On Thursday October 28 2021, Uganda’s President Yoweri Kaguta Museveni, announced that the government was making plans to fully reopen its economy in January. He called on Ugandans that fall under the critical age group to go get vaccinated against the Coronavirus. Uganda had its first case of Covid-19 in March 2020, following which the government swung into action, declaring a plethora of measures to slow the spread of the virus in the population. In President Museveni’s own admission, the country’s healthcare system could not stand the strain that would be potentially brought on it by a super spreading virus that has killed millions across the globe.
Today, 19 months since the first case, the country has gone through two waves (while other countries have had three or more) with 125,920 infections, of which 96,597 have recovered and 3,209 have died.
Mr Museveni, in his address, stated that the second wave was as a result of indiscipline of certain political actors who disregarded government advice in the General Election and conducted open political gatherings. Government had advised that campaigns be conducted via various media platforms in order to avoid transmission caused by people gathering.
At the peak of the second wave, Mr Museveni, while delivering his victory speech and during the World Economic Forum, blasted the international community for what he called self-centeredness. He accused developed countries of hoarding the Covid-19 vaccines and denying the less developed countries access. A bitter Museveni stated that his government had tried on several occasions to buy the vaccine from manufacturers but these efforts were always frustrated by various actors.
Uganda has since acquired a total of 9,650,750 doses of vaccines, broken down as 4,565,000 doses of Astra-Zeneca, 1,674,270 doses of Pfizer, 647,080 doses of Moderna, 1,000,000 doses of Sinovac, 346,800 doses of Sinopharm and 1,417,600 doses of Johnson and Johnson. Of these, a total 4,096,372 doses have been used. Today Uganda has about 170 people with Covid-19 in its hospitals across the country.
While Mr Museveni’s government seem to be on top of the situation with keeping the numbers of infections relatively low, there are concerns that the economy has suffered badly. Analysts say the pandemic has disrupted the supply and demand chain, financial and the education sectors.
While the numbers are still unrecorded, many have been sent home jobless, mainly as a result of budget cuts that the government had to undertake in order to keep the economy running. Ministries, Departments and Agencies, whose programmes were not ‘urgent’ faced the biggest cuts and for the critical ministries such as education and health, the focus was largely on emergencies. Under Education, the government refocused the money into ensuring continuity of learning by providing reading materials.
Under the health ministry, the focus was on management of the pandemic, providing critical infrastructure such as oxygen plants, personal protective gear for medical workers and acquiring ambulances for both mainland and on water, to respond to emergencies.
According the Uganda Revenue Authority, revenue collection has not survived the wrath of the pandemic. URA reports that government operations in July 2021, had a deficit of Ugx1.2 trillion due to the second lockdown. This is higher than the planned deficit of Ugx935.8 billion, on account of revenue shortfalls and higher than planned spending during the month.
According to the finance ministry, the government revenue collection amounted to sh1.4 trillion in July, representing a 90.6% performance against the planned target. Of these, a total of Ugx1.34 trillion were tax revenues whereas the Ugx39.64 billion were non-tax revenues.
Government expenditure on the other hand amounted to Ugx2.66 trillion representing a 103.0% figure compared to the planned spending level. Recurrent expenditure was higher than planned as a result of the need to provide additional resources to support the health sector as well as to provide for cash relief to most vulnerable sections of the population affected by the lockdown.
The finance ministry notes that the lockdown measures announced during the second half of June 2021 to curb the resurgence in infections extended through July 2021, with movements restricted and the majority of businesses remaining closed; affected the level of economic activity with adverse effects experienced by sectors that remained in full lockdown like education and transport (except for cargo transport).
The other sectors which were severely affected are the Small and Medium Enterprises (SMEs) as well as hotel and accommodation. The Finance ministry warns that this weak pace of economic activity in July 2021 shall affect real GDP growth for the first quarter of the current financial year, 2021/22.
To enhance the recovery, the Ugandan government has rolled out programmes such as the Emyooga Initiative and the SME recovery fund, which when capitalized and with the on-going vaccination efforts, the government says, the impact on the overall GDP is expected to be less severe. Government projects that the economy remains on course to achieve a growth rate of between 3.5% to 4.0% during FY 2021/22.
Even with over 50% reduction in business activities countrywide, finance minister Kasaija said, URA managed to collect sh19.3 trillion in the last financial year, 2020/2021. This was equivalent to 14.99% revenue growth and tax to GDP standing at 12.99%.
According to the finance ministry, as a result of the pandemic (that started in March 2020), the country registered the slowest GDP growth rate of 3% in the financial year 2019/20. However, for the financial year 2020/21, the country slowly picked up and achieved a growth rate of 3.3%.
The slowdown has had an adverse effect on domestic consumption, lowered Uganda’s exports to regional and international markets and as such many businesses have suffered and some even closed shop.
This, Kasaija says, is not good news to the tax collecting body, URA. “We continue to challenge URA to stretch and deploy innovative ways of achieving excellent results and I believe we shall make it. As a Ministry, we commit to supporting URA in its mandate and together we shall fulfil the government’s objective of ensuring industrialization for inclusive growth, employment and wealth,” Kasaija added.
According to the minister, the 2022/23 financial year Budget strategy will focus on industrialization for inclusive growth, employment and wealth. These, he said, shall help raise Uganda’s per capita income from Usd936 (about sh3.3m) to Usd 1, 0499 (about sh3.7m) and improve the quality of life for every Ugandan.
The finance ministry also highlighted key strategies the government will undertake to liberate the country from depending on donor funding. These will include, boosting exports through development of trade and market infrastructure that will ease access to major markets in the region such as South Sudan. According to the government, this will be facilitated by the operational One Stop Border Posts (OSBPs) and will be further enhanced by the ongoing works for the Gulu Logistics Centre and Road to DRC.
For the country to restore socio-economic activity to pre-pandemic levels, the government intends to increase access to capital for individuals. In addition, the government shall revamp the health system, ensure delivery of impactful investments and restructure resources to areas with greater value for money as a priority. To reinstate business activity, the government says, the different fiscal and monetary measures like EMYOOGA Initiative and other financing schemes shall help boost aggregate demand.
“Once demand for goods and services increases, businesses will increase their turnover,” Kasaija said.
John Musinguzi, the URA Commissioner General says they are prioritizing mobilizing sufficient revenue to fully fund the country’s national budget.
This will be done in such a way that the Country’s social and economic development projects can be fully financed and resourced.
“We are working on expanding the tax base, encouraging the informal sector to remit their taxes. We also continue to sensitize people on the need to pay taxes. Our tax base is still small,” he said.
According to statistics shared by URA, the taxpayer register has increased over the years.
For instance, during the financial year 2020/21, a total of 189,377 new taxpayers were added to the taxpayer register and by end of the year, the register had 1,783,493 taxpayers representing a yearly increase of over 10%.
“We have improved the Tax Identification Number (TIN) registration from which has been simplified, from excel templates into a simple single web form to facilitate taxpayer registration. This has further been linked with the NIRA database to make it easier to register for tax once you have a NIN,” he says.
