Coronavirus bailout

COVER STORY | THE INDEPENDENT TEAM |  As the coronavirus pandemic ravages the globe, countries are scrambling to protect citizens financially, cushion businesses and companies, and ensure their economies do not fail from the fallout.

This is because the coronavirus pandemic is not only straining the world’s health sector, businesses and companies but the ability of governments to manage the crisis is being tested.

The Uganda government is also under pressure to act.

It is inevitable that cases of the coronavirus in Uganda will go up before they go down. It is also almost inevitable that government will have to shut down all public transport and all other services that are not essential for the sustenance of life.

These developments mean that most Ugandans will have nothing to survive on.

Our economy, analysts say, depends on the informal sector, which employs over 70% of the labour force and contributes 60% of our GDP. Here most Ugandans earn by the day enough money to survive that night.

What will happen when boda boda riders; taxi drivers, touts and conductors; bartenders, waiters and waitresses and bouncers in restaurants, bars and nightclubs; people who vend or hawk wares in markets and on the streets – in short people who live hand to mouth on a daily basis and cannot earn because of Corona virus?

Is it possible that government can intervene to provide subsistence insurance to such persons? If yes, how? If no, how will they survive when normal activities from which they derive sustenance on a daily are halted for a month?

Unlike other countries’ governments that are planning to use their budgets to stimulate the economy in the face of the shocks caused by the corona pandemic, Uganda appears constrained by limited spending tools at its disposal.

The pandemic seems to have hit Uganda at a very bad time economically. Even before the coronavirus emerged in China in December last year, economic experts in Uganda were already projecting slower economic growth due to revenue shortfalls by Uganda Revenue Authority (URA), low export earnings and rising unemployment.

Statistics indicate that URA was below its target revenue by nearly Shs950 billion as at the end of February this year.

The government had hoped to raise US$- 167million (Approx. Shs640 billion) from Capital Gains Tax on a transfer of assets deal by the local subsidiary of the Irish exploration firm, Tullow Oil, to the China National Offshore Oil Corporation (CNOOC) and the French oil giant Total.

But the Tullow farm-down collapsed mid last year, wiping out this expectation.

Added to this was the projected $100 million (Approx. Shs 384 billion) from the renewal of the MTN license, which is yet to materialise.

Whereas the World Bank had offered Uganda $300 million (Shs 1.15 billion) in budget support, the funds were later withheld over government’s delay to clear the Jinja-Kampala Expressway.

This meant that the total revenue that was projected in the 2019/20 budget but could not be realised by end of February 2020 stood at Shs 3.12 trillion; which is a huge hole in the current budget.

This is said to have prompted the finance ministry to slash budgets of all ministries, for some sending less than 30% of their quarterly release.

It is in this context of a severe shortfall in the budget that the coronavirus has reared its ugly head, sending GDP growth projections into a tailspin.

Analysts say Uganda is currently facing three major shocks from the coronavirus: the rapid fall in export earnings especially due to the virtual collapse of the country’s largest foreign exchange earner, tourism.

The second is a sharp fall in imports, especially from China, as traders cannot travel to buy goods from which URA collects taxes.

The third is the big reduction in and/or suspension of many business activities such as bars, nightclubs, concerts, public transport, etc. from which many Ugandans derive a living.

Mutebile reacts, Museveni shy

On March.20, the Bank of Uganda (BoU) announced seven measures to cushion the economy against the effects of the coronavirus.