Government should reconstruct economy after lockdown

Friday May 29 2020



While the lockdown was intended to curb the spread of coronavirus in Uganda, it has nevertheless dealt a heavy blow to the national economy.

Now that the lockdown is being gradually eased in the country, it is important to note that reopening of the economy alone is not adequate. What is equally critical is to quickly find ways of boosting consumption or demand.

While it will take time for the economy to recover fully, considering that growth for the financial year ending June, is now expected to be 3.9 per cent down from a pre-Covid-19 pandemic projection of 6 per cent, according to a monthly report from the Ministry of Finance, arising from the effects of Covid-19 pandemic, there is an urgent need for the resumption of economic activities.

There might not be “the essential guide” to reviving Uganda’s economy after disruption caused by the Covid-19 lockdown. However, there are some economic activities we can prioritise in order to revamp businesses after more than a two-month lockdown.

What government needs to do is to make it easier for businesses to resume operations given that many of them have to service loans, pay rent, and utility bills, among others.

The government needs to waive rental income tax obligations for city landlords for all the months the traders were locked up in their homes and were not earning any income.


Similarly, banks should waive the accrued interest on loans acquired by the landlords to ease the burden of demanding for rent.

Such tax breaks will leave businesses with the liquidity they need to meet operational expenses. Small and medium enterprises (SMEs), which operate across various sectors of the economy, are considered as the engine of growth.

There is also need for the government to pay its domestic debt in a phases, starting with businesses in the most Covid pandemic hit sectors such as tourism and small industries.

While the shutdown brought non-essential consumption to a standstill, it also impacted cash flows of the micro, small and medium-size enterprises.

The Ministry of Finance should also establish an economic injury loan guarantee scheme for SME-affected sectors to provide them with zero-interest loans to meet their financial obligations. Such a scheme will reduce the risk profile of these SMEs and open up funding to them.

Waiving Pay As You Earn (PAYE) for at least three months would also free up some cash required for SMEs to meet their financial obligations and kick-start their businesses.

Most importantly, there is need for government to reinvigorate the economy by boosting local demand and consumption following the lockdown disruptions.

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