How the government plans to deal with poor policy implementation

by Abbas Muhamad
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There is no doubt that the Ugandan economy is emerging from the devastating impact of the Covid-19 after the pandemic shock caused a sharp contraction of the economy to its slowest pace in the last few years.

Household incomes fell when firms closed and jobs were lost, particularly in the urban informal sector. The country’s Gross Domestic Product (GDP) dropped by 1.1% in 2020, and is estimated to have recovered to 3.3% during the 2021 fiscal year.

Following the job losses and closure of small businesses, many people returned to agriculture and other natural resources dependent activities to manage and survive the crisis, according to the experts.

From the severe contraction in economic activities and its subsequent impacts on livelihoods during 2020, experts note that signs of recovery have strengthened, underpinned by improved business and trading conditions.

Domestic investments picked up during the last quarter of 2020 in line with global investment recovery. Manufacturing and construction recovered during the quarter ending March 2021 while the cash crop sector has sustained agricultural sector growth.

The economic growth outlook is 4.6% in 2022, and acceleration to 6.4% in the 2023 fiscal year, as domestic demand conditions improve and global recovery continues as Covid-19 vaccines are rolled out.

During the launch of “Beyond Recovery: Policies towards resurgent growth in Uganda, outlining policy options to support the transition from pandemic-induced slowdown to robust economic growth,” the Ministry of Finance Permanent Secretary Ramadhan Ggoobi says the government must rise to the challenge of undoing its old age problem of poor policy implementation to enable full recovery of the economy.

Ggoobi says policymakers must take note of proposals that have been provided and provide a roadmap to recovery.

To this end, a new book authored by Dr. Albert Musisi the Commissioner, Macroeconomic Policy and Richard Newfarmer the country director, International Growth Center, highlighting robust policy actions that will lift the country from the slow growth experienced in 2020 to recovery in 2021/22 and 22/23.

The book summarizes and updates a series of presentations from the Ministry’s annual economic growth forum, featuring chapters on trade, education, tourism, agriculture and more.

“As you may be aware, the Covid-19 pandemic and the global recession of 2020 brought Uganda’s previous four years of rapid growth to a sudden halt. There was a strain on the health system, households and businesses which were hurt as a result and hence the overall performance of the economy slowed down,” says Ggoobi.

He explains why the country registered low export receipts as the global economy slowed down, the tourism sector was affected due to the lockdowns and our remittances dwindled because Ugandans in the diaspora lost jobs. 

Some studies that are quoted in the book show that poverty rates rose by 8% in 2020 alone and unemployment also shot up and Small Medium Enterprises (SMEs) were forced to either downsize or slowdown operations which in turn negatively affected workers’ wages.

Ggoobi says the crash of the global economy intensified structural changes particularly through accelerated pace of technological diffusion through new channels of communication and heightened the importance of the services sector as a source of jobs and growth.

The book’s editor, Commissioner for Macroeconomic Policy, Dr. Albert Musisi says the re-ignition of rapid and robust economic growth will require policymakers to address the constraints that existed prior to the Covid-19 crisis.

“This book will act as a resource for government, students and citizens to understand which policies worked and which did not, supporting robust evidence-based policy making in the future,” he says.

In light of the recent schools reopening, Dr. Newfarmer discusses highlights from a chapter on how the education sector can better equip tomorrow’s workforce for productive employment.

The Deputy Governor Bank of Uganda, Dr. Micheal Atingi-Ego, says evidence shows that recovery in global economic growth after adverse impact of Covid-19 has been partly driven by countries with strong well diversified economies, governance structures, remote working and vulnerable support.

“The economy is now expected to grow at about 3.8%, but Uganda needs to achieve and sustain much higher growth to attain middle income status and I hope the government is doing everything possible to minimize the impact of Covid-19.”

Dr. Atingi-Ego speaking of fiscal policy calls for reduction in spending on non-priority areas, postponement of capital intensive and import dependent projects to help improve external balance as well as revenue enhancing measures to protect against future shocks.

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