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Experts: African Continental Free Trade Could Cost Uganda Shs50bn In Revenue

Moses Kaggwa, Director Economic Policy at the Ministry of Finance

 

Experts have called on Ugandan officials to intensify negotiations into the Africa Continental Free Trade Area (AfCTA ) after studies emerged that the liberalization of the economy to such a magnitude would see Uganda lose about US$13m (about Shs48.275Bn) in revenue.

 

Leading the call was Jane Nalunga, Executive Director of Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) Uganda during the East African Community Post Tax and Budget Dialogue 2022/2023 at Kampala Serena Hotel on Tuesday, where she quoted a study by the Economic Research Policy Centre at Makerere University. .

 

Nalunga said that the EAC nations have high expectations that trade under the AfCTA offers a major opportunity for African countries to cushion the economic impacts of the Covid-19 pandemic and is a vehicle for continued recovery to boost growth, reduce poverty and broaden economic inclusion, but the region is still stuck somewhere between negotiations and implementation phases of AfCFTA.

 

“The conservative estimates by researchers at the EPRC suggest that in terms of absolute amounts Kenya will incur the largest loss followed by Uganda at US14.2M, 13.5M respectively. Tanzania US$5.3m, but that study also shows that in terms of proportional losses of revenue, Burundi will incur the highest proportion followed by Uganda,”Nalunga said.

 

 

 

The African Continental Free Trade Agreement (AfCFTA) entered into force at the end of May 2019 and currently, 54 african countries have signed the agreement, while over 43 nations have ratified the agreement with South Sudan being the only member in EAC yet to ratify the agreement.

 

Trading under the AfCFTA was expected to begin in July 2020 and the new trading block is expected to bring together 1.2 billion people and a combined GDP of more than US$3.4Trn.

 

However, Moses Kaggwa, Director Economic Policy at the Ministry of Finance said that the worries of civil society group is misplaced and instead, focus should be put on the long term benefits Uganda will reap after opening up its trade with Africa.

 

“I have heard a lot of concern about the African Continental Free Trade Area, and what that would mean for our revenue, I got a figure  of US$13.5M which is about Shs51.5Bn, really should we be scratching our heads that we are going to have loss of revenue of Shs51Bn and as a result we shouldn’t be talking about the African Continental Free Trade Area? That is very little money according to me, we are going to collect Shs25Trn next year, so if we take off Shs51Bn, should we be here debating that?” asked Kaggwa.

 

He was backed by George Odongo Member of East African Legislative Assembly who argued that whereas in the short term, Uganda and EAC will make losses, but in the long run, focus should be directed at boosting efficiency in production, to position EAC to be more competitive when the market is opened up.

 

“So the fear of loss of revenue is an interim that can be overcome by efficiencies in our production. Uganda should focus its efforts on solving the internal revenue challenges. We can take care of those fears if we build more efficiency at the local levels and ensure that we have more capacity to produce. The challenge we have had is that we are narrowing so much of our ambitions and we aren’t really putting in enough effort to overcome some of the obstacles otherwise, opening up the market to Africa is a huge opportunity,” said Odong.

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