Govt faces tough choices in reopening economy

Government faces tough choices in trying to strike a delicate balance between protecting peoples’ health and reopening the economy amid the rising Covid-19 infections in the country.

As of Thursday, authorities had confirmed a total of 9,442 coronavirus cases, with 5,781 recoveries and 85 deaths.

Government is trying to contain the pandemic, while at the same time attempting to save the economy from collapse. Projected economic growth has dropped from six per cent, to three per cent with poverty and unemployment hitting an all time low.

Putting the impact of the pandemic into perspective, the Secretary to the Treasury, Mr Keith Muhakanizi, explains that the effects of the pandemic are most keenly felt through the disruption of key service sectors such as tourism and hotels, while manufacturing and trade activities are affected by the disruptions to the supply chain. 

Foreign direct investment in-flows have been hit as liquidity dries up in the global financial markets.Preliminary estimates now indicate that economic growth slowed to three per cent during the 2019/2020 financial year, down from pre-pandemic projections of six per cent. 

Mr Muhakanizi cites the closure of borders and the partial lockdown that temporarily dampened the economy, with the effects of the lockdown felt in informal trade sector, domestic transport, retail, increased cost of imported goods in the domestic market, among others.

According to experts, the government is walking “a tightrope” and finds itself pulled in opposite directions on what to do simultaneously in order to contain the rising Covid-19 infections and resuscitate the economy.

As the country reopens the key sectors of the economy, economists have warned against trade-off between peoples’ lives and economic growth. 

They say the focus should be placed on two fronts: helping small and big businesses to recover, conserving limited finances and containing the spread of the virus in the country.

“Covid-19 is a very serious issue for us as a country, but we need to strike a balance between health and the economy. You may suffer from ‘health Covid’ but also ‘economic Covid’ as you go through this difficult period,” Prof Sabiti Makara, a senior lecturer at Makerere University department of Public Administration and Political Science said during a policy dialogue on reopening the economy in Kampala last week.

Following the reopening of some sectors, the country, for instance, recorded 5,000 Covid-19 cases in 30 days, from 3,112 on September 1 to 8,287 cases as of October 1, according to the Health ministry’s data.

Mr Fred Muhumuza from Economic Policy Research Center at Makerere University, however, argues that there is no strong reason government should put the biggest portion of resources in Covid-19 fight and sacrifice the economy.

Mr Muhumuza says there is evidence that Covid-19 effects in the country will not be as disastrous as it is in European countries because of contrasting climatic conditions and a number of other factors.

“The death rate from Covid-19 in Uganda and Africa is meagre compared to other parts of the world. If you go to Canada, 18 per cent of the people are above the age of 65, which is Covid-19 territory. But if you come to Africa, people in the said age group are only three per cent,” Dr Muhumuza argues.

He adds: “Fifty five per cent of Ugandans are below the age of 18 and so they may not even get symptoms of Covid-19 after contracting the virus. Are we considering this dynamics into policies we are developing or we are just going to borrow more money and buy more ambulances?”

Mr Muhumuza says although the country is opening sectors, it may take time before substantial economic growth is experienced.

“Even as government opens up for the economy to begin proceeding, we are not sure whether we will move as we expected to go because there are many other things to look at,” he says.

“People working in arcades have seen this evidence, that even after opening, the demand was down and many of them are closing shops. Landlords are demanding rent but clients are not coming to purchase because people don’t have money to buy goods,” Mr Muhumuza adds.

According to the senior economist, the too much emphasis on the medicine part of this disease is also a wrong move.

“Covid-19 is a public health issue. What public health policies are we rolling out to the public as a long term measure to contain the pandemic? What policy do you have to protect those with underlying health complications from contracting Covid-19?” he says.

Mr John Walugembe, the executive director of the Federation of Small and Medium Scale Enterprises (FSME), says a large number of businesses are closing because of low demand from consumers.

However, Dr Arthur Binomugisha, the executive director of Advocacy Coalition for Development and Environment (Acode), believes focusing on the safety of people is more important than reviving the economy and reopening sectors like education.

“It is important that our human resource capital is saved during the pandemic. Protecting our people and ensuring that they observe standard operating procedures (SOPs) is very critical; it is actually more important than reopening the economy,” Dr Bainomugisa says.
He adds: “The Education ministry should assure us how safe schools are going to be as we move to reopen the sector so that our children are not exposed to danger. ”

Dr Bainomugisha says parents don’t have money to pay schools fees and the owners of schools are debt-stressed and cannot reopen.

Way forward

The Finance ministry says although the government is faced with tough choices in curbing the pandemic and minimising extreme effects of Covid-19 on the economy, plans have been developed to prevent the health crisis turning into a national catastrophe.

Mr Moses Kabanda, a senior economist at the ministry, says unlike other countries whose economies are in a recession, Uganda’s economy is growing amid challenges brought by the pandemic.

“Since May when government started easing the lockdown, we are seeing signs of recoveries, though it is going to be gradual with more Ugandans coming back to work and engaging in a number of different productive economic activities,” he says.

The economist adds: “Our GDP is projected to accelerate to 4.5 per cent this financial year. We are still growing, although our growth has slowed. We are not in a recession like economies of other countries.”

However, he advises that for the economy to revive sustainably, people need to continue adhering to Covid-19 prevention measures to avoid extreme shock on the health system that may need more investment from government and wastage of work time in hospital.

“We are planning to recruit more health workers, improve the state of health facilities, strengthen the supply chain for medicines, ensure accountability and increase sensitisation at community levels to address the problem of Covid-19,” Mr Kabanda says.

“We need to accelerate planning on how to live with the new norm to restore business competence and revive the economy. As a country, we must position ourselves to take advantage of the opportunities that Covid-19 brings, especially on import substitution and increase export,” he adds.

However, Mr Julius Mukunda, the executive director of the Civil Society Budget Advocacy Group (CSBAG), advises that government should focus on prioritising the limited resources and investment in the real economy like agriculture and manufacturing, and enhance accountability.

“The most important thing that we should ask when it comes to borrowing is whether we are borrowing for consumption or production. We need to spend our money correctly; this country is good in agriculture and so we can produce to feed ourselves and the world. We need to invest in the real economy,” says Mr Mukunda.

“We demand accountability for money that is spent in the name of Covid-19. Up to now, you still hear of shortage of testing kits yet government said most of the money went to buying testing kits,” he adds.

The CSBAG boss says government should look at ways of helping businesses that are closing, especially in Kampala metropolitan area because of low income.

Ms Jeane Byamugisha, the executive director of Uganda Hotel Owners association, says government should put more resources in marketing the country at the  international scene and focus on attracting tourists from foreign countries instead of local tourism.

“The cost of doing business has become very high because clients are few and yet payment for things like security and other utilities remained the same. For us in the tourism industry, our business is majorly from those coming from foreign countries. Domestic tourism can bridge the gap but it can’t bring us the money to run the industry,” Ms Byamugisha says.

But Prof Makara asks government to provide a stimulus package for schools to put in place SOPs for reopening and increase sensitisation about Covid-19 prevention measures to avoid extreme effects.

“Covid-19 fight is going to be the same way we fought HIV/Aids. I think what worked most in the HIV fight was not the drug but information on the importance of using condoms and other preventive measures,” he said.

[email protected]