Ugandan businesses are still low on funds even after the Ministry of Finance, Planning and Economic Development injected a stimulus package of Ush13,208 billion ($3.7 billion) into the economy to help them weather the economic impacts of Covid-19.
As part of the stimulus package, private loans in commercial banks were restructured, development financer Uganda Development Bank (UDB) recapitalised to finance distressed companies, businesses directly benefited from tax rebates and deferrals and youth and women entrepreneurs got seed capital. However, businesses in Kampala The EastAfrican spoke to are still reporting a drop in cash flow and low foot traffic.
Data from Uganda brewers indicate that 60,000 bars countrywide employing 1.8 million directly and four million people indirectly remain closed.
According to the Uganda Bureau of Statistics, before Covid-19, the entertainment industry contributed Ush141.5 billion ($40 million) to the GDP in fiscal year 2017/2016.
“Over a million businesses in the country are struggling, explaining why the size of the economy has been halved,” Jjemba Mulondo, one of the leaders of Kampala City Traders Association said.
The slow businesses activity in the country has sent economic managers back to the drawing board.
Uganda’s Finance Minister Matia Kasaija says part of his priority in the 2022/2023 fiscal year is restoring business activity through increasing access to capital.
Analysts expect next fiscal year’s budget to introduce more tax rebates, new affordable credit lines and fresh policy measures to support businesses recovery.
“The economic policy framework in the short to medium-term aims to restore activity to pre-pandemic levels and accelerate the pace of socioeconomic transformation,” Mr Kasaija told a recent budget strategy conference.
He said boosting aggregate demand underpins Uganda’s economic recovery, and will be achieved by restoring domestic consumption, private and public investment, and export promotion.
Returning the economy to pre-Covid-19 growth levels requires more funding, and analysts expect the finance minister to have a tough time convincing Parliament to avail the money in fiscal year 2022/2023.
Parliamentarians question if the money reached the beneficiaries, and have asked the executive for accountability of the Ush558.1 billion ($156.8 million) appropriated for re-capitalisation of Uganda Development Bank as a stimulus package. The lawmakers have also asked for a list of the beneficiaries of Ush77.7 billion ($21.8 million) for Sacco support allocated to Uganda Microfinance Support Centre, Ush260 billion ($26 million) to Emyooga, and Ush130 billion $36.5 million) to the Youth Fund.
Data from the Ministry of Finance shows that the GDP growth, which had hit 6.3 percent in the fiscal year 2017/18, reaching an eight-year high of 6.4 percent in 2018/2019 dropped to three percent in 2019/2020 then picked up marginally to 3.3 percent in 2020/21.
Uganda is also grappling with a slowdown in both private and public investment, a drop in exports into the region, and a trade deficit which is putting pressure on foreign reserves.
Uganda’s export to East African Community (EAC) members states for the full month ending August 2021, dropped to Ush380.6 billion ($107.13 million) compared to Ush536.8 billion ($150.98 million) in July, a 29 percent reduction.
The slow economic activity in Uganda has also impacted domestic revenue collections with taxman missing targets, putting Uganda in difficult position to financing its development plan with shortfall.
For example, in 30 days to September 2021, data from Ministry of finance shows that domestic revenue collected was Ush1,538.39 billion ($432.7 million) representing an 88.6 percent performance against the Ush1,736.34 billion ($488.4 million) target and therefore a shortfall of Ush197.94 billion ($55.6 million) in September this year.