Cut public sector spending to close donor aid cuts, says private sector

Target. Last month, the government issued new targets for Uganda Revenue Authority worth Shs34 billion in addition to their initial target of Shs7.2 trillion.

Kampala.

The private sector has warned government against increasing the tax threshold saying this will worsen the investment climate.
Already, the private sector is struggling to make ends meet because of the tight cost of doing business – something which has seen many who could not bear the situation close business, while others cut down on production.

The private sector is worried about the government’s recent pronouncement of increasing the threshold in an effort to close the gap created by the donors’ aid cuts.
Last month, the government issued new targets for Uganda Revenue Authority worth Shs34 billion in addition to their initial target of Shs7.2 trillion.

Mr Gideon Badagawa, the executive director, Private Sector Foundation Uganda, said”: “We are heading for the serious times. Already, the privates sector is facing challenges because of the high cost of doing business since the interest rates are still high.”
The donors were forced to cut aid following large scale corruption in government ministries and departments.

Denmark, the UK and Ireland, German and European Union cut aid to Uganda, a situation whose impact has started being felt.

Shilling depreciates
As a result, the local unit has depreciated because the flow of dollars is limited into the country is limited and as result, hurting the private sector and common man.
“Increasing URA targets is an artificial action that will not be sustainable, instead what the government should do is to immediately cut back on the expenditures of the public sector because this is where the problem lies,” Mr Badagawa advised.

The public sector employs about 500,000 Ugandans and yet it takes up most of the budget expenditure, leaving the private sector, which employees more than 4 million Ugandans to share little resources from the national cake.

He said: “We urge government that doing this is trading a tight rope which can’t cut back on its expenditure-put money in agriculture and value addition this will create more jobs and attract more investors too and also exports will increase”.

URA’s Commissioner Public and Corporate Affairs, Ms Sarah Banage, said the source of that money will have to be the small formal sector that is already burdened by several taxes as the tax collectors pledge to double their efforts to fix the gaps.

dnakaweesi@ug.nationmedia.com