The business community, under Private Sector Foundation Uganda (PSFU), has asked government to put in place measures that will ensure business continuity and mitigate losses in the face of a stressful environment.
In a statement released at the weekend and signed by PSFU Chairman Elly Karuhanga, the private sector urged government to swiftly act, noting that a number of countries including Nigeria, China and the UK, among others, had put in place stimulus measures that will foster business continuity beyond coronavirus.
Among the measures, the statement noted, government must consider waiving taxes on some goods and services, defer mandatory contribution such as NSSF and Pay As You Earn, especially in the tourism sector as well as providing credit guarantee schemes, particularly to the agricultural sector.
“Overall government needs to act swiftly and boldly in order to avoid a potential recession,” the statement said, noting that government, in consultation with the private sector, must develop post corona strategy that will support business recovery and support economic development.
In an open letter to the President at the weekend, Mr Amos Nzeyi, the Crown Beverages executive chairman and businessman, urged government to among others, pay domestic arrears, which have grown to Sshs3.3 trillion as of June 2017.
The settlement of domestic debt, he said, will allow most private sector businesses to get back on their feet, noting they will “stimulate domestic demand to substitute depressed international demand”.
However, a statement to Parliament last week, in which the Finance Ministry indicated the economy is expected to suffer, was loaded on expected outcomes but lacked mitigation measures that will ensure business continuity.
Government projected that the economy will contract to about 5.2 per cent, in the worst case scenario, noting the slowdown is expected to push 2.6 million people into poverty.
Uganda had been projected to grow at 6 per cent this year. The statement also projected a deterioration in balance of payment, which is likely to worsen depreciation of the shilling.
At the weekend, Bank of Uganda said it would intervene in the foreign exchange market to shore up the shilling as well as provide liquidity assistance of up to one year to financial institutions that may require it.
The central bank also said it will waive limitations on restructuring credit facilities that may be at risk of going into distress due to the coronavirus pandemic.
At the close of last week, Mr Stephen Kaboyo, a forex dealer and the Alpha Capital managing partner, told Daily Monitor there is need for an economic response plan as Uganda starts to feel the impact of coronavirus, especially in regard to the disruption in tourism and the supply chains.
“Radical measures should be taken. The private and public sector should work together for a plan. We should work on how liquidity conditions can be eased to allow businesses access funds,” he said, noting that suspending taxes and NSSF contributions will give businesses room to survive.
Mr Kaboyo also said government should avail a plan through which banks will access zero-rated liquidity facilities that can be extended to borrowers at lower rates.
Some Private sector recommendations
VAT refunds: To provide outstanding value added tax refunds which stand greater than 45 days.
Interest rates: The central bank should direct commercial banks to reduce dollar interest rates.
Money in market: Increase liquidity in the market without government entering the money markets to force down interest rates and help banks support the private sector
Interest rates: Banks must disperse low interest short term working capital loans immediately to business to meet their urgent commitments.
Deferred: Statutory payments for six months to be deferred interest-free.
In order to ease loan and repay burdens,
Debt: Government should pay all outstanding domestic arrears
NPLs: Increase statutory period for banks to declare non-performing assets from 90 to 180 days for next 12 months.
Loans: Allow commercial banks to restructure loans from two to four times.
CBR: Reduce the central bank rate (CBR)