemic,”he said.
He said there was a sharp decline in economic activities in Uganda but in the last two months, there has been an improvement.
Experts said the projected rise in public debt implies that the country is not collecting enough domestic taxes to meet the ever increasing government expenditure and that it also puts a lot of pressure on government to service the debt.
The executive director of National Planning Authority (NPA), Dr Joseph Muvawala said the problem is not the increase in the ratio of the debt level to GDP but the capacity to pay it and what the money being borrowed is being used used for.
“The issue is your capacity to pay back the debt not the rise in debt. The USA has debt which is more than 100 per cent of the GDP but they have the capacity. Right now there is no choice about borrowing because the government needs the money to boost the aggregate demand.”he said.
“Some things have worked for us. Like production. I don’t know what could have happened if we weren’t producing food.We should ensure that we retain the people producing after COVID19,”he added.
Keith Muhakanizi, the permanent secretary in the Ministry of Finance asked for a debt waiver for sub-Saharan countries like Uganda if these nations are to recover from the effects of the pandemic.
Despite the country’s hardships, Muhakanizi said the pandemic has provided us with an opportunity to orientate the economy towards increased domestic production.
Muhakanizi said good fiscal policies are needed to get more revenue.
Discussion about this post