The government does not have a provision for any fiscal stimulus for businesses that have been affected by the impacts of the COVID-19 pandemic, the Finance Minister Matia Kasaija has said.
The alternative, Kasaija said, is for private entrepreneurs to utilise loans in the Uganda Development Bank (UDB) which the government has recapitalized to support businesses in the post-COVID-19 recovery process.
The government recapitalized UDB to the tune of Shs 1 trillion, with more funding expected to come from the World Bank and International Monetary Fund (IMF) to increase access to credit among Ugandan entrepreneurs.
“There is no money we can get and give to every businessman, it is not possible, it is not sustainable and it is not nice. The only thing I do is to put money in UDB. You go and discuss with them or go to a commercial bank. For the farmers, there is what we call agricultural credit scheme,” Kasaija said.
Several economists and players within the private sector have been calling upon the government to consider giving economic stimulus packages to businesses, most especially small and medium Enterprises to save them from winding up. The said package is looked at inform of tax breaks, waivers, and direct recapitalization.
The small businesses and individuals, Kasaija said, can also take advantage of the several government microcredit schemes aimed at fighting poverty in the country with a focus on creating revolving funds for microcredit to households at the grassroots.
Kasaija said that although COVID-19 has greatly impacted the country, it is also becoming a turning point and an eye-opener for the economy which is, according to him, going to take a different direction towards production and massive industrialization.
However, he fears that many loans are currently being taken by the government yet they are poorly absorbed which might cause a great increase in the debt burden.
He thus proposes a scaling down expenses so that some finances are diverted to most pressing expenditures at the moment.
“We are borrowing for sure, but we are still in acceptable debt levels. We are not entertaining any loan that is not concessional; we have to live within our means. We haven’t agreed as a government but the way I am seeing things, we have to scale down a bit,” Kasaija said.
The COVID-19 pandemic has already heightened pressure on fiscal space as a result of additional expenditure to address rapid response in the health sector and livelihood support for affected persons.
A recent preliminary assessment of the short-term impact of the pandemic by the finance ministry anticipating the increase in the number of poor people by 2.6 million and a significant deterioration of the current account balance owing to an expected severe reduction in exports, tourism receipts, and workers’ remittances.
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