High fuel, commodity prices dampen Museveni’s first year in his sixth term

Nakasero market in Kampala.

Fresh food produce sold at Nakasero market in Kampala. Consumers are feeling the pinch of rising food prices. PHOTO | FILE

What you need to know:

  • The president, expected to address the nation today evening after the end of the first year of his current term, has been facing calls from businesses and the public to tame the escalating cost of commodities, especially fuel, whose retail price has risen over 70 percent in the past year.

The high cost of living, a widening budget deficit, corruption and growth uncertainties continue to blot Ugandan President Yoweri Museveni’s sixth term in office.

The president, expected to address the nation today evening after the end of the first year of his current term, has been facing calls from businesses and the public to tame the escalating cost of commodities, especially fuel, whose retail price has risen over 70 percent in the past year.

The last time President Museveni addressed the nation about the increasing prices was Labour Day, when he advised Ugandans to choose between buying bread and cassava.

Finance minister Matia Kasaija told the nation to brace for the worst, saying the government cannot intervene and or reduce taxes.

Household budgets and operating costs in Uganda have risen sharply in the face of the government’s stance not to give a tax rebate on fuel, adding uncertainty to economic recovery.

Although the Bank of Uganda says the economy is recovering from the pandemic downturn, domestic growth weakened in March 2022 due to the rising prices of food and fuel.

Juliet Najjinda, manager of tax services at PricewaterhouseCoopers Uganda, said it is time the government introduced a fuel subsidy to reduce pump prices, as the manufacturing sector is feeling the heat.

“It is no longer sustainable to leave the fuel price to market forces,” said Ms Najjinda, adding that the government collects between Ush1,200 ($0.33) and Ush1,300 ($0.36) per litre of fuel.

Opposition Members of Parliament Cecilia Ogwal, Muwanga Kivumbi and Anthony Akol said that until the government comes up with specific funding, the greater north -— Busoga, Bukedi, Teso, Karamoja, Acholi, Lango, and West Nile — will continue suffering.

“The outlook of the country seems to indicate there are two countries in one; the greater North and South,” said Mr Kivumbi, the shadow minister of finance and economic planning. “If not addressed, it poses a threat to the security of and posterity of the country.”

Willis Bashasha, director of manifesto implementation in the Office of the President, said that they are facing challenges in carrying out their policies.

“Corruption is our biggest enemy. It affects the implementation of the projects,” he said.

Although the government has set up institutions to fight corruption, there is still a lot to be done. A survey by the Inspectorate of Government found that the country loses Ush20 trillion ($5.5 billion) to corruption annually in key government agencies, and Ush590 billion ($161.7 million) in fraudulent procurement deals.

The report has helped Parliament question multimillion-dollar contracts that the government has single-sourced. Members have called on the government to cancel the deal giving Uganda Vinci Coffee Company Ltd exclusive rights to buy all Uganda’s coffee. In 2019, the same company was contracted to manage the construction of the stalled Lubowa Specialised Hospital without being subjected to a competitive bid process. The government issued a promissory note of $397 million.

In the 2021/2022 budget, the hospital was given Ush348 billion ($95.4 million) and, in the 2022/2023 budget proposals before the Committee on Finance, additional Ush319 billion ($87.4 million) is allocated to the project.

Political finance watchdog Alliance for Financial Monitoring says single sourcing seems to be synonymous with big-ticket procurement deals.

“This makes it by far the most expensive hospital to be built in Uganda, in comparison to Kiruddu, which cost Uganda $25 million. The Lubowa hospital project is about 16 times more expensive,” said Henry Muguzi, a member of the lobby. “The lack of transparency around this procurement exposes the process to abuse. This is what is unravelling in the Lubowa hospital case, which makes it subject to financial crime.”

The increase in administrative units is also putting pressure on the national budget. From 14 districts in the country in the 1960s, there are now 146 districts.

Stretched resources
“A lot of resources have to be used to cater for the new units, which affects delivery of services as resources get overstretched,” Mr Bashasha said.

Uganda faces a perennial problem of running a budget deficit, given the low domestic revenue collections.

“Over the past decade, Uganda’s tax-to-GDP ratio has increased by over three percentage points to about 12 per cent. It stagnated at this level in the years prior to the Covid-19 pandemic. Although during the pandemic revenues declined, the tax-to-GDP ratio held up well,” said Izabella Karpowicz, resident representative of the International Monetary Fund Uganda.

Ms Karpowicz said Uganda has to increase domestic revenue collection by 0.5 percent of GDP per year.

She said further stagnation in revenues could push Uganda to borrow more or contain spending, including on priority outlays. This would further delay implementation of the sustainable development goals.

President Museveni’s year has borne some good fruits, such as the restoration of relations with Rwanda, culminating in the opening of the border at Katuna. Rwandan President Paul Kagame visited Uganda to attend Gen Muhoozi Kainerugaba’s 48th birthday party last month. It was the first visit in four years.

Uganda’s deployment and collaboration with Democratic Republic of Congo forces to root out Islamist rebels of the Allied Democratic Forces - who have been destabilising the region, killing thousands of people in the past two decades - is also a positive act. The government has also started on the construction of roads in the DRC as part of efforts to ensure security, promote trade and access new markets in the vast mineral-rich country.

In the year, President Museveni also hosted Mozambican president Felipe Nyusi and the two countries committed to strengthen co-operation in defence and security, immigration, agriculture, energy, petroleum and mineral Development.