FDI projections to decline by 35% due to Covid - 19

Friday May 1 2020

Igongo Cultural Centre is one of the compan

Igongo Cultural Centre is one of the companies that have submitted details to PSFU seeking payment of its arrears from government. FILE PHOTO  

By Dorothy Nakaweesi

Kampala- Close to 40 companies have, through Private Sector Foundation Uganda (PSFU), asked government to pay more than Shs200b in arrears to help them deal with cash flow problems amid the Covid-19 crisis.
The companies, which have, in about two weeks, been submitting details to PSFU, want government to offset arrears, some of which have not been paid for more than three years.

They say the arrears will be timely in dealing with current business constraints such as cash flow issues and resetting their operations in the coming months.

In an interview yesterday, Mr Gideon Badagawa, the PSFU executive director, told Daily Monitor, there was a glimmer of hope given that government was cooperating and showing commitment to settle outstanding payment.”

However, he said, not all arrears will be offset at ago, noting that some companies will have to wait as government deals with priority sectors.

“We have agreed to prioritise the productive sectors [such as] agro-processing and manufacturing,” he said. Government currently holds about Shs3.7 trillion in private sector arrears, some of which have not been paid in over five years.

Earlier, Mr Kenneth Mugambe, the Finance ministry director budget, said government had already released nearly Shs450b in the 2019/20 financial year to settle arrears.


However, we could not independently verify how much government will be willing to release in the 2020/21 financial year to settle arrears in the face of a stressed business environment brought about Covid-19.

Mr Jim Mugunga, the Finance Ministry spokesperson, last week told Daily Monitor that the Secretary to the Treasury, Mr Keith Muhakanizi, had instructed all government ministries, departments and agencies to ensure that they secure budget allocations for services and commitments before they make them.

“In this way,” he said: “Our target is to ultimately reduce domestic arrears and enforce budget discipline.”

Resource mobilisation
However, Mr Badagawa warned that government should not attempt to mobilise resources from the domestic market to settle the arrears, noting: “… this will compound the problem and we will again see interest rates shoot up.”

He also said government given the current limited resources must cut back on consumptive spending.

“We see Parliament awarding itself money. This Shs10b is way too much, instead it should have been put into productive sectors,” he said.